[Federal Register Volume 89, Number 218 (Tuesday, November 12, 2024)]
[Rules and Regulations]
[Pages 89084-89213]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25486]



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Vol. 89

Tuesday,

No. 218

November 12, 2024

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 410, 413, 494, et al.





Medicare Program; End-Stage Renal Disease Prospective Payment System, 
Payment for Renal Dialysis Services Furnished to Individuals With Acute 
Kidney Injury, Conditions for Coverage for End-Stage Renal Disease 
Facilities, End-Stage Renal Disease Quality Incentive Program, and End-
Stage Renal Disease Treatment Choices Model; Final Rule

Federal Register / Vol. 89 , No. 218 / Tuesday, November 12, 2024 / 
Rules and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 413, 494, and 512

[CMS-1805-F]
RIN 0938-AV27


Medicare Program; End-Stage Renal Disease Prospective Payment 
System, Payment for Renal Dialysis Services Furnished to Individuals 
With Acute Kidney Injury, Conditions for Coverage for End-Stage Renal 
Disease Facilities, End-Stage Renal Disease Quality Incentive Program, 
and End-Stage Renal Disease Treatment Choices Model

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of 
Health and Human Services (HHS).

ACTION: Final rule.

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SUMMARY: This final rule updates and revises the End-Stage Renal 
Disease (ESRD) Prospective Payment System for calendar year 2025. This 
rule also updates the payment rate for renal dialysis services 
furnished by an ESRD facility to individuals with acute kidney injury. 
In addition, this rule updates requirements for the Conditions for 
Coverage for ESRD Facilities, ESRD Quality Incentive Program, and ESRD 
Treatment Choices Model.

DATES: These regulations are effective on January 1, 2025.

FOR FURTHER INFORMATION CONTACT: 
    <a href="/cdn-cgi/l/email-protection#743127263024150d19111a00341719075a1c1c075a131b02"><span class="__cf_email__" data-cfemail="3d786e6f796d5c44505853497d5e504e1355554e135a524b">[email protected]</span></a> or Nicolas Brock at (410) 786-5148 for 
issues related to the ESRD Prospective Payment System (PPS) and 
coverage and payment for renal dialysis services furnished to 
individuals with acute kidney injury (AKI).
    <a href="/cdn-cgi/l/email-protection#e9acbabbada8999985808a889d8086879aa98a849ac781819ac78e869f"><span class="__cf_email__" data-cfemail="4401171600053434282d2725302d2b2a37042729376a2c2c376a232b32">[email protected]</span></a>, for issues related to applications 
for the Transitional Drug Add-on Payment Adjustment (TDAPA) or 
Transitional Add-On Payment Adjustment for New and Innovative Equipment 
and Supplies (TPNIES).
    <a href="/cdn-cgi/l/email-protection#195c4a4b5d485049597a746a3771716a377e766f"><span class="__cf_email__" data-cfemail="8fcadcddcbdec6dfcfece2fca1e7e7fca1e8e0f9">[email protected]</span></a>, for issues related to the ESRD Quality 
Incentive Program (QIP).
    <a href="/cdn-cgi/l/email-protection#14514057395759595d547779673a7c7c673a737b62"><span class="__cf_email__" data-cfemail="c6839285eb858b8b8f86a5abb5e8aeaeb5e8a1a9b0">[email protected]</span></a>, for issues related to the ESRD Treatment 
Choices (ETC) Model.

SUPPLEMENTARY INFORMATION: 
    Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a 
plain language summary of this rule may be found at https://www.regulations.gov/.
    Current Procedural Terminology (CPT) Copyright Notice: Throughout 
this final rule, we use CPT[supreg] codes and descriptions to refer to 
a variety of services. We note that CPT[supreg] codes and descriptions 
are copyright 2020 American Medical Association (AMA). All Rights 
Reserved. CPT[supreg] is a registered trademark of the AMA. Applicable 
Federal Acquisition Regulations (FAR) and Defense Federal Acquisition 
Regulations (DFAR) apply.

Table of Contents

    To assist readers in referencing sections contained in this 
preamble, we are providing a Table of Contents.

I. Executive Summary
    A. Purpose
    B. Summary of the Major Provisions
    C. Summary of Cost and Benefits
II. Calendar Year (CY) 2025 End-Stage Renal Disease (ESRD) 
Prospective Payment System (PPS)
    A. Background
    B. Provisions of the Proposed Rule, Public Comments, and 
Responses to the Comments on the CY 2025 ESRD PPS
    C. Transitional Add-On Payment Adjustment for New and Innovative 
Equipment and Supplies (TPNIES) Applications and Technical Changes 
for CY 2025
    D. Continuation of Approved Transitional Add-On Payment 
Adjustments for New and Innovative Equipment and Supplies for CY 
2025
    E. Continuation of Approved Transitional Drug Add-On Payment 
Adjustments for CY 2025
III. Final CY 2025 Payment for Renal Dialysis Services Furnished to 
Individuals With AKI
    A. Background
    B. Public Comments and Responses on the Proposal To Allow 
Medicare Payment for Home Dialysis for Beneficiaries With AKI
    C. Annual Payment Rate Update for CY 2025
    D. AKI and the ESRD Facility Conditions for Coverage
IV. Updates to the End-Stage Renal Disease Quality Incentive Program 
(ESRD QIP)
    A. Background
    B. Updates to Requirements Beginning With the PY 2027 ESRD QIP
    C. Requests for Information (RFIs) on Topics Relevant to ESRD 
QIP
V. End-Stage Renal Disease Treatment Choices (ETC) Model
    A. Background
    B. Provisions of the Proposed Rule
    C. Request for Information
VI. Collection of Information Requirements
VII. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact Analysis
    C. Detailed Economic Analysis
    D. Accounting Statement
    E. Regulatory Flexibility Act (RFA)
    F. Unfunded Mandates Reform Act (UMRA)
    G. Federalism
    H. Congressional Review Act
VIII. Files Available to the Public via the Internet

I. Executive Summary

A. Purpose

    This rule finalizes changes related to the End-Stage Renal Disease 
(ESRD) Prospective Payment System (PPS), payment for renal dialysis 
services furnished to individuals with acute kidney injury (AKI), the 
Conditions for Coverage for ESRD facilities, the ESRD Quality Incentive 
Program (QIP), and the ESRD Treatment Choices (ETC) Model. 
Additionally, this rule finalizes and discusses policies that reflect 
our commitment to achieving equity in health care for our beneficiaries 
by supporting our ability to assess whether, and to what extent, our 
programs and policies perpetuate or exacerbate systemic barriers to 
opportunities and benefits for underserved communities. For example, we 
are finalizing the proposal to allow Medicare payment for home dialysis 
for beneficiaries with acute kidney injury, which would assist this 
vulnerable population with transportation and scheduling issues and 
allow them to have flexibility in their dialysis treatment modality. 
Additionally, we discuss the incorporation of oral-only drugs into the 
ESRD PPS bundled payment beginning January 1, 2025, which will expand 
access to these drugs to the 21 percent of the ESRD PPS population who 
do not have Part D coverage. Our internal data show that a significant 
portion of ESRD beneficiaries who lack Part D coverage are African 
American/Black patients with ESRD. Our policy objectives include a 
commitment to advancing health equity, which stands as the first pillar 
of the Centers for Medicare & Medicaid Services (CMS) Strategic 
Plan,\1\ and reflect the goals of the Administration, as stated in the 
President's Executive Order 13985.\2\ We define health equity as the 
attainment of the highest level of health for all people, where 
everyone has a fair and just opportunity to attain their optimal health 
regardless of race, ethnicity, disability, sexual orientation, gender 
identity, socioeconomic status, geography, preferred language, or other 
factors that affect access to care and

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health outcomes.'' \3\ In the calendar year (CY) 2023 ESRD PPS final 
rule, we noted that, when compared with all Medicare fee-for-service 
(FFS) beneficiaries, Medicare FFS beneficiaries receiving dialysis are 
disproportionately young, male, African American/Black, have 
disabilities and low income as measured by eligibility for both 
Medicare and Medicaid (dual eligible status), and reside in an urban 
setting (87 FR 67183). In this final rule, we continue to address 
health equity for beneficiaries with ESRD who are members of 
underserved communities, including but not limited to those living in 
rural communities, those who have disabilities, racial and ethnic 
minorities, and American Indians and Alaska Natives. The term 
`underserved communities' refers to populations sharing a particular 
characteristic, including geographic communities, that have been 
systematically denied a full opportunity to participate in aspects of 
economic, social, and civic life.\4\
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    \1\ Centers for Medicare & Medicaid Services (2022). Health 
Equity. Available at: https://www.cms.gov/pillar/health-equity.
    \2\ 86 FR 7009 (January 25, 2021). https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government.
    \3\ Centers for Medicare & Medicaid Services (2022). Health 
Equity. Available at: https://www.cms.gov/pillar/health-equity.
    \4\ 86 FR 7009 (January 25, 2021). https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government.
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1. End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)
    On January 1, 2011, we implemented the ESRD PPS, a case-mix 
adjusted, bundled PPS for renal dialysis services furnished by ESRD 
facilities as required by section 1881(b)(14) of the Social Security 
Act (the Act), as added by section 153(b) of the Medicare Improvements 
for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275). 
Section 1881(b)(14)(F) of the Act, as added by section 153(b) of MIPPA, 
and amended by section 3401(h) of the Patient Protection and Affordable 
Care Act (the Affordable Care Act) (Pub. L. 111-148), established that 
beginning CY 2012, and each subsequent year, the Secretary of the 
Department of Health and Human Services (the Secretary) shall annually 
increase payment amounts by an ESRD market basket percentage increase, 
reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act. This rule finalizes updates to the 
ESRD PPS for CY 2025.
2. Coverage and Payment for Renal Dialysis Services Furnished to 
Individuals With Acute Kidney Injury (AKI)
    On June 29, 2015, the President signed the Trade Preferences 
Extension Act of 2015 (TPEA) (Pub. L. 114-27). Section 808(a) of the 
TPEA amended section 1861(s)(2)(F) of the Act to provide coverage for 
renal dialysis services furnished on or after January 1, 2017, by a 
renal dialysis facility or a provider of services paid under section 
1881(b)(14) of the Act to an individual with AKI. Section 808(b) of the 
TPEA amended section 1834 of the Act by adding a new subsection (r) 
that provides for payment for renal dialysis services furnished by 
renal dialysis facilities or providers of services paid under section 
1881(b)(14) of the Act to individuals with AKI at the ESRD PPS base 
rate beginning January 1, 2017. This final rule updates the AKI payment 
rate for CY 2025. Additionally, this rule extends payment for home 
dialysis and the payment adjustment for home and self-dialysis training 
to renal dialysis services provided to beneficiaries with AKI.
3. End-Stage Renal Disease Quality Incentive Program (ESRD QIP)
    The End-Stage Renal Disease Quality Incentive Program (ESRD QIP) is 
authorized by section 1881(h) of the Act. The Program establishes 
incentives for facilities to achieve high quality performance on 
measures with the goal of improving outcomes for ESRD beneficiaries. 
This rule finalizes our proposals to replace the Kt/V Dialysis Adequacy 
Comprehensive clinical measure with a Kt/V Dialysis Adequacy measure 
topic and to remove National Healthcare Safety Network (NHSN) Dialysis 
Event reporting measure beginning with Payment Year (PY) 2027. This 
rule also discusses feedback received in response to our requests for 
public comment on two topics relevant to the ESRD QIP.
4. End-Stage Renal Disease Treatment Choices (ETC) Model
    The ETC Model is a mandatory Medicare payment model tested under 
section 1115A of the Act. The ETC Model is operated by the Center for 
Medicare and Medicaid Innovation (Innovation Center). The ETC Model 
tests the use of payment adjustments to encourage greater utilization 
of home dialysis and kidney transplants, to preserve or enhance the 
quality of care furnished to Medicare beneficiaries while reducing 
Medicare expenditures. The ETC Model was finalized as part of a final 
rule published in the Federal Register on September 29, 2020, titled 
``Medicare Program: Specialty Care Models to Improve Quality of Care 
and Reduce Expenditures'' (85 FR 61114), referred to herein as the 
``Specialty Care Models final rule.'' Subsequently, the ETC Model has 
been updated three times in the annual ESRD PPS final rules for 
calendar year (CY) 2022 (86 FR 61874), CY 2023 (87 FR 67136), and CY 
2024 (88 FR 76344).
    This final rule makes certain changes to the methodology CMS uses 
to identify transplant failure for the purposes of defining an ESRD 
beneficiary and attributing an ESRD beneficiary to the ETC Model. We 
also solicited input from the public through a Request for Information 
(RFI) on topics pertaining to increasing equitable access to home 
dialysis and kidney transplantation. Feedback we receive from the 
public will be used to inform CMS' thinking regarding opportunities and 
barriers the Innovation Center may address in potential successor 
models to the ETC Model.

B. Summary of the Major Provisions

1. ESRD PPS
    <bullet> Update to the ESRD PPS base rate for CY 2025: The final CY 
2025 ESRD PPS base rate is $273.82, an increase from the CY 2024 ESRD 
PPS base rate of $271.02. This amount reflects the application of the 
wage index budget-neutrality adjustment factor (0.988600), and a 
productivity-adjusted market basket percentage increase of 2.2 percent 
as required by section 1881(b)(14)(F)(i)(I) of the Act, equaling 
$273.82 (($271.02 x 0.988600) x 1.022 = $273.82).
    <bullet> Modification to the wage index methodology: We are 
finalizing a new ESRD-specific wage index that will be used to adjust 
ESRD PPS payment for geographic differences in area wages on an annual 
basis. Beginning for CY 2025, we will change our methodology to use 
mean hourly wage data from the Bureau of Labor Statistics (BLS) 
Occupational Employment and Wage Statistics (OEWS) program and full 
time equivalent (FTE) labor and treatment volume data from freestanding 
ESRD facility Medicare cost reports to produce an ESRD-specific wage 
index for use, instead of using the hospital wage index values for each 
geographic area, which are derived from hospital cost report data. 
Additionally, we are finalizing updates to the wage index to reflect 
the latest core-based statistical area (CBSA) delineations determined 
by the Office of Management and Budget (OMB) to better account for 
differing wage levels in areas in which ESRD facilities are located.
    <bullet> Annual update to the wage index: For CY 2025, we are 
finalizing updates to the wage index using the new methodology based on 
the latest available data. This is consistent with

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our past approach to updating the ESRD PPS wage index on an annual 
basis but uses the new wage index methodology based on data from BLS 
and freestanding ESRD facility Medicare cost reports.
    <bullet> Modifications to the outlier policy: We are finalizing 
several proposed revisions to the outlier policy. For the outlier 
payment methodology, we are finalizing the use of a drug inflation 
factor based on actual spending on drugs and biological products rather 
than the growth in the price proxy for drugs used in the ESRD Bundled 
(ESRDB) market basket. We are also finalizing the use of the growth in 
the ESRDB market basket price proxies for laboratory tests and supplies 
to estimate CY 2025 outlier spending for these items. Additionally, we 
are finalizing our proposal to account for the post-TDAPA add-on 
payment adjustment amount for outlier-eligible drugs and biological 
products during the post-TDAPA period. Lastly, we are finalizing the 
expansion of the list of eligible ESRD outlier services to include 
drugs and biological products that were or would have been included in 
the composite rate prior to establishment of the ESRD PPS.
    <bullet> Annual update to the outlier policy: We are updating the 
outlier policy based on the most current data and the final methodology 
changes previously discussed. Accordingly, we are updating the Medicare 
allowable payment (MAP) amounts for adult and pediatric patients for CY 
2025 using the latest available CY 2023 claims data. We are updating 
the ESRD outlier services fixed dollar loss (FDL) amount for pediatric 
patients using the latest available CY 2023 claims data and updating 
the FDL amount for adult patients using the latest available claims 
data from CY 2021, CY 2022, and CY 2023. For pediatric beneficiaries, 
the final FDL amount will increase from $11.32 to $234.26, and the MAP 
amount will increase from $23.36 to $59.60, as compared to CY 2024 
values. For adult beneficiaries, the final FDL amount will decrease 
from $71.76 to $45.41, and the MAP amount will decrease from $36.28 to 
$31.02. We note that the inclusion of composite rate drugs and 
biological products will cause a significant increase in the final FDL 
and MAP amounts for pediatric patients due to high-cost composite rate 
drugs furnished to pediatric beneficiaries; this is discussed in 
further detail in section II.B.3.e of this final rule. The 1.0 percent 
target for outlier payments was achieved in CY 2023, as outlier 
payments represented approximately 1.0 percent of total Medicare 
payments.
    <bullet> Update to the offset amount for the transitional add-on 
payment adjustment for new and innovative equipment and supplies 
(TPNIES) for CY 2025: The final CY 2025 average per treatment offset 
amount for the TPNIES for capital-related assets that are home dialysis 
machines is $10.22. This final offset amount reflects the application 
of the final productivity-adjusted ESRDB market basket update of 2.2 
percent ($10.00 x 1.022 = $10.22). There are no capital-related assets 
set to receive the TPNIES in CY 2025 for which this offset would apply.
    <bullet> Update to the Post-TDAPA Add-on Payment Adjustment 
amounts: We calculate the post-TDAPA add-on payment adjustment in 
accordance with Sec.  413.234(g). The final post-TDAPA add-on payment 
adjustment amount for Korsuva[supreg] is $0.4601 per treatment, which 
will be included in the calculation of the total post-TDAPA add-on 
payment adjustment for each quarter in CY 2025. The estimated post-
TDAPA add-on payment adjustment amount for Jesduvroq is $0.0096 per 
treatment, which will be included in the calculation for only the 
fourth quarter of CY 2025. We are finalizing our proposal to publish 
the final post-TDAPA add-on payment adjustment amount for drugs and 
biological products that do not have a full year of utilization data at 
the time of rulemaking after the publication of the final rule through 
a Change Request (CR). For CY 2025, this will be the case for 
Jesduvroq.
    <bullet> Update to the Low-Volume Payment Adjustment (LVPA): We are 
finalizing our proposal to modify the LVPA policy to create a two-
tiered LVPA whereby ESRD facilities that furnished fewer than 3,000 
treatments per cost reporting year will receive a 28.9 percent upward 
adjustment to the ESRD PPS base rate and ESRD facilities that furnished 
3,000 to 3,999 treatments will receive an 18.3 percent adjustment. We 
are also finalizing that the tier determination would be based on the 
median treatment count over the past 3 cost reporting years.
    <bullet> Inclusion of oral-only drugs in the ESRD PPS bundled 
payment: Under 42 CFR 413.174(f)(6), payment to an ESRD facility for 
oral-only renal dialysis service drugs and biological products is 
included in the ESRD PPS bundled payment effective January 1, 2025. In 
this final rule, we are providing information about how we will 
operationalize the inclusion of oral-only drugs into the ESRD PPS as 
well as budgetary estimates of the effects of this inclusion for public 
awareness. After reviewing public comments, we are finalizing a $36.41 
increase to the monthly TDAPA amount for claims which utilize phosphate 
binders to account for operational costs related to ESRD facilities 
providing phosphate binders that were not addressed when the ESRD PPS 
base rate was developed for CY 2011.
2. Payment for Renal Dialysis Services Furnished to Individuals With 
AKI
    <bullet> Update to the payment rate for individuals with AKI: We 
are finalizing an update the AKI payment rate for CY 2025. The final CY 
2025 payment rate is $273.82, which reflects the final CY 2025 ESRD PPS 
base rate of $273.82 reduced by the home and self-dialysis training 
add-on payment budget-neutrality adjustment of $0.00 (as detailed in 
section III.C.3 of this final rule).
    <bullet> Payment for home dialysis for beneficiaries with AKI: We 
are finalizing our proposal to allow Medicare payment for beneficiaries 
with AKI to dialyze at home. Payment for home dialysis treatments 
furnished to beneficiaries with AKI will be made at the same payment 
rate as in-center dialysis treatments. We are finalizing our proposal 
to permit ESRD facilities to bill Medicare for the home and self-
dialysis training add-on payment adjustment for beneficiaries with AKI, 
and to implement this adjustment in a budget neutral manner with a 
$0.00 reduction to the AKI base rate. We are finalizing modifications 
to the ESRD facility conditions for coverage (CfCs) to implement this 
policy change.
3. ESRD QIP
    Beginning with PY 2027, we are finalizing our proposal to replace 
the Kt/V Dialysis Adequacy Comprehensive clinical measure, on which 
facility performance is scored on a single measure based on one set of 
performance standards, with a Kt/V Dialysis Adequacy measure topic, 
which would be comprised of four individual Kt/V measures and scored 
based on a separate set of performance standards for each of those 
measures. We are also finalizing our proposal to remove the National 
Healthcare Safety Network (NHSN) Dialysis Event reporting measure from 
the ESRD QIP measure set beginning with PY 2027. We are discussing 
feedback received in response to our request for public comment on a 
potential health equity payment adjustment and our request for public 
comment on potential future updates to the data validation policy.
4. ETC Model
    Beginning for CY 2025, we are finalizing the proposed modification 
to

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the methodology used to attribute ESRD Beneficiaries to the ETC Model, 
specifically, to the definition of an ESRD Beneficiary at 42 CFR 
512.310. Under the ETC Model, CMS attributes ESRD beneficiaries to the 
ETC Model that meet several criteria including having a kidney 
transplant failure less than 12 months after the transplant date. We 
are refining the methodology we use to identify ESRD Beneficiaries with 
a kidney transplant failure to reduce the likelihood that CMS is 
overestimating the true number of transplant failures for the purposes 
of the model. We provide more detail on the finalized modification and 
its rationale in section V.B of this final rule.
    We also sought input from the public through a RFI on the future of 
the ETC Model, potential successor Models and other approaches CMS may 
consider to support beneficiary access to patient-centered modalities 
for treatment of ESRD.

C. Summary of Costs and Benefits

    In section VII.C.5 of this final rule, we set forth a detailed 
analysis of the impacts that the final changes would have on affected 
entities and beneficiaries. The impacts include the following:
1. Impacts of the Final ESRD PPS
    The impact table in section VII.C.5.a of this final rule displays 
the estimated change in Medicare payments to ESRD facilities in CY 2025 
compared to estimated Medicare payments in CY 2024. The overall impact 
of the CY 2025 payment changes is projected to be a 2.7 percent 
increase in Medicare payments. Hospital-based ESRD facilities will have 
an estimated 4.5 percent increase in Medicare payments compared with 
freestanding ESRD facilities with an estimated 2.6 percent increase. We 
estimate that the aggregate ESRD PPS expenditures will increase by 
approximately $220 million in CY 2025 compared to CY 2024 as a result 
of the proposed payment policies in this rule. Because of the projected 
2.7 percent overall payment increase, we estimate there will be an 
increase in beneficiary coinsurance payments of 2.7 percent in CY 2025, 
which translates to approximately $40 million.
    Section 1881(b)(14)(D)(iv) of the Act provides that the ESRD PPS 
may include such other payment adjustments as the Secretary determines 
appropriate. Under this authority, CMS implemented Sec.  413.234 to 
establish the TDAPA, a transitional drug add-on payment adjustment for 
certain new renal dialysis drugs and biological products and Sec.  
413.236 to establish the TPNIES, a transitional add-on payment 
adjustment for certain new and innovative equipment and supplies. The 
TDAPA and the TPNIES are not budget neutral.
    As discussed in section II.D of this final rule, since no new items 
were approved for the TPNIES for CY 2024 (88 FR 76431) there are no 
continuing TPNIES payments for CY 2025. In addition, since we did not 
receive any applications for the TPNIES for CY 2025, there will be no 
new TPNIES payments for CY 2025. As discussed in section II.E of this 
final rule, the TDAPA payment periods for Jesduvroq and 
DefenCath[supreg], will continue into CY 2025. As described in section 
VII.C.5.b of this final rule, we estimate that the combined total TDAPA 
payment amounts for Jesduvroq and DefenCath[supreg] in CY 2025 will be 
approximately $25,633,599, of which, $5,126,719 will be attributed to 
beneficiary coinsurance amounts.
2. Impacts of the Final Payment Rate for Renal Dialysis Services 
Furnished to Individuals With AKI
    The impact table in section VII.C.5.c of this final rule displays 
the estimated change in Medicare payments to ESRD facilities for renal 
dialysis services furnished to individuals with AKI compared to 
estimated Medicare payments for such services in CY 2024. The overall 
impact of the CY 2025 changes is projected to be a 2.3 percent increase 
in Medicare payments for individuals with AKI. Hospital-based ESRD 
facilities will have an estimated 3.4 percent increase in Medicare 
payments compared with freestanding ESRD facilities that will have an 
estimated 2.3 percent increase. The overall impact reflects the effects 
of the final Medicare payment rate update and the final CY 2025 ESRD 
PPS wage index, as well as the policy to extend payment for AKI 
dialysis at home, which is not expected to have any impact on payment 
rates. As discussed in section III.C.3, we are finalizing our proposal 
to extend the ESRD PPS home and self-dialysis training add-on payment 
adjustment to AKI patients; however, that adjustment is required to be 
implemented in a budget neutral manner for AKI payments, so it will not 
have any impact on the overall payment amounts for AKI renal dialysis 
services and therefore is not included in these estimates. We estimate 
that the aggregate Medicare payments made to ESRD facilities for renal 
dialysis services furnished to individuals with AKI, at the final CY 
2025 ESRD PPS base rate, will increase by $1 million in CY 2025 
compared to CY 2024.
3. Impacts of the PY 2027 ESRD QIP
    We estimate that, as a result of previously finalized policies and 
changes to the ESRD QIP that we are finalizing in this final rule, the 
overall economic impact of the PY 2027 ESRD QIP will be approximately 
$154 million. The $154 million estimate for PY 2027 includes $136.1 
million in costs associated with the collection of information 
requirements and approximately $17.9 million in payment reductions 
across all facilities.
4. Impacts of the Proposed Changes to the ETC Model
    The final change to the definition of an ESRD Beneficiary for the 
purposes of attribution in the ETC Model is not expected to have a net 
effect on the model's projected economic impact.

II. Calendar Year (CY) 2025 End-Stage Renal Disease (ESRD) Prospective 
Payment System (PPS)

A. Background

1. Statutory Background
    On January 1, 2011, CMS implemented the ESRD PPS, a case-mix 
adjusted bundled PPS for renal dialysis services furnished by ESRD 
facilities, as required by section 1881(b)(14) of the Act, as added by 
section 153(b) of the Medicare Improvements for Patients and Providers 
Act of 2008 (MIPPA) (Pub. L. 110-275). Section 1881(b)(14)(F) of the 
Act, as added by section 153(b) of MIPPA and amended by section 3401(h) 
of the Patient Protection and Affordable Care Act (Affordable Care Act) 
(Pub. L. 111-148), established that beginning with CY 2012, and each 
subsequent year, the Secretary shall annually increase payment amounts 
by an ESRD market basket percentage increase reduced by the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act.
    Section 632 of the American Taxpayer Relief Act of 2012 (ATRA) 
(Pub. L. 112-240) included several provisions that apply to the ESRD 
PPS. Section 632(a) of ATRA added section 1881(b)(14)(I) to the Act, 
which required the Secretary, by comparing per patient utilization data 
from 2007 with such data from 2012, to reduce the single payment for 
renal dialysis services furnished on or after January 1, 2014, to 
reflect the Secretary's estimate of the change in the utilization of 
ESRD-related drugs and biologicals \5\ (excluding oral-only ESRD-

[[Page 89088]]

related drugs). Consistent with this requirement, in the CY 2014 ESRD 
PPS final rule, we finalized $29.93 as the total drug utilization 
reduction and finalized a policy to implement the amount over a 3- to 
4-year transition period (78 FR 72161 through 72170).
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    \5\ As discussed in the CY 2019 ESRD PPS final rule (83 FR 
56922), we began using the term ``biological products'' instead of 
``biologicals'' under the ESRD PPS to be consistent with FDA 
nomenclature. We use the term ``biological products'' in this final 
rule except where referencing specific language in the Act or 
regulations.
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    Section 632(b) of ATRA prohibited the Secretary from paying for 
oral-only ESRD-related drugs and biologicals under the ESRD PPS prior 
to January 1, 2016. Section 632(c) of ATRA required the Secretary, by 
no later than January 1, 2016, to analyze the case-mix payment 
adjustments under section 1881(b)(14)(D)(i) of the Act and make 
appropriate revisions to those adjustments.
    On April 1, 2014, the Protecting Access to Medicare Act of 2014 
(PAMA) (Pub. L. 113-93) was enacted. Section 217 of PAMA included 
several provisions that apply to the ESRD PPS. Specifically, sections 
217(b)(1) and (2) of PAMA amended sections 1881(b)(14)(F) and (I) of 
the Act and replaced the drug utilization adjustment that was finalized 
in the CY 2014 ESRD PPS final rule (78 FR 72161 through 72170) with 
specific provisions that dictated the market basket update for CY 2015 
(0.0 percent) and how the market basket percentage increase should be 
reduced in CY 2016 through CY 2018.
    Section 217(a)(1) of PAMA amended section 632(b)(1) of ATRA to 
provide that the Secretary may not pay for oral-only ESRD-related drugs 
under the ESRD PPS prior to January 1, 2024. Section 217(a)(2) of PAMA 
further amended section 632(b)(1) of ATRA by requiring that in 
establishing payment for oral-only drugs under the ESRD PPS, the 
Secretary must use data from the most recent year available. Section 
217(c) of PAMA provided that as part of the CY 2016 ESRD PPS 
rulemaking, the Secretary shall establish a process for (1) determining 
when a product is no longer an oral-only drug; and (2) including new 
injectable and intravenous products into the ESRD PPS bundled payment.
    Section 204 of the Stephen Beck, Jr., Achieving a Better Life 
Experience Act of 2014 (ABLE) (Pub. L. 113-295) amended section 
632(b)(1) of ATRA, as amended by section 217(a)(1) of PAMA, to provide 
that payment for oral-only renal dialysis drugs and biological products 
cannot be made under the ESRD PPS bundled payment prior to January 1, 
2025.
2. System for Payment of Renal Dialysis Services
    Under the ESRD PPS, a single per-treatment payment is made to an 
ESRD facility for all the renal dialysis services defined in section 
1881(b)(14)(B) of the Act and furnished to an individual for the 
treatment of ESRD in the ESRD facility or in a patient's home. We have 
codified our definition of renal dialysis services at Sec.  413.171, 
which is in 42 CFR part 413, subpart H, along with other ESRD PPS 
payment policies.
    The ESRD PPS base rate is adjusted for characteristics of both 
adult and pediatric patients and accounts for patient case-mix 
variability. The adult case-mix adjusters include five categories of 
age, body surface area, low body mass index, onset of dialysis, and 
four comorbidity categories (that is, pericarditis, gastrointestinal 
tract bleeding, hereditary hemolytic or sickle cell anemia, 
myelodysplastic syndrome). A different set of case-mix adjusters are 
applied for the pediatric population. Pediatric patient-level adjusters 
include two age categories (under age 13, or age 13 to 17) and two 
dialysis modalities (that is, peritoneal or hemodialysis) (Sec.  
413.235(a) and (b)(1)).
    The ESRD PPS provides for three facility-level adjustments. The 
first payment adjustment accounts for ESRD facilities furnishing a low 
volume of dialysis treatments (Sec.  413.232). The second payment 
adjustment reflects differences in area wage levels developed from 
core-based statistical areas (CBSAs) (Sec.  413.231). The third payment 
adjustment accounts for ESRD facilities furnishing renal dialysis 
services in a rural area (Sec.  413.233).
    There are six additional payment adjustments under the ESRD PPS. 
The ESRD PPS provides adjustments, when applicable, for: (1) a training 
add-on for home and self-dialysis modalities (Sec.  413.235(c)); (2) an 
additional payment for high cost outliers due to unusual variations in 
the type or amount of medically necessary care (Sec.  413.237); (3) a 
TDAPA for certain new renal dialysis drugs and biological products 
(Sec.  413.234(c)); (4) a TPNIES for certain new and innovative renal 
dialysis equipment and supplies (Sec.  413.236(d)); (5) a transitional 
pediatric ESRD add-on payment adjustment (TPEAPA) of 30 percent of the 
per-treatment payment amount for renal dialysis services furnished to 
pediatric ESRD patients (Sec.  413.235(b)(2)); and (6) a post-TDAPA 
add-on payment adjustment for certain new renal dialysis drugs and 
biological products after the end of the TDAPA period (Sec.  
413.234(g)).
3. Updates to the ESRD PPS
    Policy changes to the ESRD PPS are proposed and finalized annually 
in the Federal Register. The CY 2011 ESRD PPS final rule appeared in 
the August 12, 2010, issue of the Federal Register (75 FR 49030 through 
49214). That rule implemented the ESRD PPS beginning on January 1, 
2011, in accordance with section 1881(b)(14) of the Act, as added by 
section 153(b) of MIPPA, over a 4-year transition period. Since the 
implementation of the ESRD PPS, we have published annual rules to make 
routine updates, policy changes, and clarifications.
    Most recently, we published a final rule, which appeared in the 
November 6, 2023, issue of the Federal Register, titled ``Medicare 
Program; End-Stage Renal Disease Prospective Payment System, Payment 
for Renal Dialysis Services Furnished to Individuals with Acute Kidney 
Injury, and End-Stage Renal Disease Quality Incentive Program, and End-
Stage Renal Disease Treatment Choices Model,'' referred to herein as 
the ``CY 2024 ESRD PPS final rule.'' In that rule, we updated the ESRD 
PPS base rate, wage index, and outlier policy for CY 2024. We also 
finalized a post-TDAPA add-on payment adjustment; a TPEAPA for 
pediatric ESRD patients for CYs 2024, 2025, and 2026; administrative 
changes to the LVPA eligibility requirements to allow additional 
flexibilities for ESRD facilities impacted by a disaster or other 
emergency; clarifications on TPNIES eligibility requirements; and, 
effective January 1, 2025, requirements for ESRD facilities to report 
time on machine for in-center hemodialysis treatments, and to report 
discarded amounts of renal dialysis drugs and biological products from 
single-dose containers or single-use packages. For further detailed 
information regarding these updates and policy changes, see 88 FR 
76344.

B. Provisions of the Proposed Rule, Public Comments, and Response to 
the Comments on the CY 2025 ESRD PPS

    The proposed rule, titled ``Medicare Program; End-Stage Renal 
Disease Prospective Payment System, Payment for Renal Dialysis Services 
Furnished to Individuals with Acute Kidney Injury, End-Stage Renal 
Disease Quality Incentive Program, and End-Stage Renal Disease 
Treatment Choices Model'' (89 FR 55760-55843), referred to as the ``CY 
2025 ESRD PPS proposed rule,'' appeared in the July 5, 2024 issue of 
the Federal Register, with a comment period that ended on August 26, 
2024. In that proposed rule, we proposed to make a number of updates 
and policy

[[Page 89089]]

changes for CY 2025, including annual updates to the ESRD PPS base 
rate, a new ESRD PPS wage index methodology, changes to the list of 
eligible ESRD outlier services, several methodological changes to the 
outlier policy, changes to the LVPA structure, updates to the post-
TDAPA add-on payment adjustment amounts, and updates to the offset 
amount for the TPNIES.
    We received 212 public comments on our proposals, including 
comments from kidney and dialysis organizations, such as large and 
small dialysis organizations, for-profit and non-profit ESRD 
facilities, ESRD networks, and dialysis coalitions. We also received 
comments from patients; healthcare providers for adult and pediatric 
ESRD beneficiaries; home dialysis services and advocacy organizations; 
provider and legal advocacy organizations; administrators and insurance 
groups; a non-profit dialysis association; a professional association; 
alliances for kidney care and home dialysis stakeholders; drug and 
device manufacturers; health care systems; a health solutions company; 
and the Medicare Payment Advisory Commission (MedPAC). Of these 212 
public comments, approximately 70 were unique and approximately 130 
were either duplicative submissions or were solely a form letter. We 
received approximately 110 comments from unique submitters, which 
reflected a form letter expressing support for a piece of ESRD-related 
draft legislation which would delay the inclusion of oral-only drugs 
into the ESRD PPS. We note that we do not comment on draft legislation 
in this rule will not be directly responding to the support for this 
draft legislation in this rule, but we are interpreting these letters 
as expressing support for a delay to the inclusion of phosphate binders 
into the ESRD PPS bundled payment and have responded to comments which 
express this sentiment in section II.B.7 of this final rule. 
Additionally, we note that many of the form letters we received appear 
to be duplicative submissions based on many names and contact 
information repeating, so we wish to encourage organizers of these and 
future campaigns in the future to avoid such duplication as it creates 
additional operational considerations when reviewing comments.
    We received numerous comments on policies for which we did not make 
any proposals, including mandatory charity care requirements in 
dialysis clinics, care for undocumented patients, staff assistance for 
home dialysis, addressing disparities in the kidney transplant process, 
elevating and integrating patient and caregiver perspectives through a 
needs navigation model, dialysis commercials for ESRD and AKI, the 
continuation of TPEAPA, removing the budget neutrality requirement for 
TPEAPA, both replacing and preventing the replacement of nephrology 
nurses with other health professionals for prolonged care, including 
physician assistants or physician associates within the minimum 
requirement for a dialysis facility's interdisciplinary team, 
addressing the need for emergency planning for dialysis services in the 
event of power outages or extreme weather conditions, removing the 
prospective payment system for home dialysis patients, increasing 
Medicare Advantage (MA) program payments to beneficiaries in certain 
geographic areas, restructuring the functional categories for renal 
dialysis drugs and biological products, aligning CMMI voluntary model 
benchmarks with the ESRD PPS and its respective add-on payment 
adjustments, recognizing the mandatory network fee in cost-reports for 
independent dialysis facilities, removing or mitigating outdated 
barriers to the use of digital health technology solutions in the ESRD 
PPS, changing how ESRD patients pay copays, eliminating copays for home 
dialysis, adding codes for dialysis training onto the telehealth list, 
and the general need for statutory and regulatory refinements to the 
ESRD PPS bundled payment. While we are not providing detailed responses 
to these comments in this final rule because they are out of scope of 
the proposed rule, we thank the commenters for their input and will 
potentially consider the recommendations for future rulemaking.
    We received several comments related to the requirement at Sec.  
413.198(b)(5)(i) to report ``time on machine'' data effective January 
1, 2025. These comments generally requested that CMS amend or eliminate 
the requirement. Some commenters reiterated their concern that this 
requirement would be burdensome and potentially hazardous. Commenters 
also requested that CMS identify a consensus definition for time on 
machine, define time on machine based on ``clock time,'' exclude home 
dialysis claims from reporting requirements, and designate a claims-
based code for an inability to report time on machine data. We did not 
include any proposals in the CY 2025 ESRD PPS proposed rule to modify 
the time on machine reporting requirement, and therefore we are not 
addressing these comments in this rule. We refer commenters to the CY 
2024 ESRD PPS final rule (88 FR 76344 through 76507), and the 
additional guidance CMS posted on November 22, 2023.\6\ However, we 
will consider these comments for potential future refinements to the 
requirement for reporting of ``time on machine'' data.
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    \6\ https://www.cms.gov/files/document/mm13445-esrd-acute-kidney-injury-dialysis-cy-2024-updates.pdf.
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    We received several comments not related to policies we proposed 
regarding the TDAPA, TPNIES, TPNIES for capital-related assets that are 
home dialysis machines, the post-TDAPA add-on payment adjustment, or 
other potential areas where commenters thought similar policies could 
be beneficial. Several commenters expressed concern that the ESRD PPS 
does not sufficiently incentivize innovation in dialysis care or 
reimburse for innovative technologies. Commenters' suggestions included 
extending the TDAPA and TPNIES payment periods from 2 years to 3 years, 
extending the duration of the post-TDAPA add-on payment adjustment to 
make it permanent, refining base rate-setting exercises based on TDAPA 
utilization and price data, and adjusting the base rate at the end of 
the TPNIES payment period. Commenters also suggested revisions to 
existing TPNIES policies such as expanding the TPNIES for capital 
related assets beyond home dialysis machines to include in-center 
dialysis machines or other equipment and supplies that are capital 
related assets. Commenters suggested that CMS further clarify the 
TPNIES substantial clinical improvement criteria, clarify whether 
software can be eligible for the TPNIES, and urged CMS to incentivize 
more manufacturers to apply for TPNIES. Several commenters suggested 
that CMS create a pathway for new clinical laboratory tests related to 
the treatment of ESRD either through an expansion of TPNIES or adoption 
of a parallel Transitional Laboratory Add-on Payment Adjustment, which 
the commenters called TLAPA. Commenters suggested changes to the ESRD 
facility cost reports and billing procedures that would allow for line-
item reporting of TDAPA, post-TDAPA, and TPNIES related costs. We 
received several comments stating that the MA and ESRD PPS regulatory 
processes should be coordinated to ensure that beneficiaries with ESRD 
that are enrolled in MA can access items approved for the TDAPA and the 
TPNIES under the ESRD PPS. Finally, we received several comments on 
Medicare coverage for certain Humanitarian Use Devices.

[[Page 89090]]

We are not providing detailed responses to these comments in this final 
rule because they are not related to the policy proposals of the CY 
2025 ESRD PPS proposed rule. We thank the commenters for their input 
and will potentially consider the recommendations for future 
rulemaking.
    Lastly, a commenter suggested that CMS had not allowed for a 60-day 
comment period for the proposed rule because the beginning of the 
comment period was calculated from the date the proposed rule was made 
available for public inspection on the Federal Register website rather 
than the date that it appeared in a print issue of the Federal 
Register. The commenter stated that the public comment deadline should 
have been September 4, 2024. We disagree with the commenter's assertion 
that we did not allow for the appropriate comment period for this rule. 
Section 1871(b) of the Act requires that we provide for notice of the 
proposed regulation in the Federal Register and a period of not less 
than 60 days for public comment thereon. The proposed rule was 
available for public inspection on federalregister.gov (the website for 
the Office of Federal Register) on June 27, 2024. We believe that 
beginning the comment period for the proposed rule on the date it 
became available for public inspection at the Office of the Federal 
Register fully complied with the statute and provided the required 
notice to the public and a meaningful opportunity for interested 
parties to provide input on the provisions of the proposed rule.
1. CY 2025 ESRD Bundled (ESRDB) Market Basket Percentage Increase; 
Productivity Adjustment; and Labor-Related Share
a. Background
    In accordance with section 1881(b)(14)(F)(i) of the Act, as added 
by section 153(b) of MIPPA and amended by section 3401(h) of the 
Affordable Care Act, beginning in 2012, the ESRD PPS payment amounts 
are required to be annually increased by an ESRD market basket 
percentage increase and reduced by the productivity adjustment 
described in section 1886(b)(3)(B)(xi)(II) of the Act. The application 
of the productivity adjustment may result in the increase factor being 
less than 0.0 for a year and may result in payment rates for a year 
being less than the payment rates for the preceding year. Section 
1881(b)(14)(F)(i) of the Act 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 included in renal dialysis 
services.
    As required under section 1881(b)(14)(F)(i) of the Act, CMS 
developed an all-inclusive ESRDB input price index using CY 2008 as the 
base year (75 FR 49151 through 49162). We subsequently revised and 
rebased the ESRDB input price index to a base year of CY 2012 in the CY 
2015 ESRD PPS final rule (79 FR 66129 through 66136). In the CY 2019 
ESRD PPS final rule (83 FR 56951 through 56964), we finalized a rebased 
ESRDB input price index to reflect a CY 2016 base year. In the CY 2023 
ESRD PPS final rule (87 FR 67141 through 67154), we finalized a revised 
and rebased ESRDB input price index to reflect a CY 2020 base year.
    Although ``market basket'' technically describes the mix of goods 
and services used for ESRD treatment, this term is also commonly used 
to denote the input price index (that is, cost categories, their 
respective weights, and price proxies combined) derived from a market 
basket. Accordingly, the term ``ESRDB market basket,'' as used in this 
document, refers to the ESRDB input price index.
    The ESRDB market basket is a fixed-weight, Laspeyres-type price 
index. A Laspeyres-type price index measures the change in price, over 
time, of the same mix of goods and services purchased in the base 
period. Any changes in the quantity or mix of goods and services (that 
is, intensity) purchased over time are not measured.
b. CY 2025 ESRD Market Basket Update
    We proposed to use the 2020-based ESRDB market basket as finalized 
in the CY 2023 ESRD PPS final rule (87 FR 67141 through 67154) to 
compute the CY 2025 ESRDB market basket percentage increase based on 
the best available data. Consistent with historical practice, we 
proposed to estimate the ESRDB market basket percentage increase based 
on IHS Global Inc.'s (IGI) forecast using the most recently available 
data at the time of rulemaking. IGI is a nationally recognized economic 
and financial forecasting firm with which CMS contracts to forecast the 
components of the market baskets. As discussed in section II.B.1.b.(3) 
of this final rule, we are calculating the final market basket update 
for CY 2025 based on the final market basket percentage increase and 
the final productivity adjustment, following our longstanding 
methodology.
(1) CY 2025 Market Basket Percentage Increase
    Based on IGI's first quarter 2024 forecast of the 2020-based ESRDB 
market basket, the proposed CY 2025 market basket percentage increase 
was 2.3 percent. We also proposed that if more recent data became 
available after the publication of the proposed rule and before the 
publication of this final rule (for example, a more recent estimate of 
the market basket percentage increase), we would use such data, if 
appropriate, to determine the CY 2025 market basket percentage increase 
in the final rule. Accordingly, based on IGI's third quarter 2024 
forecast of the 2020-based ESRDB market basket, the final CY 2025 ESRDB 
market basket percentage increase is 2.7 percent.
(2) 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 ESRDB market basket percentage increase 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 to be equal 
to the 10-year moving average of changes in annual economy-wide, 
private nonfarm business multifactor productivity (MFP) (as projected 
by the Secretary for the 10-year period ending with the applicable 
fiscal year (FY), year, cost reporting period, or other annual period) 
(the ``productivity adjustment'').
    The Bureau of Labor Statistics (BLS) publishes the official 
measures of productivity for the United States economy. As we noted in 
the CY 2023 ESRD PPS final rule (87 FR 67155), the productivity measure 
referenced in section 1886(b)(3)(B)(xi)(II) of the Act previously was 
published by BLS as private nonfarm business MFP. Beginning with the 
November 18, 2021, release of productivity data, BLS replaced the term 
``multifactor productivity'' with ``total factor productivity'' (TFP). 
BLS noted that this is a change in terminology only and would not 
affect the data or methodology.\7\ As a result of the BLS name change, 
the productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of 
the Act is now published by BLS as private nonfarm business TFP; 
however, as mentioned previously, the data and methods are unchanged. 
We refer readers to https://www.bls.gov/productivity/ for the BLS

[[Page 89091]]

historical published TFP data. A complete description of IGI's TFP 
projection methodology is available on CMS's website at https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information. In 
addition, in the CY 2022 ESRD PPS final rule (86 FR 61879), we noted 
that effective for CY 2022 and future years, we would be changing the 
name of this adjustment to refer to it as the productivity adjustment 
rather than the MFP adjustment. We stated this was not a change in 
policy, as we would continue to use the same methodology for deriving 
the adjustment and rely on the same underlying data.
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    \7\ Total Factor Productivity in Major Industries--2020. 
Available at: https://www.bls.gov/news.release/prod5.nr0.htm.
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    Based on IGI's first quarter 2024 forecast, the proposed 
productivity adjustment for CY 2025 (the 10-year moving average of TFP 
for the period ending CY 2025) was 0.5 percentage point. Furthermore, 
we proposed that if more recent data became available after the 
publication of the proposed rule and before the publication of this 
final rule (for example, a more recent estimate of the productivity 
adjustment), we would use such data, if appropriate, to determine the 
CY 2025 productivity adjustment in the final rule. Accordingly, based 
on IGI's third quarter 2024 forecast, the CY 2025 final productivity 
adjustment remains unchanged at 0.5 percentage point.
(3) CY 2025 Market Basket Update
    In accordance with section 1881(b)(14)(F)(i) of the Act, we 
proposed to base the CY 2025 market basket percentage increase on IGI's 
first quarter 2024 forecast of the 2020-based ESRDB market basket. We 
proposed to then reduce the market basket percentage increase by the 
estimated productivity adjustment for CY 2025 based on IGI's first 
quarter 2024 forecast. Therefore, the proposed CY 2025 ESRDB market 
basket update was equal to 1.8 percent (2.3 percent market basket 
percentage increase reduced by a 0.5 percentage point productivity 
adjustment). Furthermore, as noted previously, we proposed that if more 
recent data became available after the publication of the proposed rule 
and before the publication of this final rule (for example, a more 
recent estimate of the market basket percentage increase or 
productivity adjustment), we would use such data, if appropriate, to 
determine the CY 2025 market basket percentage increase and 
productivity adjustment in the final rule. Accordingly, the final CY 
2025 ESRDB market basket update is calculated using the final CY 2025 
ESRDB market basket percentage increase, based on IGI's third quarter 
2024 forecast of the 2020-based ESRDB market basket, and the final 
productivity adjustment, based on IGI's third quarter 2024 forecast. 
Therefore, the final CY 2025 ESRDB market basket update is equal to 2.2 
percent (2.7 percent market basket percentage increase reduced by a 0.5 
percentage point productivity adjustment).
(4) Labor-Related Share
    We define the labor-related share 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. For the CY 2025 
ESRD PPS payment update, we proposed, and are finalizing, to continue 
using a labor-related share of 55.2 percent, which was finalized in the 
CY 2023 ESRD PPS final rule (87 FR 67153 through 67154).
(5) Public Comments on the ESRDB Market Basket Increase Factor, 
Productivity Adjustment, Annual Update and Labor-Related Share
    We invited public comment on our proposals related to the ESRDB 
market basket update and labor-related share. Approximately 25 unique 
commenters including large dialysis organizations (LDOs); small 
dialysis organizations (SDOs), patient advocacy organizations; 
nonprofit dialysis associations; two coalitions of dialysis 
organizations; professional organizations; and MedPAC commented on the 
proposed update. The following is a summary of the public comments 
received on these proposals and our responses.
    Comment: Commenters generally supported increasing the ESRD PPS 
base rate and the utilization of the most recent data available (for 
example, a more recent estimate of the market basket or productivity 
adjustment) to determine the final CY 2025 ESRD PPS update. MedPAC 
recommended that the ESRD PPS base rate increase for CY 2025 should be 
updated by the amount determined under current law, and commented that 
analysis reported in the March 2024 Report to the Congress: Medicare 
Payment Policy concluded that this increase is warranted based on its 
analysis of payment adequacy (which includes an assessment of 
beneficiary access, supply and capacity of facilities, facilities' 
access to capital, quality, and financial indicators for the sector). 
Most other commenters, however, expressed concerns regarding the 
proposed productivity-adjusted ESRDB market basket update, the proposed 
ESRD PPS base rate and payment adequacy under the ESRD PPS.
    Response: We appreciate commenters' support for an increase to the 
ESRD PPS base rate and MedPAC's support of the proposed update amount. 
We acknowledge that many commenters expressed numerous concerns related 
to the proposed payment rates and payment adequacy within the ESRD PPS. 
We agree with MedPAC that increasing the payment rate according to the 
established ESRD PPS methodology is the most appropriate course of 
action. We have summarized and addressed commenters' specific concerns 
regarding the payment rate and payment adequacy below.
    Comment: Numerous commenters expressed concerns regarding payment 
rates within the ESRD PPS and the CY 2025 ESRDB market basket update. 
The general opinion of commenters was that the current ESRD PPS payment 
rate was not adequate. Many of these comments specifically indicated a 
belief that the proposed CY 2025 ESRDB market basket update was not a 
sufficient increase given inflation, specifically pointing to rising 
costs including labor costs. Many of these concerns were presented in 
concert with a request for a ``forecast error adjustment,'' which we 
discuss later in this section of the preamble. Some commenters included 
comparisons between the ESRD PPS payment rates or ESRDB market basket 
increases, and other figures not directly related to the furnishing of 
renal dialysis services such as other Medicare payment systems, overall 
healthcare costs and overall inflation. Most of these comments 
requested that CMS take some action to alleviate the perceived concern 
regarding payment rates. Commenters often cited certain costs which 
have contributed to the rising costs faced by ESRD facilities including 
costs related to labor and wages, costs related to training nurses and 
technicians, supply costs often resulting from limited competition for 
supplies or limited purchasing power for supplies, supply costs 
associated with receiving goods in geographically isolated areas, and 
costs of home dialysis supplies and equipment. Some commenters detailed 
the potential implications of inadequate ESRD PPS payments including 
worsened health outcomes, health equity concerns, access to care issues 
often resulting from ESRD facility closures or reduction of shifts, and 
inability for ESRD facilities to recruit and retain high quality staff. 
Several comments quoted MedPAC's estimated 2024 Medicare margins for 
ESRD facilities which were 0.0 percent as

[[Page 89092]]

published in the March 2024 Report to Congress.\8\
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    Response: We thank commenters for their insight into the payment 
adequacy of the ESRD PPS and the costs faced by ESRD facilities. We 
recognize that the input prices that ESRD facilities face have 
increased in recent years at a rate higher than the ESRDB market basket 
forecasts have predicted. We address commenters' related requests for a 
``forecast error adjustment'' later in this section of the preamble. 
Payment rates under the ESRD PPS are established based on a methodology 
dictated by statute, which means the CY 2025 ESRD PPS base rate 
reflects the CY 2011 ESRD PPS base rate updated by each year's ESRDB 
market basket update. The ESRD PPS base rate has also been routinely 
adjusted by certain budget-neutrality factors, for example, budget 
neutrality adjustment factors related to the annual update to the wage 
index or related to various payment adjustments like the case mix 
adjustments or the LVPA. However, we note that the construction of 
these budget-neutrality factors is calculated to offset the effect of 
certain other updates and adjustments on total spending under the ESRD 
PPS and thereby maintain the level of overall payments, so we do not 
believe that the budget-neutrality factors have had a negative impact 
on the total payments under the ESRD PPS. Since CY 2011, the only time 
the ESRD PPS base rate was increased other than as part of a routine 
update or adjustment was in the CY 2021 ESRD PPS final rule, when we 
first incorporated calcimimetics into the bundled payment and increased 
the base rate by $9.93 (85 FR 71410). In summary, the ESRD PPS base 
rate is based on a longstanding, data driven method provided for by 
statute. We did not propose, and are not finalizing, any changes to the 
ESRD PPS payment update methodology.
    We agree with commenters that payment adequacy is important as it 
has a wide variety of impacts both on ESRD facilities and ESRD 
patients, many of which have been described by commenters. We intend to 
continue monitoring the performance of the ESRD PPS, and any changes to 
the ESRD PPS payment rate or ESRDB market basket would be made through 
notice and comment rulemaking.
    We recognize that MedPAC has found that the Medicare FFS margins 
for ESRD facilities are projected to be 0.0 percent for 2024. We wish 
to add that MedPAC found that Medicare marginal profit for ESRD 
facilities was approximately 18 percent for 2022.\9\ We understand that 
the Medicare FFS margin is lower than many interested parties may 
believe would be appropriate; however, we believe that payments are 
sufficiently high relative to marginal costs to support the profitable 
operation of ESRD facilities generally. While we believe MedPAC margin 
estimates are generally a reasonable metric, we note that the ESRD PPS 
payment rate is based on the change in prices of a fixed bundle of 
goods and services, not based on continuously re-aligning payment with 
costs directly.
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    Comment: Several commenters discussed the current difficulties of 
recruiting and retaining healthcare workers. Commenters often 
characterized this as a healthcare labor shortage and stated that the 
accompanying increase in wage inflation was a major source of increased 
costs for ESRD facilities. Many commenters indicated a belief that the 
proposed CY 2025 ESRDB market basket update or the proposed CY 2025 
ESRD PPS base rate were insufficient given this increase in labor 
costs. One analysis cited by commenters found that labor costs for ESRD 
facilities rose by 23.7 percent between 2017 and 2023 whereas the ESRD 
PPS base rate rose by only 14.7 percent during that same period.
    Response: We appreciate the commenters' evaluation of labor costs 
for ESRD facilities. We acknowledge that many ESRD facilities are 
having increased difficulty in hiring due to overall trends present in 
the healthcare industry. We note that the ESRDB market basket includes 
several price proxies for the various cost categories of the ESRDB 
market basket, including labor. We agree with commenters that labor 
costs are a significant driver of overall rising costs for ESRD 
facilities; however, they are not the only costs faced by ESRD 
facilities and, therefore, are not the only component of the ESRDB 
market basket. As labor is a substantial driver of the overall input 
price increase, generally the other input prices faced by ESRD 
facilities are increasing less than labor prices, so the overall ESRDB 
market basket increase for a given year is less than the amount by 
which labor prices have increased. Our analysis of the ESRDB market 
basket increases from 2017 to 2023 has found that the ESRDB market 
basket forecasted compensation prices increased by a cumulative 20.9 
percent over this time period. The actual ESRDB market basket 
compensation price growth (based on historical data) over this time 
period is 23.7 percent. This suggests the ESRDB market basket price 
proxies are projecting the increased price of labor faced by ESRD 
facilities with reasonable accuracy, and we believe that the data 
presented by the commenters supports this belief.
    Comment: Several commenters, representing numerous industry 
interests, stated they believe that the ESRDB market basket is 
systemically flawed, because the market basket fails to accurately 
capture the changes over time in the prices in the goods and services 
included in renal dialysis services. The commenters believed the flaws 
are due to problems with the weights and price proxies used to assess 
the changes in costs year-over-year.
    The commenters cited analysis from a contractor that suggests 
possible flaws in the market basket cost weights and price proxies. 
First, the commenters noted that the cost weights for capital costs are 
significantly higher in the ESRDB market basket compared to other CMS 
market baskets. They suggested that while 31 percent of the overall 
capital costs are determined to be labor-related, the price proxy for 
capital costs does not use a labor-related price proxy. The commenters 
suggested that the price proxy for capital costs should be a blended 
proxy that also includes a price proxy for labor. Another area of 
concern was that the weight for the ``All Other Goods and Services'' 
cost category is much larger than in other CMS market baskets--a weight 
of 11.1 percent is assigned to this category in the ESRDB market 
basket--and that similar categories under the inpatient prospective 
payment system (IPPS) and skilled nursing facility (SNF) PPS have 
weights of 1.2 percent and 0.3 percent, respectively. The commenters 
stated that further refining the category's definition under the ESRD 
PPS could reduce the weight and result in a more accurate update factor 
reflective of ESRD-specific costs.
    Response: We appreciate the commenters' suggestions for areas that 
could benefit from technical improvements in the design and methodology 
for the ESRDB market basket cost weights and price proxies. We did not 
propose to rebase or revise the ESRDB market basket in the CY 2025 ESRD 
PPS proposed rule and further note that we finalized the 2020-based 
ESRDB market basket in the CY 2023 ESRD PPS final rule (87 FR 67141). 
At the time of the CY 2023 rulemaking cycle, the 2020 Medicare cost 
report data was the most recent, fully complete

[[Page 89093]]

cost data available and reflected cost data as submitted by 
freestanding ESRD facilities.
    The share of capital costs referenced by the commenter are related 
to the allocation of a portion of the capital cost weight to the labor-
related share since fixed capital costs (for example, construction or 
improvements to a building) would include costs associated with labor 
to perform the construction in the initial price, and that price is 
financed over time or incorporated with the lease contract. This 
methodology of allocating a portion of the market basket capital cost 
weight to the labor-related share is consistent across the other CMS 
PPSs such as those for SNFs, inpatient rehabilitation facilities 
(IRFs), inpatient psychiatric facilities (IPFs), and long-term care 
hospitals. For the CY 2023 ESRD PPS final rule (87 FR 67141 through 
67154), we finalized the continued use of the Producer Price Index 
(PPI) Industry for Lessors of Nonresidential Buildings (BLS series code 
#PCU531120531120), to measure the price growth of the Capital-Related 
Building and Fixtures cost category. This PPI reflects the prices of 
leases for nonresidential buildings (including professional and office 
buildings). The North American Industrial Classification System (NAICS) 
definition for this industry comprises establishments primarily engaged 
in acting as lessors of buildings (except mini-warehouses and self-
storage units) that are not used as residences or dwellings. Included 
in this industry are: (1) owner-lessors of nonresidential buildings; 
(2) establishments renting real estate and then acting as lessors in 
subleasing it to others; and (3) establishments providing full service 
office space, whether on a lease or service contract basis. The 
establishments in this industry may manage the property themselves or 
have another establishment manage it for them. We continue to believe 
that this is an appropriate price proxy, as it reflects the lease or 
replacement value of nonresidential buildings that would be influenced 
by both labor prices, such as those associated with construction costs, 
as well as other nonlabor factors, such as building supplies and 
interest rates.
    In response to the concerns related to the ESRDB market basket cost 
weight for All Other Goods and Services, as stated in the CY 2023 ESRD 
PPS final rule (87 FR 67145), the All Other Goods and Services cost 
weight was derived by disaggregating the Administrative and General 
cost weight (calculated using the freestanding ESRD Medicare Cost 
Report data) using the 2012 Service Annual Survey data, which was the 
most recent year of detailed expense data (inflated to 2020 levels) 
published by the Census Bureau for NAICS Code 621492: Kidney Dialysis 
Centers. Though the resulting weight for this category may differ from 
the weight calculated for other indices, it appropriately reflects the 
cost distributions associated with providing ESRD services, as 
prescribed by law.
    We note that changing the composition of the ESRDB market basket or 
changing the price proxies used for the ESRDB market basket would 
likely not have had a significant impact on the past forecast errors of 
the ESRDB market basket, since those forecast errors were calculated by 
comparing the forecasted ESRDB market basket update available at the 
time of rulemaking to the ``actual'' ESRDB market basket update based 
on that same index. Any change to the weights or price proxies in the 
ESRDB market basket would not by itself mitigate a forecast error. The 
forecast error would only be different or mitigated if the forecasts of 
alternative price proxies were more accurate than those for the current 
price proxies used in the ESRDB market basket.
    CMS is open to hearing from the commenters and discussing any data 
or analysis the industry may provide regarding ways to ensure the 
Medicare payments are appropriate and that the market basket price 
proxies and weights are accurate. We welcome any publicly available and 
representative input cost data that reflects total and category-
specific costs for the ESRD industry the commenters could provide. We 
will consider the commenters' suggestions when we propose to rebase and 
revise the ESRDB market basket in the future and note that any such 
proposal would occur through notice and comment rulemaking. We rebase 
and revise the CMS market baskets approximately every 4 to 5 years so 
that the cost weights reflect recent changes in the mix of goods and 
services that ESRD facilities purchase to furnish renal dialysis 
services between base periods. We last rebased in the CY 2023 ESRD PPS 
final rule (87 FR 67141 through 67153).
    Comment: Several commenters expressed concern that the ESRDB market 
basket updates are disproportionately lower than for all other Medicare 
providers reimbursed under a PPS. The commenters stated they understand 
that different cost structures influence this outcome; however, they 
noted it is important to note these discrepancies given that all these 
healthcare sectors draw from the same labor pools, and lower ESRD PPS 
updates erode ESRD facilities' ability to attract caregivers in the 
current labor market. One commenter noted that the price proxy for 
buildings utilized by IPPS and SNF is the ``BEA--Chained Price Index 
for Private Fixed Investment in Structures, Nonresidential, Hospitals 
and Special Care--vintage weighted 27 years'' which the commenter 
stated is growing at a faster rate than the price proxy ``PPI Industry 
for Lessors of Nonresidential Buildings'' which is used by the ESRD 
PPS.
    Response: The 2020-based ESRDB market basket percentage increase is 
equal to the weighted price change of the individual price proxies 
based on their respective cost weights. The cost weights are primarily 
derived using data from the freestanding ESRD facility Medicare cost 
reports and reflect relative shares of input costs needed to provide 
renal dialysis services to ESRD beneficiaries. Similarly, the other CMS 
PPS market baskets, such as the 2022-based SNF market basket and 2018-
based IPPS market basket, reflect the relative share of input costs 
needed to provide skilled nursing and hospital care to Medicare 
beneficiaries based on the data reported on the respective provider 
cost reports.
    While we understand that commenters may compare the annual updates 
in the ESRDB market basket to other Medicare payment system market 
baskets, the ESRDB market basket is developed in accordance with 
section 1881(b)(14)(F)(i) of the Act requiring that the index reflect 
the composition of costs associated with providing renal dialysis 
services. These costs (and the subsequent cost distributions) are 
reported by ESRD facilities on the Medicare cost reports and may differ 
(appropriately) from the relative distribution of costs of other 
medical care providers, such as inpatient hospitals or skilled nursing 
facilities. Additionally, the price proxies used in the ESRDB market 
basket are intended to reflect the price pressures faced by ESRD 
facilities. While some price proxies may be similar to those used 
across other CMS market baskets, in most cases they are appropriately 
different because they reflect the price pressures faced by ESRD 
facilities. For example, the rate of increase in the ESRDB market 
basket compensation category reflects the weighted average of the price 
increase for occupations employed by ESRD facilities.
    At the time of the CY 2025 ESRD PPS proposed rule, based on the 
IGI's first quarter 2024 forecast with historical data through the 
fourth quarter of 2023,

[[Page 89094]]

the 2020-based ESRDB market basket increase was forecasted to be 2.3 
percent for CY 2025, reflecting forecasted compensation price growth of 
3.6 percent. In the CY 2025 ESRD PPS proposed rule, we proposed that if 
more recent data became available, we would use such data, if 
appropriate, to derive the final CY 2025 ESRDB market basket update for 
the final rule. For this final rule, we now have an updated forecast of 
the price proxies underlying the market basket that incorporates more 
recent historical data and reflects a revised outlook regarding the 
U.S. economy and expected price inflation for CY 2025. Based on IGI's 
third quarter 2024 forecast with historical data through the second 
quarter of 2024, we are projecting a CY 2025 ESRDB market basket 
increase of 2.7 percent (reflecting forecasted compensation price 
growth of 3.8 percent). Therefore, for CY 2025 a final ESRDB 
productivity-adjusted market basket update of 2.2 percent (2.7 percent 
less 0.5 percentage point for the productivity adjustment) will be 
applicable, compared to the 1.8 percent productivity-adjusted market 
basket update that was proposed.
    Comment: Several commenters raised concerns about the labor-related 
share of the ESRD PPS. These commenters suggested that adjusting the 
labor-related share could better recognize changes in labor costs and 
result in a higher overall market basket update for the ESRD PPS. Some 
commenters noted that the ESRD PPS labor-related share for CY 2025 is 
55.2 percent while the labor-related share for SNF PPS is 70.1 percent 
and 67.6 or 62 percent for IPPS.
    Response: The purpose of the labor-related share is to reflect the 
proportion of the national ESRD PPS base payment rate that is adjusted 
by the wage index. CMS adjusts the labor-related portion of the base 
rate to account for geographic differences in the area wage levels 
using an appropriate wage index, which reflects the relative level of 
wages and wage-related costs in the geographic area in which the ESRD 
facility is located. The purpose of the labor-related share is to 
allocate ESRD payment between a labor-related portion and non-labor-
related portion for purposes of geographic adjustment and the labor-
related share does not directly impact the market basket update.
    We define the labor-related share 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 costs that are related to, 
influenced by, or vary with the local labor market. In the CY 2023 ESRD 
PPS final rule (87 FR 67153 through 67154), we detailed the use of the 
2020-based ESRDB market basket cost weights to determine the labor-
related share for ESRD facilities. Specifically, effective for CY 2023, 
a labor-related share of 55.2 percent was determined based on the sum 
of Wages and Salaries, Benefits, Housekeeping, Operations & 
Maintenance, 87 percent of the weight for Professional Fees, and 46 
percent of the weight for Capital-related Building and Fixtures 
expenses, which, with the exception of the Professional Fees (0.7 
percent) cost weight, were derived from the ESRD Medicare cost reports 
(CMS Form 265-11, OMB NO. 0938-0236).
    While the conceptual definition of the labor-related share used for 
the ESRD PPS is similar to that used for SNF PPS and IPPS, the cost 
structures for the various providers differ substantially. Thus, we 
believe the ESRD labor-related share of 55.2 percent is appropriate, 
and we are finalizing our proposal to continue to use this labor-
related share for CY 2025 ESRD PPS payments.
    We note that the labor-related share, as previously discussed, is 
used to determine the portion of the ESRD PPS base rate which is 
related to labor for the purposes of applying the ESRD PPS wage index. 
We believe some of the commenters who requested a higher labor-related 
share may have believed that increasing the labor-related share would 
change the proportion of the ESRDB market basket to which price proxies 
related to labor are applied. As discussed in the CY 2023 ESRD PPS 
final rule, the ESRDB market basket cost weights are derived from cost 
report data and, therefore, are the most appropriate measures of the 
proportion of the ESRDB to which we apply each pricy proxy. It would 
not be appropriate to apply one of the labor price proxies to other 
non-labor cost weights in the ESRDB market basket.
    Comment: One commenter stated that while they understand CMS does 
not have authority to waive the application of the productivity 
adjustment, they were concerned that applying a one-size-fits-all 
approach in an effort to incentivize efficiencies fails to recognize 
the unique challenges facing ESRD facilities.
    Response: Section 1881(b)(14)(F)(i) of the Act requires the 
application of the productivity adjustment described in section 
1886(b)(3)(xi)(II) of the Act. As required by statute, the CY 2025 
productivity adjustment is derived based on the 10-year moving average 
growth in economy-wide productivity for the period ending CY 2025. We 
recognize the concerns of the commenters regarding the appropriateness 
of the productivity adjustment; however, we are required pursuant to 
section 1881(b)(14)(F)(i) of the Act to apply the specific productivity 
adjustment described here and do not believe it can be removed from the 
calculation of the market basket update. As such, we are not finalizing 
any changes to the use of the productivity adjustment in the CY 2025 
ESRDB market basket update.
    As stated in the CY 2025 ESRD PPS proposed rule (89 FR 55765), the 
United States Department of Labor's Bureau of Labor Statistics (BLS) 
publishes the official measures of annual economy-wide, private nonfarm 
business total factor productivity (previously referred to as annual 
economy-wide, private nonfarm business multifactor productivity). IGI 
forecasts total factor productivity consistent with BLS methodology by 
forecasting the detailed components of TFP. A complete description of 
IGI's TFP projection methodology is available on the CMS website at 
https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information. We believe our methodology for the productivity adjustment 
is consistent with sections 1881(b)(14)(F)(i)(II) and 
1886(b)(3)(B)(xi)(II) of the Act, the latter of which states the 
productivity adjustment is equal to the 10-year moving average of 
changes in annual economy-wide private nonfarm business multi-factor 
productivity (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 CY 2025 proposed productivity adjustment of 0.5 percent was 
based on IGI's forecast of the 10-year moving average of annual 
economy-wide private nonfarm business TFP, reflecting historical data 
through 2022 as published by BLS and forecasted TFP for 2023 through 
2025. The final productivity adjustment for CY 2025 is also 0.5 
percentage point for this final rule and is slightly higher than the 
productivity adjustment for CY 2024 (0.3 percent). This higher 
productivity adjustment is primarily a result of incorporating BLS 
revised historical data through 2022, the preliminary historical growth 
rate in TFP for 2023, and an updated forecast for TFP growth for 2024 
reflecting higher expected growth in economic output.
    Comment: Commenters reported that the IGI forecast continues to 
significantly underestimate the increasing costs ESRD facilities incur 
when providing services to Medicare

[[Page 89095]]

beneficiaries and that the market basket increases provided by CMS have 
not kept up with the rising costs of doing business, particularly labor 
costs. Commenters stated that while they recognize that updates to the 
ESRDB market basket are set prospectively, and some degree of forecast 
error is thus inevitable, they also believe that ESRD facilities should 
not be financially disadvantaged as a result of CMS market basket 
forecasting errors. Many commenters urged CMS to reconsider its 
decision not to adopt a forecast error policy. They stated that a 
forecast error adjustment for the ESRD PPS would be needed to ensure 
the funding that the Congress intended ESRD facilities to receive would 
be available to support patient care and help address health 
inequities.
    The commenters stated that the CMS contractor that determines 
forecasted price growth for the bundled ESRD PPS market basket has 
failed to provide an accurate update for the last 4 years resulting in 
an approximately negative 7 percent forecast error since 2019. They 
further stated that they believe that the existing methodology will 
produce an inaccurate annual payment update for CY 2025. Furthermore, 
they stated that the forecast errors in the ESRD PPS are 
disproportionately worse than the forecast errors in the other Medicare 
payment systems and continue to urge CMS to address what they describe 
as the past underfunding of the payment system.
    A few commenters stated that the failure to correct the known 
forecast errors over the last several years is contrary to the 
statutory requirement at section 1881(b)(14)(F)(i) of the Act to update 
the ESRD PPS payment rate based on the change in prices of the ESRDB. 
The commenters stated that the CMS response in the CY 2024 ESRD PPS 
final rule was that its market basket update forecast ``misses'' for CY 
2021 and CY 2022 were largely due to unanticipated inflationary and 
labor market pressures as the economy emerged from the COVID-19 Public 
Health Emergency (PHE) and that an analysis of the forecast error of 
the ESRDB market basket over a longer period shows the forecast error 
has been both positive and negative. The commenters highlighted our 
past statement that the difference between the projected and actual 
market basket increases can be both positive and negative. The 
commenters claimed that this is not the reality of the current 
situation, and that it would be unlikely that the forecast errors would 
``miss'' to the same extent in the future. The commenters also noted 
that it appears that the under-forecast of the ESRDB market basket 
updates have continued into 2023, and they stated that preliminary 
evidence shows even into 2024.
    The commenters requested that CMS reconsider its decision not to 
adopt a forecast error adjustment for the ESRD PPS to account for the 
underestimates from CMS' forecasted market basket updates in prior 
calendar years, and to eliminate the risk of further substantial 
forecast errors going forward by adopting a forecast error adjustment 
policy for future years modeled after the forecast error adjustment 
policy in the SNF PPS. Some commenters supported CMS finalizing a 
forecast error adjustment in this final rule effective for CY 2025, 
whereas other commenters supported CMS proposing a forecast error 
adjustment effective for CY 2026. The commenters further stated that 
addressing these forecast errors is essential to fulfill CMS's 
statutory obligation to ensure that the ESRD PPS market basket update 
reflects actual changes over time in the prices of an appropriate mix 
of goods and services included in renal dialysis services.
    Several commenters noted that when CMS first introduced the 
forecast error adjustment for SNFs, the agency explicitly determined 
that this type of adjustment would not be providing a source of new 
industry funding. Instead, the commenters noted that CMS stated that we 
were correcting an under-forecast of pricing levels that resulted in 
lower payments than we would otherwise have made if actual, instead of 
forecast, data were used. One commenter further stated that on the 
contrary in the CY 2024 ESRD PPS final rule, CMS justified not 
implementing stakeholder calls for a forecast error adjustment for the 
ESRD PPS by explaining that the cumulative under-forecast of the SNF 
market basket increases was not due to a PHE, which was the case for 
the ESRD PPS's under-forecast in recent years. However, the same 
commenter noted that CMS finalized a forecast error adjustment for the 
SNF payment system due to the rapid increase in the price of labor and 
because CMS concluded that a forecast error adjustment was appropriate 
for payment accuracy for SNFs. The commenter further rationalized that 
while the forces driving the under-forecast of the ESRDB market basket 
today may differ from those impacting the SNF market basket in 2003, 
the outcomes for providers are presenting in the same manner. 
Commenters stated that they believe implementation of a retroactive 
cumulative forecast error adjustment and continued forecast error 
adjustment in the future is within CMS's existing statutory authority 
under section 1881(b)(14)(F)(i) of the Act. Commenters referenced 
perceived similarities between this statutory language for the ESRD PPS 
and the statutory language for the SNF PPS annual update at section 
1395rr(b)(F)(i)(I) of the Act, which CMS utilized when finalizing the 
SNF PPS forecast error adjustment.
    Based on what the commenters characterized as the same statutory 
obligation and an even larger and longer record of forecast errors, the 
commenters requested CMS adopt the same retrospective forecast error 
adjustment and future forecast error adjustment process for the ESRD 
PPS. They provided further context for this request by referencing the 
justification of the forecast error adjustment policy in the SNF PPS as 
precedent.
    Some commenters urged CMS to implement a one-time retrospective 
adjustment to the ESRD PPS base rate in the amount of the current 
cumulative forecast error calculated from the beginning of the ESRD 
PPS, while others requested such an adjustment for the period of 2019 
or 2020 through 2023. Additionally, most commenters also supported the 
implementation of a forecast error correction policy for future years 
that would be triggered when the absolute (positive or negative) error 
is equal to or exceeds a 0.5 percentage point threshold. One commenter 
also requested that CMS acknowledge that the current forecast 
methodology has failed to produce accurate updates for 4 years and work 
with IGI to minimize forecast misses in the future. One commenter 
requested more transparency regarding the methodology for developing 
the price forecasts that are used in the CMS market baskets.
    Response: The ESRDB market basket updates are set prospectively, 
which means that the update relies on a mix of both historical data for 
part of the period for which the update is calculated and forecasted 
data for the remainder. For instance, the CY 2025 market basket update 
in this final rule reflects historical data through the second quarter 
of CY 2024 and forecasted data through the fourth quarter of CY 2025. 
While there is no precedent to adjust for market basket forecast error 
in the ESRD PPS payment update, a forecast error can be calculated by 
comparing the actual market basket increase for a given year to the 
forecasted market basket increase. Due to the uncertainty regarding 
future price trends, forecast errors can be both positive and negative, 
as has occurred

[[Page 89096]]

since the implementation of the ESRD PPS in CY 2011. Over most of this 
history the forecast errors were small in magnitude, with the largest 
error (in absolute terms) prior to 2021 being an over-forecast (the 
actual market basket increase was less than the forecasted market 
basket increase) of 0.8 percentage point in 2017. More recently the 
ESRDB market basket has been under-forecast, as noted by the 
commenters, with larger errors occurring for 2021 through 2023. The 
cumulative forecast error since ESRD PPS inception (CY 2012 to CY 2023) 
is an under-forecast of 4.3 percent.\10\ These recent forecast errors 
were largely a function of uncertainty in the overall economy and the 
health sector specifically due to the nature of the COVID-19 PHE and 
the unforeseen inflationary environment.
---------------------------------------------------------------------------

    \10\ This figure does not include a forecast error for CY 2015, 
as section 1881(b)(14)(F)(i)(III) of the Act required a 0.0 percent 
update for that year.
---------------------------------------------------------------------------

    We thank the commenters for their continued feedback on the ESRDB 
market basket. In the CY 2024 ESRD PPS proposed rule we explained why 
we did not believe a forecast error adjustment was appropriate at that 
time. We did not propose a forecast error adjustment in the CY 2025 
ESRD PPS proposed rule for these same reasons and are not finalizing a 
forecast error adjustment at this time. Specifically, predictability in 
Medicare payments is important to enable ESRD facilities to budget and 
plan their operations, and forecast error calculations are 
unpredictable (88 FR 76356 through 76358). Historically, the positive 
differences between the actual and forecasted market basket increase 
have offset negative differences over time. Although we acknowledge 
that this has not been the case in recent years, we note that it may 
take a longer period of time for forecast errors to balance out. For 
example, in CY 2016 the cumulative forecast error for the ESRDB market 
basket since CY 2012 was 0.4 percent, and in each year from CY 2012 to 
CY 2016, the cumulative forecast error was positive, ranging from 0.2 
percent to 0.5 percent. Then, beginning in CY 2017, the cumulative 
forecast error was negative, which continued through CY 2020, ranging 
from -0.4 percent to -0.6 percent. These examples illustrate that over 
time positive and negative differences between the actual and 
forecasted market basket increase have tended to balance out. 
Therefore, in accordance with our longstanding ESRD PPS payment update 
methodology, we are finalizing to update the CY 2025 ESRD PPS base rate 
without the application of a forecast error adjustment to the ESRDB 
market basket.
    Given the concerns raised by the commenters, we intend to continue 
to monitor the pattern of the ESRDB market basket forecast errors to 
observe if the historical experience (where errors have balanced out) 
continues. Any changes to the ESRD PPS payment update methodology, 
including any forecast error adjustment policy, would be proposed 
through notice and comment rulemaking. We acknowledge the commenter's 
request for more transparency regarding the ESRDB market basket 
forecast methodology and have shared details in prior and this year's 
rules on these methods; however, we are limited in the amount of 
information we can provide regarding the forecast methodology, which is 
proprietary to IGI.
    Comment: Some commenters expressed concern about whether CMS was 
adhering to Social Security Act and the Administrative Procedure Act 
requirements in declining to adopt a forecast error adjustment. One 
commenter stated that, given the past forecast errors, they did not 
believe our methodology fulfilled the requirement to update the payment 
system based on the change in prices of the ESRDB market basket. This 
commenter further stated a belief that because CMS had determined that 
a forecast error adjustment was appropriate for the SNF PPS in 2004, we 
would be in violation of the ESRD PPS's similarly worded statute unless 
we were to implement a forecast error adjustment for the ESRD PPS, due 
to the similarities between the circumstances of SNF PPS in 2004 and 
the ESRD PPS presently.
    Response: We strongly disagree with the commenter's assertion that 
CMS's position regarding an ESRD PPS forecast error payment adjustment 
conflicts with any of the statutory requirements for the ESRD PPS. As 
we have discussed previously, we believe that the ESRDB market basket 
forecast reflects the change in prices of an appropriate mix of goods 
and services included in renal dialysis services, as required by 
statute. We note that the circumstances of the ESRD PPS in the present 
are not identical to the circumstances of the SNF PPS when we finalized 
a forecast error adjustment. The cumulative under-forecast of the SNF 
market basket increases in 2004 was based on a rapid increase in the 
price of labor, not due to a PHE that rapidly increased the price of 
most of the goods and services in the ESRDB market basket. 
Additionally, the increase in the price of labor uniquely impacted the 
SNF PPS at that time as the SNF PPS had only existed for a few years 
and had numerous under-forecasts in that short timeframe. This is 
unlike the current ESRD PPS environment, where the ESRD PPS had a 
decade of reasonably accurate forecasts, followed by a PHE resulting in 
multiple Medicare payment systems facing similar forecast errors. We 
continue to believe these differences in circumstances are relevant in 
evaluating the forecast errors in the ESRD PPS in recent years and 
their implications for the future performance of the payment system. We 
note that when CMS finalized a forecast error adjustment for the SNF 
payment system, we concluded that a forecast error adjustment was 
appropriate for payment accuracy for SNFs; not that it was required 
under the statute (68 FR 46057). For these reasons, we disagree with 
the commenter's stated belief that a forecast error adjustment would be 
required to fulfill the ESRD PPS statutory requirements, and, at this 
time, for the reasons discussed previously, we do not believe that a 
forecast error payment adjustment would be appropriate for the ESRD 
PPS. We also disagree with the commenter's assertion that by not 
implementing a forecast error adjustment we are in violation of the 
Administrative Procedure Act; as discussed previously, our established 
ESRDB market basket methodology has been set and revised through notice 
and comment rulemaking (75 FR 49151 through 49162, 79 FR 66129 through 
66136, 83 FR 56951 through 56964, 87 FR 67141 through 67154). For the 
CY 2025 ESRD PPS proposed rule we provided a 60-day comment period, and 
we have considered and responded to all relevant comments in this final 
rule explaining our reasoning for the policies we are finalizing.
    Comment: One coalition of dialysis organizations disagreed with 
CMS's evaluation that a forecast error adjustment would make ESRD PPS 
payments less predictable. The commenter stated that under the current 
payment system providers are uncertain whether the ESRDB market basket 
forecast would be accurate for a given year.
    Response: We appreciate this commenter's perspective on 
predictability within the ESRD PPS as we work to improve the payment 
system. Our current view on predictability is that it is important for 
ESRD facilities to be able to plan for future years with the most 
complete information possible, which we believe would likely not be the 
case if the ESRD PPS base rate would be lowered in a given year due to 
an over-forecast in the prior year. We will take this input into 
consideration for future rulemaking.

[[Page 89097]]

    Final Rule Action: We did not propose and are not finalizing any 
changes to the ESRDB market basket methodology for CY 2025. Thus, the 
final ESRDB market basket update for CY 2025 is 2.2 percent, 
representing a ESRDB market basket percentage increase of 2.7 percent 
reduced by a 0.5 percentage point productivity adjustment.
2. CY 2025 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, as the 
Secretary determines to be appropriate. In the CY 2011 ESRD PPS final 
rule (75 FR 49200), we finalized an adjustment for wages at Sec.  
413.231. Specifically, we established a policy to adjust the labor-
related portion of the ESRD PPS base rate to account for geographic 
differences in the area wage levels using an appropriate wage index, 
which reflects the relative level of hospital wages and wage-related 
costs in the geographic area in which the ESRD facility is located. 
Under current policy, we use the Office of Management and Budget's 
(OMB's) CBSA-based geographic area designations to define urban and 
rural areas and their corresponding wage index values (75 FR 49117). 
OMB publishes bulletins regarding CBSA changes, including changes to 
CBSA numbers and titles. The bulletins are available online at https://www.whitehouse.gov/omb/information-for-agencies/bulletins/.
    We have also adopted methodologies for calculating wage index 
values for ESRD facilities that are located in urban and rural areas 
where there are no hospital data. For a full discussion, see the CY 
2011 and CY 2012 ESRD PPS final rules at 75 FR 49116 through 49117 and 
76 FR 70239 through 70241, respectively. For urban areas with no 
hospital data, we have computed the average wage index value of all 
hospitals in urban areas within the State to serve as a reasonable 
proxy for the wage index of that urban CBSA. For rural areas with no 
hospital data, we have computed the wage index using the average 
hospital wage index values from all contiguous CBSAs to represent a 
reasonable proxy for that rural area. We applied the statewide urban 
average based on the average of all urban areas within the State to 
Hinesville Fort Stewart, Georgia (78 FR 72173), and we applied the wage 
index for Guam to American Samoa and the Northern Mariana Islands (78 
FR 72172).
    Under Sec.  413.231(d), a wage index floor value of 0.6000 is 
applied under the ESRD PPS as a substitute wage index for areas with 
very low wage index values, as finalized in the CY 2023 ESRD PPS final 
rule (87 FR 67161). Currently, all areas with wage index values that 
fall below the floor are located in Puerto Rico and the US Virgin 
Islands. However, the wage index floor value is applicable for any area 
that may fall below the floor. A further description of the history of 
the wage index floor under the ESRD PPS can be found in the CY 2019 
ESRD PPS final rule (83 FR 56964 through 56967) and the CY 2023 ESRD 
PPS final rule (87 FR 67161).
    An ESRD facility's wage index is applied to the labor-related share 
of the ESRD PPS base rate. In the CY 2023 ESRD PPS final rule (87 FR 
67153), we finalized the use of a labor-related share of 55.2 percent. 
In the CY 2021 ESRD PPS final rule (85 FR 71436), we updated the OMB 
delineations as described in the September 14, 2018, OMB Bulletin No. 
18-04, beginning with the CY 2021 ESRD PPS wage index. In that same 
rule, we finalized the application of a 5 percent cap on any decrease 
in an ESRD facility's wage index from the ESRD facility's wage index 
from the prior CY. We finalized that the transition would be phased in 
over 2 years, such that the reduction in an ESRD facility's wage index 
would be capped at 5 percent in CY 2021, and no cap would be applied to 
the reduction in the wage index for the second year, CY 2022. In the CY 
2023 ESRD PPS final rule (87 FR 67161), we finalized a permanent policy 
under Sec.  413.231(c) to apply a 5 percent cap on any decrease in an 
ESRD facility's wage index from the ESRD facility's wage index from the 
prior CY. For CY 2025, as discussed in section II.B.1.b.(4) of this 
final rule, the final labor-related share to which the wage index would 
be applied is 55.2 percent.
    In the CY 2011 ESRD PPS final rule (75 FR 49116) and the CY 2011 
final rule on Payment Policies Under the Physician Fee Schedule (PFS) 
and Other Revisions to Part B (75 FR 73486) we established an ESRD PPS 
wage index methodology to use the most recent pre-floor, pre-
reclassified hospital wage data collected annually under the hospital 
inpatient prospective payment system (IPPS). The ESRD PPS wage index 
values have historically been calculated without regard to geographic 
reclassifications authorized for acute care hospitals under sections 
1886(d)(8) and (d)(10) of the Act and utilize pre-floor hospital data 
that are unadjusted for occupational mix.
b. Methodology Changes for the CY 2025 ESRD PPS Wage Index
    CMS has received feedback on our longstanding ESRD PPS wage index 
methodology from interested parties through comments on routine wage 
index updates in the annual ESRD PPS proposed rules. Commenters often 
suggested specific improvements for the ESRD PPS wage index. In the CY 
2024 ESRD PPS final rule (88 FR 76359 through 76361), we discussed the 
comments on the routine wage index proposals from the CY 2024 ESRD PPS 
proposed rule (88 FR 42436); commenters, including MedPAC, suggested 
that we establish an ESRD PPS wage index for all ESRD facilities using 
wage data that represents all employers and industry-specific 
occupational weights, rather than the hospital wage data currently 
used. MedPAC specifically suggested that CMS implement the 
recommendations discussed in its June 2023 Report to Congress,\11\ 
which recommended moving away from the current IPPS wage index 
methodology in favor of a methodology based on all employer wage data 
for all Medicare PPSs with industry specific occupational weights. 
Additionally, MedPAC suggested that the new methodology reflect local 
area level differences in wages between and within metropolitan 
statistical areas and statewide rural areas and smooth wage index 
differences across adjacent local areas. MedPAC stated that, compared 
to the current IPPS wage index methodology, a methodology based on all 
employer wage data with industry-specific occupational weights would 
improve the accuracy and equity of payments for provider types other 
than inpatient acute care hospitals, such as ESRD facilities.
---------------------------------------------------------------------------

    \11\ https://www.medpac.gov/wp-content/uploads/2023/06/Jun23_MedPAC_Report_To_Congress_SEC.pdf.
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    In past years some interested parties have contended that the 
methodology used to construct the current ESRD PPS wage index does not 
accurately reflect the ESRD facility labor market. These interested 
parties have noted that the ESRD PPS wage index has been based on the 
IPPS wage index, which uses hospital data, which commenters have stated 
may not be applicable for ESRD facilities. More specifically, 
commenters have suggested that the types of labor used in ESRD 
facilities differ significantly from the types of labor used by 
hospitals, which may result in the use of relative wage values across 
the United States that do not accurately match the actual relative 
wages paid by ESRD facilities. For example, if ESRD

[[Page 89098]]

facilities have a different proportion of registered nurses (RNs), 
technicians and administrative staff compared to hospitals, and if 
wages for each of those labor categories vary differentially across the 
country, it is possible that relative wages for ESRD facilities, given 
their occupational mix, would vary differently from relative wages for 
hospitals across CBSAs. Because of this, some commenters have 
specifically requested that CMS develop an ESRD PPS wage index based 
only on data from ESRD facilities. Additionally, some commenters have 
criticized the time lag associated with using the IPPS wage index, 
which is generally based on data from four FYs prior to the rulemaking 
year (see, for example, 88 FR 58961).
(1) December 2019 Technical Expert Panel (TEP)
    In response to feedback from interested parties on the ESRD PPS 
wage index, CMS's data contractor hosted a Technical Expert Panel (TEP) 
in December of 2019.\12\ During this TEP, the contractor presented a 
potential alternative approach to the wage index, which utilized BLS 
data to address the concerns of commenters, to initiate a discussion on 
the ramifications of a potential new ESRD PPS wage index that would 
combine two sources of existing data to more closely reflect the 
occupational mix in ESRD facilities. The methodology presented at this 
TEP utilized publicly available wage data for selected occupations from 
the BLS OEWS survey and occupational and fulltime equivalency (FTE) 
data from freestanding ESRD facility cost reports (Form CMS 265-11, OMB 
No. 0938-0236). Specifically, this approach used the freestanding ESRD 
facility cost reports to determine the national average occupational 
mix and relative weights for ESRD facilities. Next, the contractor 
applied the estimated county-level wages based on BLS OEWS \13\ to 
obtain occupation-specific wages in each county. The BLS OEWS data is 
updated annually using sample data collected in six semiannual survey 
panels over the prior 3-year period, which allows for the inclusion of 
more recent data than the hospital cost report data that is utilized by 
the IPPS wage index. Therefore, as noted during the TEP, this new 
methodology would allow CMS to adjust wage index values to reflect 
relative changes in wage conditions in a timelier fashion compared to 
the current ESRD PPS wage index methodology. Additionally, as noted 
during the TEP, by utilizing FTE data reported on the freestanding ESRD 
facility cost reports, this methodology is likely more reflective of 
the occupational mix employed by ESRD facilities than the hospital wage 
index.
---------------------------------------------------------------------------

    \12\ https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-summary-report-may-2020.pdf.
    \13\ The OEWS program produces estimates of employment and wages 
by occupation based on a survey of business establishments. OEWS 
data are released annually with a May reference date. Each set of 
OEWS estimates is based on data from six semiannual survey panels 
collected over a 3-year period. For example, the May 2022 OEWS wage 
estimates are based on six semiannual survey panels from November 
2019 through May 2022. We note that we use a crosswalk between 
counties and MSAs, non-MSAs and NECTAs to get county level wage 
estimates.
---------------------------------------------------------------------------

    Panelists at this TEP generally indicated their preference for the 
presented alternative wage index methodology, because it utilized more 
recent wage data from the BLS OEWS program. Panelists also favored how 
the alternative methodology was more targeted to ESRD facilities by 
utilizing FTE data from ESRD facility cost reports in determining the 
occupational mix. Some panelists voiced concerns about using publicly 
available BLS geographic area data, as the data do not disaggregate 
wages by health care sector, and therefore wages from acute care 
hospitals are not differentiated from outpatient care centers and other 
non-hospital health care settings. Some panelists noted that this would 
result in a wage index based on the publicly available BLS OEWS data 
having some of the same limitations for which the use of the IPPS wage 
index has been criticized--mainly that it includes wage data from 
hospitals.
(2) Proposed New Methodology for Using BLS Data To Calculate the ESRD 
PPS Wage Index
    Based on feedback we received in response to past ESRD PPS proposed 
rules and from the December 2019 TEP, we developed a new ESRD PPS wage 
index methodology that we believe better reflects the ESRD facility 
labor market, which we proposed in the CY 2025 ESRD PPS proposed rule 
(89 FR 55766 through 55782). Similar to the methodology presented in 
the December 2019 TEP, this new methodology utilizes two data sources: 
one for occupational mix and one for geographic wages. First, we 
determine a national ESRD facility occupational mix (NEFOM) based on 
cost report data from freestanding ESRD facilities. Second, we extract 
and use data from the publicly available BLS OEWS survey on the average 
wages in each CBSA for each labor category present in the NEFOM. We 
note that because the publicly available BLS data are available at the 
Metropolitan Statistical Area (MSA), non-MSA and New England City and 
Town Area (NECTA) levels, and the wage index is designated at the CBSA 
level (which uses MSAs and other area designations that differ from 
non-MSAs and NECTAs), we use the area definition dataset \14\ that 
accompanies the BLS data to assign wages at the county level, and map 
counties to CBSAs using a crosswalk. This crosswalk is included in 
Addendum B, available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices.
---------------------------------------------------------------------------

    \14\ For more information on MSAs and non-MSAs please see: 
https://www.bls.gov/oes/current/msa_def.htm. For more information on 
the most recent CBSA delineations (as discussed later in this 
section) please see: https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf.
---------------------------------------------------------------------------

(a) Description of Data Sources Utilized in the Proposed Methodology
    In the CY 2025 ESRD PPS proposed rule we discussed the data sources 
which we utilized for the proposed new ESRD PPS wage index methodology. 
We described the data sources in detail alongside explanations of the 
ways in which we proposed to use the data, potential benefits and 
weaknesses compared to the IPPS wage index data, and the lag associated 
with the data.
(i) Data From the BLS OEWS Metropolitan and Nonmetropolitan Area 
Occupational Employment and Wage Estimates
    The BLS OEWS program publishes annual estimates of employment and 
wages by occupation. Each set of OEWS estimates is based on data from 
six semiannual survey panels collected over a 3-year period. For 
example, the May 2022 OEWS wage estimates, published in April 2023, are 
based on six semiannual survey panels from November 2019 to May 2022. 
We proposed to use publicly available mean hourly wage data at the MSA 
level,\15\ which is available online at https://www.bls.gov/oes/. OEWS 
wage data collected in earlier survey panels are ``aged'' or updated to 
the reference date of the estimates based on adjustment factors derived 
from the OEWS survey data using a regression model. The BLS OEWS mean 
hourly wage data that was presented in the CY 2025 ESRD PPS proposed 
rule and was utilized for the proposed new wage index methodology 
described in detail later in this section of this final rule reflect 
these wage aging adjustments. Table 1 shows the

[[Page 89099]]

occupation codes based on the Standard Occupational Classification 
(SOC) and the corresponding occupational title for each SOC, alongside 
the common name that we use to refer to workers in specific occupations 
throughout this final rule. The ESRD PPS common names match the FTE 
categories captured on Worksheet S-1, lines 23 through 30 of the 
freestanding ESRD facility cost report form. The SOC System is a United 
States government system for classifying occupations. It is used by 
Federal Government agencies collecting occupational data, enabling 
comparison of occupations across data sets. When we considered the use 
of BLS data we had to determine which occupation code was appropriate 
for each occupation in the NEFOM. For many of these occupations, the 
corresponding BLS code was straightforward. For example, BLS code 29-
1141 is for ``Registered Nurses'' which matches the category on the 
cost reports from which the NEFOM is derived exactly. For the 
occupations that were not necessarily specific to the healthcare field, 
for example administrative staff, we used BLS codes that were specific 
for healthcare, such as code 43-6013 for ``Medical Secretaries and 
Administrative Assistants.'' In the proposed rule, we explained that we 
believe that these are the most appropriate codes, as a more general 
code may not capture the specifics of the healthcare labor market.
---------------------------------------------------------------------------

    \15\ We use the territory-level data for Guam and Virgin 
Islands, since the MSA and non-MSA level data is not available.
[GRAPHIC] [TIFF OMITTED] TR12NO24.000

    The BLS OEWS data used for the analysis presented in the proposed 
rule included mean wages by occupation for all industries combined 
located in a MSA (or non-MSA area or NECTA), including the hospital 
industry. While interested parties have criticized the current ESRD PPS 
wage index methodology's sole reliance on hospital data, we stated that 
inpatient hospital data is appropriate to include in this analysis for 
several reasons. Principally, as explained later in this section, the 
wage data is being weighted based on an occupational mix that is 
specific to ESRD facilities, which makes this methodology more accurate 
to the wage environment of ESRD facilities regardless of the source of 
the wage data. Additionally, ESRD facility data is included in the BLS 
data, while ESRD facilities generally are not included in the hospital 
cost report data used in the IPPS wage index (with the exception of 
hospital-based ESRD facilities). Lastly, hospitals are a major 
contributor to labor markets, and it is reasonable to believe that ESRD 
facilities compete with hospitals (as well as other healthcare 
facilities) when it comes to hiring labor; as such, the inclusion of 
hospital data would provide additional insight into the labor markets 
of these areas.
    In the proposed rule, we discussed that a limitation of the 
publicly available BLS OEWS data is that the survey only includes 
information on the wages that employers paid to their employees. 
Therefore, the OEWS does not include self-employed contract labor wages 
or benefits paid to employees, which are reflected in the IPPS wage 
index. Nevertheless, we believed, and we continue to believe, that this 
data source would be an improvement over the use of the IPPS wage index 
for the ESRD PPS, as its purpose is to identify geographic differences 
in wages. In the proposed rule, we noted that assuming wages spent on 
self-employed contract labor wages and employee benefits vary similarly 
to employee wages, we would not expect any significant difference 
arising from this limitation of the BLS data. We anticipated that most 
traveling nurses and technicians would be employed by a staffing 
agency, and therefore would be included in the OEWS estimates; however, 
as worksite location reporting is optional,\16\ we note it is possible 
that some of the wages for these traveling nurses and technicians could 
be included in the MSA in which their employing agency is located, 
rather than the MSA in which they worked. However, we noted that we 
would not anticipate that this would have an appreciable impact on the 
OEWS estimates used for this methodology. Additionally, we noted that 
the OEWS would only include the wages paid by the contract agency to 
these contract workers, so the OEWS estimates would likely not include 
the full cost of the contract labor paid by the ESRD facilities to the 
contracting agency. We could not separately estimate the prevalence of 
self-employed contract labor at ESRD facilities from the rest of 
contract labor, which we believe would still provide some insight into 
the potential limitation of the exclusion of self-employed contract 
labor wages from the BLS OEWS. We noted that all contract labor costs 
represent approximately 5 percent of compensation costs in the 2020-
based ESRDB market basket (87 FR 67143). As discussed in the CY 2025 
ESRD PPS proposed rule, our analysis of freestanding ESRD facility cost 
report FTE data indicated that approximately 1.3 percent of RN hours 
and 1.1 percent

[[Page 89100]]

of technician hours were contract labor in 2022. Additionally, our data 
showed that the share of contract labor hours has been relatively 
stable over time but has increased slightly over the past few years.
---------------------------------------------------------------------------

    \16\ https://www.bls.gov/respondents/oes/instructions.htm#online.
---------------------------------------------------------------------------

    In the proposed rule, we discussed that one potential concern about 
use of the BLS OEWS data is that in some cases, the BLS OEWS may not 
have usable data for a county for an occupation, which is used in the 
construction of the new ESRD PPS wage index according to the 
methodology presented later in this section. This occurs when BLS is 
unable to publish a wage estimate for a specific occupation and area 
because the estimate does not meet BLS quality or confidentiality 
standards.\17\ For reference, among the 25,808 unique county-occupation 
combinations in the May 2022 BLS OEWS data used in the analysis in the 
proposed rule, the wage information missing rate was 5.2 percent. To 
impute the missing data for the methodology presented in the proposed 
rule, we performed a regression using the most similar (by mean hourly 
wage) occupation (of the occupations we proposed to include in the wage 
index methodology, presented in Table 1) for which there was no missing 
data. For dietitians we used RNs, for technicians we used LPNs and for 
nurses' aides we used administrative staff. The regression included 
controls for whether the county is rural, the census region in which 
the county is located, and the natural logarithm of the treatment count 
of the county. For the wage index presented in the CY 2025 ESRD PPS 
proposed rule, we only had to impute missing county-level data for 
dietitians, technicians, and nurses' aides; however, for future years, 
we noted that we may have to impute data for other occupations and will 
be sure to note any imputations through notice and comment rulemaking.
---------------------------------------------------------------------------

    \17\ https://www.bls.gov/oes/oes_ques.htm.
---------------------------------------------------------------------------

    In the proposed rule, we presented an analysis on historical BLS 
OEWS data for the occupations presented in Table 1.\18\ We found that 
mean hourly wages for these categories are increasing over time, 
consistent with what we would expect given the ESRD PPS market basket 
increases. Given this analysis, we stated that the BLS OEWS data are 
reasonably stable and appropriately reflect general wage inflation 
trends that ESRD facilities face.
---------------------------------------------------------------------------

    \18\ We note that the BLS OEWS wage data is not intended to be 
used as a time-series analysis, but rather as cross-sectional 
estimate of wages in a geographic area (https://www.bls.gov/oes/oes_ques.htm#other). We reviewed and presented this data primarily 
to demonstrate the stability of the methodology by evaluating the 
robustness of the input data source.
---------------------------------------------------------------------------

(ii) Data From Freestanding ESRD Facility Cost Reports
    Under Sec.  413.198(b)(1), all ESRD facilities must submit the 
appropriate CMS-approved cost report in accordance with Sec. Sec.  
413.20 and 413.24, which provide rules on financial data and reports, 
and adequate cost data and cost finding, respectively. Generally, these 
cost reports have a time range of January 1 to December 31 of a given 
year, but they can represent any 12-month period. Included in these 
cost reports is information on the number of full-time equivalent (FTE) 
positions employed by the ESRD facility. FTEs are stratified by 
occupation type, such as RNs, LPNs, technicians, and administrative 
staff. For the purpose of these cost reports, an FTE represents a 40-
hour work week averaged across the year. Specifically, the cost reports 
define FTEs as the sum of all hours for which employees were paid 
during the year divided by 2080 hours. The cost reports also state 
personnel involved in more than one activity must have their time 
prorated among those activities. For example, an RN who provided 
professional services and administrative services is counted in both 
the RN line and the administrative line according to the number of 
hours spent in each activity.
    For the methodology presented in the proposed rule, we proposed to 
use FTEs to calculate the occupational mix for all freestanding ESRD 
facilities. For the purposes of this proposal, we used the term 
``freestanding ESRD facilities'' to mean ESRD facilities that complete 
the independent renal dialysis facility cost report (Form CMS 265-11, 
OMB No. 0938-0050). We noted that these ESRD facilities are a subset of 
``independent'' facilities as defined at Sec.  413.174(b), as cost-
reporting is only one of 5 criteria used in the determination of 
whether an ESRD facility is independent or hospital-based as listed at 
Sec.  413.174(c). For the purposes of this proposal, we referred to 
ESRD facilities that complete the hospital cost report (Form CMS 2552-
10, OMB No. 0938-0050) as ``ESRD facilities that are financially 
integrated with a hospital,'' per the criteria at Sec.  413.174(c)(5). 
The occupational mix data presented in the proposed rule represented 
the average proportion of hours spent on the duties of that occupation 
at all freestanding ESRD facilities nationally for CY 2022. This 
national mix includes FTE data on both staff and contract labor from 
freestanding ESRD facility cost reports for each occupational category.
    Table 2 presents the NEFOM calculated from the freestanding ESRD 
facility cost report data from cost reporting periods beginning on or 
after January 1, 2022, and before December 31, 2022 (2022 cost report 
data), with four decimal places of precision. For the purposes of 
comparison, Table 2 includes both the occupational mix we presented in 
the CY 2025 ESRD PPS proposed rule, as well as an updated version of 
this occupational mix with more complete CY 2022 cost report data. In 
the proposed rule, we noted that CY 2022 would be the most recent 
complete year of cost reporting data for both the proposed rule and for 
this CY 2025 ESRD PPS final rule, as the latest 2022 cost reports could 
have begun in December 2022 and ended in December 2023, although some 
2022 cost reports were not yet available at the time of the analysis 
for the proposed rule. For the approximately 1.7 percent of 
freestanding ESRD facilities without 2022 cost report data available at 
the time of rulemaking for the proposed rule, 2021 cost report data was 
used. At the time of proposed rulemaking, we anticipated that we would 
have complete CY 2022 cost report data; however, this has proved not to 
be the case. For this final rule, some CY 2022 cost report data was 
still not available, so 2021 cost report data was used for 126 ESRD 
facilities. The occupational mix weights used in the proposed new wage 
index methodology are presented in terms of the number of FTEs per 1000 
treatments, although we note that the specific denominator does not 
impact the calculation, as these are relative weights. Table 2 also 
includes percentages that represent the percent of FTEs for each 
occupation in the NEFOM. For example, RNs represent approximately 30 
percent of the NEFOM, which means that across the nation, 30 percent of 
all hours worked by employees at freestanding ESRD facilities are 
worked by RNs. We note that we did not include FTEs that were reported 
as ``other'' occupations in the cost reports in this occupational mix, 
because we could not determine what occupation(s) this represented and, 
therefore, could not get appropriate wage estimates. ``Other'' 
occupations would have accounted for 3.8 percent of the NEFOM if 
included.

[[Page 89101]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.001

    We note that the NEFOM is calculated as a part of the proposed wage 
index methodology described in detail later in this section of this 
final rule, from freestanding ESRD facilities cost reports, and that 
the NEFOM is not an input in the wage index calculation. However, we 
presented the NEFOM in the proposed rule to inform the calculation 
process for any interested parties which wish to replicate the 
calculation.
    For this methodology, we proposed to only utilize data from 
freestanding ESRD facilities, which comprise the vast majority of ESRD 
facilities. ESRD facilities that are financially integrated with a 
hospital represent approximately 4.5 percent of ESRD facilities. It was 
necessary to make this distinction, as ESRD facilities that are 
financially integrated with a hospital complete a different cost report 
form (Form CMS 2552-10, OMB No. 0938-0050), which does not include all 
the occupational categories included on the freestanding facility cost 
report (Form CMS 265-11, OMB No. 0938-0050). Specifically, ESRD 
facilities that are financially integrated with a hospital do not 
include administrative and management staff hours in their cost 
reports. FTE data for administrative and management staff are necessary 
for this analysis, so we proposed to exclude hospital-integrated cost 
reports. We stated that we believe that the occupational mix for 
freestanding ESRD facilities is likely similar to the mix for ESRD 
facilities that are financially integrated with a hospital (which, as 
noted earlier, make up a small proportion of all ESRD facilities), such 
that we would not expect significantly different results if we were 
able to include ESRD facilities that are financially integrated with a 
hospital in this analysis.
    As discussed in the proposed rule, we conducted additional analyses 
to ensure that this occupational mix data would be appropriate for the 
construction of an ESRD facility wage index. First, we reviewed the 
occupational mix for ESRD facilities on a regional level to determine 
if the use of a single national occupational mix was appropriate. While 
we found some variation across regions, the variation was relatively 
small between regions, with the weight values for each occupation being 
within a few percentage points. The main exceptions to this were in the 
United States Territories, which had higher variation in occupational 
mix, likely due in large part to the relatively few ESRD facilities in 
those regions. Additionally, we found that lower volume ESRD facilities 
tended to have slightly different occupational mixes, requiring 
relatively more administrative and management staff FTEs, likely due to 
the lack of economies of scale for these occupations at lower treatment 
volume levels. Second, we conducted an analysis on the change in the 
national occupational mix over the past 5 years and found little 
variation over this time period. Both of these analyses indicate that 
the use of a single national occupational mix is appropriate for 
constructing an ESRD facility wage index as the occupational mix is 
reasonably similar to most region's occupational mixes and relatively 
stable over time.
    Additionally, we proposed to use treatment volume data from 
freestanding ESRD facilities as reported on freestanding ESRD facility 
cost reports. This treatment volume data is used in the proposed wage 
index methodology as a weight on the county level wages when 
calculating the wages for a CBSA. The calculation is described in 
further detail in section II.B.2.b.(2)(b) of this final rule.
    In the proposed rule, we emphasized the importance of accurate cost 
report data for this proposed policy as well as other current and 
potential policies under the ESRD PPS, such as facility-level or case-
mix adjustment refinement. We strongly urged ESRD facilities to 
carefully review cost report data to ensure continued accuracy so that 
future refinements to the ESRD PPS are based on the best data possible.
(iii) IPPS Hospital Wage Index
    As discussed in the proposed rule, the proposed new wage index 
methodology used the established ESRD PPS wage index methodology, which 
is based on the IPPS hospital wage index, for the purposes of 
standardizing the new wage index (step 6 in the methodology described 
in section II.B.2.b.(2)(b)). Consistent with our established ESRD PPS 
methodology, we use the most recent pre-floor, pre-reclassified 
hospital wage data collected annually under the IPPS. For the purposes 
of the proposed new wage index methodology, we referred to this older 
wage index methodology as the ``ESRD PPS legacy wage index.'' The ESRD 
PPS wage index values under the legacy methodology are calculated 
without regard to geographic reclassifications authorized for acute 
care hospitals under sections

[[Page 89102]]

1886(d)(8) and (d)(10) of the Act and utilize pre-floor hospital data 
that are unadjusted for occupational mix. For CY 2025, the updated wage 
data are generally for hospital cost reporting periods beginning on or 
after October 1, 2020, and before October 1, 2021 (FY 2021 cost report 
data). Under Sec.  413.231(d), a wage index floor value of 0.6000 is 
applied under the ESRD PPS as a substitute wage index for areas with 
very low wage index values, as finalized in the CY 2023 ESRD PPS final 
rule (87 FR 67161). Consistent with our established policy of updating 
wage indices in the final rule, we stated in the CY 2025 ESRD PPS 
proposed rule that we intend to use the most recent IPPS wage index for 
the construction of the CY 2025 ESRD PPS legacy wage index for the 
final rule (89 FR 55771). We noted that the purpose of calculating the 
ESRD PPS legacy wage index is solely for standardizing the new ESRD PPS 
wage index, ensuring that the treatment weighted average of the new 
ESRD PPS wage index is the same as it would have been under the 
established methodology. This would ensure that the changes associated 
with the proposed new wage index methodology are contained to the wage 
index, whereas changes associated with shifts in utilization would be 
reflected in the wage index budget neutrality factor. For example, if 
the new methodology resulted in a significant increase in the number of 
high-wage index facilities, the standardization factor would decrease 
wage index values across the board to keep the treatment-weighted 
average of the legacy and new wage index methodologies the same; in 
contrast, if utilization trends resulted in a significant increase in 
the number of treatments furnished by ESRD facilities in high-wage 
index areas, the treatment weighted average of both the legacy and new 
wage index methodologies would increase, which would need to be 
accounted for by the wage index budget neutrality adjustment factor. 
This is described in more detail in step 6 of the proposed new wage 
index methodology described in section II.B.2.b.(2)(b) of this final 
rule.
(iv) Time Lag Associated With New Data Sources
    One concern expressed by interested parties about the current ESRD 
PPS wage index methodology is that the IPPS wage index, used as its 
basis, uses data from approximately 4 fiscal years prior. Interested 
parties have opined that this delay makes the ESRD PPS wage index less 
responsive to certain changes in wages, such as inflation.\19\ In the 
proposed rule, we noted that the purpose of the wage index is to 
reflect geographic difference in the area wage levels, and that 
national trends in wages, including wage inflation, are accounted for 
by the ESRDB market basket percentage increase. We noted that the IPPS 
wage index is generally responsive to geographic variation in wages, 
including variation stemming from local or regional inflation. However, 
as interested parties have raised concerns about the time lag 
associated with our use of the IPPS wage data, we discussed the 
difference between the time lag associated with our use of the IPPS 
wage index for the ESRD PPS and the proposed new ESRD PPS wage index 
methodology.
---------------------------------------------------------------------------

    \19\ In accordance with section 1886(d)(14)(E)(1) of the Act, 
the IPPS wage index is required to employ data based on ``a survey 
conducted by the Secretary (and updated as appropriate) of the wages 
and wage-related costs of subsection (d) hospitals in the United 
States.'' The IPPS is based on the most current audited hospital 
wage data from Worksheet S-3, Parts II, III and IV of the Medicare 
cost report, CMS Form 2552-10 (OMB Control Number 0938-0050 with an 
expiration date of September 30, 2025) (see, for example, 88 FR 
58961).
---------------------------------------------------------------------------

    As previously discussed in this section, the new ESRD PPS wage 
index methodology that we proposed would use data from BLS OEWS and 
freestanding ESRD facility cost reports. BLS publishes OEWS data 
annually with a May reference date, with estimates typically released 
in late March or early April of the following year. Each set of OEWS 
estimates is based on six semi-annual survey samples spanning the prior 
3 years. Wages collected in earlier survey panels are updated to the 
reference date of the estimates based on wage adjustment factors 
derived from the OEWS survey data using a regression model. The 
freestanding ESRD facility cost report data that can be analyzed at the 
time of rulemaking are generally from 2 CYs prior. Specifically, for 
the proposed wage index presented in Addendum A of the ESRD PPS 
proposed rule, the BLS OEWS data represent wages as of May 2022 (based 
on survey panels collected from November 2019 through May 2022), and 
the cost report data generally covered cost reporting periods beginning 
on or after January 1, 2022, and before December 31, 2022.\20\ The 
publicly available BLS OEWS data is an average using data collected 
over a 3-year period due to the large sample involved in the survey. 
This pooled sampling improves stability and predictability of the OEWS 
estimates over time. In the CY 2025 ESRD PPS proposed rule (89 FR 
55772), we noted that, should the proposed methodology be finalized, we 
would use the most recent update of BLS OEWS data for the ESRD PPS 
final rule. Under this new proposed methodology, BLS OEWS estimates for 
May 2023 would be utilized for the final CY 2025 ESRD PPS wage index.
---------------------------------------------------------------------------

    \20\ In cases where 2022 freestanding cost report data were not 
available at the time of the proposed rule, 2021 data was used. This 
was the case for 131 ESRD facilities, approximately 1.7 percent of 
the ESRD facilities in this analysis. In calculating the wage 
indices for this final rule there were 126 ESRD facilities for which 
2021 cost report data was used.
---------------------------------------------------------------------------

    Both the ESRD facility cost report data and the BLS OEWS data are 
more recent than the data used for the IPPS wage index. Additionally, 
the purpose of using the freestanding ESRD facility cost report data in 
this proposed methodology would be to establish a national occupational 
mix for ESRD facilities, which we are calling the NEFOM. In the 
proposed rule, we stated that we intend to present the NEFOM annually 
to reflect the latest complete year of cost report data at the time of 
rulemaking to inform the public of the relative weights assigned to 
each occupation. Given that freestanding facility cost reports are 
submitted on a rolling basis, the most recent data would generally be 
obtained from cost reports beginning in the CY three years prior to the 
CY for which we are setting rates (that is, for the CY 2025 proposed 
rule, the latest complete year of cost report data are from cost 
reports beginning in CY 2022). Based on our analysis of prior years' 
cost report data, we did not anticipate that the national occupational 
mix would change much from year-to-year. Additionally, we noted that 
the use of a single national occupational mix for all ESRD facilities 
would limit the impact of changes in employment patterns on the wage 
index, as all ESRD facilities would be similarly impacted by a change 
in the NEFOM. As the wage index is a relative value, the main way that 
a change in the NEFOM would impact an ESRD facility's wage index would 
be if the CBSA in which that ESRD facility is located has relatively 
high or low wages for an occupation that experiences growth or 
shrinkage in the NEFOM. Thus, the main driver in changes from year-to-
year under the proposed new wage index methodology likely would be the 
BLS OEWS data, which, for the final rule, would be based on estimates 
with a reference date of the May prior to the rulemaking year.
    We noted that, at the time of the analysis conducted for the 
proposed rule, the May 2023 BLS OEWS estimates were not yet available; 
however, they were available at the time of the analysis conducted for 
this final rule. As previously discussed, some ESRD

[[Page 89103]]

facilities' CY 2022 cost reports were not available for the proposed 
rule but are available now for the final rule; however, we still do not 
have complete CY 2022 data, so we must utilize some CY 2021 cost 
reports for this final rule. In the proposed rule, we stated that 
should the proposed new wage index methodology be finalized, we would 
update the wage index values based on the most recent BLS OEWS data 
available. We also proposed to use most recent cost report data 
available for cost reporting periods beginning in CY 2022 and update 
the NEFOM in Table 2 accordingly in the final rule (89 FR 55772). Using 
the most recent 2022 data available for the calculation of the new ESRD 
PPS wage index methodology in the final rule would be consistent with 
our established ESRD PPS wage index methodology of updating ESRD 
facility wage indices between the proposed and final rules.
    In the proposed rule, we noted that our proposed new wage index 
methodology does use the IPPS wage index to create the ESRD PPS legacy 
wage index, which is used to standardize the results of the new ESRD 
PPS wage index methodology. We recognized the concerns we have heard 
regarding the data lag associated with our use of the IPPS wage index 
for the ESRD PPS. However, as the ESRD PPS legacy wage index would only 
be used to calculate a treatment-weighted average of the legacy wage 
index to standardize the wage index values derived under the proposed 
new methodology, the proposed new ESRD PPS wage index would continue to 
reflect the relative differences in area wages based on the more recent 
BLS OEWS data. Therefore, any effect of any data lag of the ESRD PPS 
legacy wage index on the proposed new ESRD PPS wage index would be 
minimal.
(v) Comparison Between Proposed New Wage Index Methodology Data Sources 
and Hospital Wage Index Data
    The other main concern that interested parties have raised about 
our current ESRD PPS wage index methodology is that the IPPS wage index 
is based on hospital cost report data. As previously discussed, 
interested parties have stated that hospital cost report data is not 
necessarily the most appropriate source for estimating geographic 
differences in wages paid by ESRD facilities. These interested parties 
predominantly point to the different occupational mix employed by ESRD 
facilities as the main differentiator between inpatient hospitals and 
ESRD facilities; however, there may also be differences in wages paid 
for the same occupational labor category in the two settings. 
Differences in wages within the same occupation could arise from any 
number of factors, including differences in duties, hours, required 
experience, or desirability of the position.
    In the proposed rule we presented Table 3 in the context of the 
proposed new wage index methodology. Table 3 compares the national 
average occupational mix and corresponding wages for occupations 
employed by freestanding ESRD facilities to that of hospitals from IPPS 
data. The source of average wages used here for ESRD facilities is the 
BLS OEWS mean hourly wage data, which is then weighted by ESRD PPS 
treatment count in the geographical area. Average IPPS wages are 
derived from the IPPS occupational survey (Form CMS-10079) as presented 
in the fiscal year (FY) 2024 IPPS Public Use File (PUF),\21\ 
representing data from 2019. The mean hourly wage data from BLS is from 
the May 2022 OEWS estimates, which are based on six panels of survey 
data from November 2019 through May 2022.
---------------------------------------------------------------------------

    \21\ Files related to the FY 2024 IPPS final rule are available 
online at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/fy-2024-ipps-final-rule-home-page.
[GRAPHIC] [TIFF OMITTED] TR12NO24.002

    In discussing this data in the proposed rule, we noted that the 
hospital wage data (column F) in Table 3 presents the wages paid by 
hospitals to employees, as derived from the IPPS occupational survey 
data, for the purposes of comparing to the BLS data. This data is used 
to adjust the hospital average hourly wage, calculated using hospital 
cost report data, based on the provider-specific occupational mix. This 
differs from the hospital cost report

[[Page 89104]]

data used for the IPPS wage index, as that does not break down all 
wages and related costs by occupation.
    Compared to hospitals, ESRD facilities generally use slightly 
higher proportions of RNs and LPNs and significantly fewer nurse aides 
and medical aides (column B). Additionally, the freestanding ESRD 
facility cost reports include additional occupational categories to 
reflect the labor mix employed by ESRD facilities.
(b) Construction of the New ESRD PPS Wage Index
    In the proposed rule, we presented these general steps, which we 
stated we would use when constructing a wage index based on the 
proposed new ESRD PPS wage index methodology; for a more detailed look 
at the specific computational steps we execute in the code to calculate 
the wage index according to the proposed methodology, including steps 
related to data collection and cleaning, we provided the supplementary 
document Addendum C of the proposed rule.
    1. We calculate the treatment count-weighted mean hourly wage for 
each occupation for each CBSA by multiplying the mean hourly wage data 
from the BLS OEWS by the treatment count for each county within that 
CBSA and dividing by the total treatment count of all counties within 
the CBSA. We weight mean hourly wage by treatment count to ensure that 
the mean hourly wage for the CBSA is proportional with the actual wages 
paid by ESRD facilities in the CBSA. This avoids a situation where a 
particularly high or low wage county within a CBSA has no ESRD 
facilities but still has a large impact on the wage index for that 
CBSA. This reasoning extends to each instance in which we weight values 
by treatment counts. We use a crosswalk that relates counties to MSAs, 
non-MSAs and NECTAs.
    2. We calculate the ESRD facility mean hourly wage in each CBSA by 
multiplying the treatment count-weighted mean hourly wage (from step 1) 
for each occupation for a given CBSA with the corresponding weight of 
the NEFOM for each occupation and then sum each category's amount to 
get the total.
    3. We calculate the treatment count-weighted mean hourly wage for 
each occupation at the national level by multiplying the mean hourly 
wage for the occupation in each CBSA by the treatment count of that 
CBSA and dividing by the aggregated treatment count nationally.
    4. We calculate the national ESRD facility mean hourly wage by 
multiplying the national mean hourly wage (from step 3) for each 
occupation by the corresponding weight of the NEFOM for each occupation 
and then sum each category's amount to get the total.
    5. We divide the ESRD facility mean hourly wage for each CBSA by 
the national ESRD facility mean hourly wage to create a raw wage index 
level (that is, a wage index that has not been normalized as described 
in step 6).
    6. We multiply the raw wage index level for each CBSA by a 
treatment weighted average of the CY 2025 ESRD PPS legacy wage index 
constructed using the established ESRD PPS methodology based on IPPS 
Medicare cost report data and divide the product by the treatment 
weighted average of raw wage indices, which equals 1 by 
construction.\22\ This is to ensure that the treatment-weighted average 
of new BLS-based wage indices is the same as the weighted average of 
the current wage indices. By ensuring the weighted average of the new 
wage index is the same as the weighted average of the pre-floor pre-
reclassification IPPS wage index we have normalized the new wage index 
such that it is more comparable to the former ESRD PPS wage index 
methodology. This prevents the possibility that the treatment-weighted 
average of the new wage index is significantly different than the 
treatment-weighted average of the established methodology. We include 
this step because our goal in establishing the proposed new wage index 
methodology is not to alter the significance of the wage index in 
determining each ESRD facility's payment, but rather to ensure that the 
wage index values better reflect relative labor costs that affect ESRD 
facilities specifically. We note that because we apply a wage index 
budget neutrality adjuster (discussed in section II.B.4.b), the new 
wage index methodology would not increase total payments to ESRD 
facilities even absent this step.
---------------------------------------------------------------------------

    \22\ Treatment weighted averages of wage indices are calculated 
by multiplying the wage index value for each CBSA by the treatment 
count in the CBSA and dividing by the aggregate national treatment 
count.
---------------------------------------------------------------------------

    7. We apply the 0.6000 floor to the wage index by replacing any 
wage index values that fall below 0.6000 with a value of 0.6000, which 
is the wage index floor for the ESRD PPS as established in the CY 2023 
ESRD PPS final rule (87 FR 67166).
    After following these steps, we would obtain the wage index values 
for each CBSA (based on the new OMB delineations as discussed later in 
this section of the preamble) according to the proposed ESRD PPS wage 
index methodology described previously. In the proposed rule, we noted 
that the 5 percent cap in year-over-year decreases in wage index values 
would be applied for each ESRD facility after the new wage index is 
calculated based on the proposed methodology for the CBSA in which the 
ESRD facility is located and, therefore, is not reflected in the 
proposed wage index value for a CBSA in Addendum A of the proposed 
rule, available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices under the page for CMS-1805-P. 
This was necessary as this cap protects ESRD facilities in the rare 
circumstances when changes in policy related to the wage index 
methodology or CBSA delineations cause an ESRD facility to be in a 
significantly lower wage index area in a given year when compared to 
the previous year (87 FR 67161). As discussed later in this section, 
for CY 2025 we proposed to adopt new OMB delineations of CBSAs relative 
to those used in the CY 2024 ESRD PPS wage index. As this 5 percent cap 
applies to an ESRD facility, and not to a CBSA, it would protect any 
ESRD facility that is delineated into a much lower wage-index CBSA for 
CY 2025.
(c) Methodological Alternatives Considered
    While developing the proposed new wage index methodology, we 
considered several different alternatives regarding both data sources 
used for the new wage index methodology and construction of the wage 
index itself. We considered the feasibility of requesting the use of 
confidential BLS OEWS data. This was one suggestion from the December 
2019 TEP. Confidential data would have some benefits over public data, 
primarily that it would provide greater disaggregation of wages by 
employer type, such as wages paid by ESRD facilities. Additionally, 
confidential BLS data could have a timeframe other than the 3-year 
pooled sample used in the public data, for example, using only the most 
recent year's data. However, we noted that the OEWS survey sample is 
designed to be statistically representative only when all 3 years of 
the sample are combined, so the use of an alternative or shorter 
timeframe may not be appropriate. We determined that the publicly 
available BLS data would be the most appropriate for our wage index, as 
it still provides precise estimates of wages and would allow for far 
better transparency. Additionally, we

[[Page 89105]]

stated that we believed that the inclusion of data from other employers 
(meaning employers that are not ESRD facilities) would improve the 
robustness of the methodology, as ESRD facilities compete for labor 
against these other employers.
    When considering the use of BLS data we had to determine which 
occupation code was appropriate for each occupation in the NEFOM. As 
discussed previously, for many of these occupations, the corresponding 
BLS code was straightforward as many of the occupations present in the 
freestanding ESRD facility cost reports matched a single BLS code. 
However, for technicians employed by ESRD facilities we gave further 
consideration to two different BLS codes. As presented in Table 1, we 
proposed to use code 29-2099 for ``Health Technologists and 
Technicians, All Other'' for the construction of the methodology to 
account for the labor costs of technicians. This is the most 
appropriate category, as ``technicians'' in the freestanding ESRD 
facility cost reports generally refers to dialysis technicians, which 
do not fall into any of the other BLS codes for health technologists 
and technicians. Additionally, we noted that the SOC uses ``dialysis 
technician'' as an illustrative example for code 29-2099.\23\ However, 
we had some concerns about using this category, as it does not 
specifically represent dialysis technicians, but rather all health 
technicians that do not fit in the other categories. Because the 
category is non-specific, also known as a ``residual'' category, we 
were concerned with the impact of the inclusion of other, non-dialysis 
technicians in this category. To avoid any issues arising from the use 
of a residual category, we considered using code 29-2010 for ``Clinical 
Laboratory Technologists and Technicians.'' Although this category does 
not fit dialysis technicians as well, it had the benefit of not being a 
residual category, and it had fewer counties with missing data. 
However, we determined that it was most appropriate to use the most 
similar category for dialysis technicians, being the category in which 
data for dialysis technicians would be included, which is code 29-2099 
``Health Technologists and Technicians, All Others.''
---------------------------------------------------------------------------

    \23\ https://www.bls.gov/soc/2018/major_groups.htm.
---------------------------------------------------------------------------

    As an alternative to using a single national occupational mix for 
ESRD facilities we considered using regional or state-level 
occupational mixes. The considered alternative would use a similar 
methodology to the construction of the NEFOM, but with a different 
occupational mix for each census region or state and would apply the 
occupational mix in the same way in the construction of the wage index. 
That is, the BLS data for a CBSA would be weighted by the occupational 
mix for the region or state in which that CBSA is located. This 
alternative was considered, in part, because of a suggestion from a 
panelist at the December 2019 TEP who pointed out that different states 
have different laws regarding staffing requirements for ESRD 
facilities, which was not reflected in the methodology presented at the 
TEP. We conducted an analysis comparing a state-level occupational mix 
wage index to the national occupational mix wage index methodology 
presented previously. This analysis found some notable differences, 
including higher wage index values for ESRD facilities in the Pacific 
census region, but many regions experienced little change. We decided 
against the use of state-level or regional occupational mixes for three 
main reasons. The first is that the use of different occupational mixes 
for different ESRD facilities made the methodology significantly more 
complicated and difficult to understand. The second is that this 
methodology made it so that one ESRD facility could be in an area with 
higher wages for all occupations compared to another ESRD facility but 
receive a lower wage index value due to having an occupational mix 
which favored lower-paying occupations. In the proposed rule, we noted 
that this could be perceived as being inconsistent with the intent of 
the wage index to recognize differences in ESRD facility resource use 
for wages specific to the geographic area in which facilities are 
located (83 FR 56967). Lastly, we were concerned about the possibility 
that, should we use anything other than a national occupational mix, 
the state-level or regional occupational mix could be manipulated. This 
would be especially relevant for states or regions with few ESRD 
facilities and, therefore, individual ESRD facilities would have an 
outsized impact on the occupational mix for that state or region. 
Accordingly, we did not propose this alternative because we believed 
that the use of a single national occupational mix is the most 
appropriate for this new ESRD facility wage index methodology.
    We considered proposing a ``phase-in'' policy for this wage index 
methodology change, which could be implemented in addition to the 5 
percent cap on wage index decreases. One potential example of a phase-
in policy could be a 50/50 blended methodology, where an ESRD facility 
would receive the average of their wage indices from the proposed new 
and legacy methodologies for the first year of implementation. However, 
we decided that such a phase-in policy was unnecessary in light of the 
5 percent cap on year-to-year wage index decreases for ESRD facilities. 
We believed that an additional, or alternative, phase-in policy would 
further complicate this change. Additionally, a phase-in policy could 
hurt ESRD facilities that would receive a higher wage-index under the 
new methodology, which we do not believe would be appropriate, as we 
believe the new methodology based on BLS data is the best approximation 
of the labor costs those ESRD facilities face.
    We considered setting the NEFOM through rulemaking separately from 
the routine wage index update. Under this alternative, we would 
periodically update the NEFOM, for example every 2 years, with 
potentially more years of freestanding ESRD facility cost report data. 
This would mean that the NEFOM would be a rounded input in the wage 
index methodology, rather than a figure precisely calculated as an 
intermediary step in the methodology. This would slightly simplify the 
calculation steps and would allow for complete transparency on the 
NEFOM. However, we have decided to instead derive the FTEs per 1,000 
treatments for each occupation as the weights as a part of the wage 
index calculation as that would increase the precision of this 
calculation. Additionally, given the transparency of the FTE data 
derived from publicly available cost reports, we noted that we could 
still publish the NEFOM for the coming year in rulemaking alongside the 
updated wage index; however, we note that the NEFOM we publish would 
have a lower precision so replications using the published NEFOM as an 
input may be slightly off. Furthermore, compared to setting the NEFOM 
through rulemaking less frequently than annually, the proposed 
methodology to calculate the NEFOM as a part of the wage index 
methodology annually would be more responsive to national trends in 
occupational mix for ESRD facilities.
    Finally, we considered whether it was most appropriate to use 
something other than the mean hourly wage for the BLS OEWS data for the 
construction of the wage index. We noted that there were always 
concerns when using the mean of a data set that the figure could be 
unduly influenced by outliers. One potential alternative would be to 
use the

[[Page 89106]]

median hourly wage data instead. The median hourly wage is available by 
occupation in publicly available BLS data, and the median is not as 
influenced by outliers as the mean. We also considered using the 
geometric mean, instead of arithmetic mean, as that is also less 
influenced by outliers; however, the geometric mean is not provided in 
publicly available BLS data. Ultimately, we determined that the mean 
hourly wage is the most appropriate for this new wage index 
methodology, as any outliers are relevant data points insofar as some 
ESRD facilities may pay wages significantly higher than the average.
c. Example Calculation Using the Proposed New Wage Index Methodology
    Table 4 is an example of a calculation of the wage index for a 
hypothetical ESRD facility in a hypothetical CBSA under the proposed 
new methodology which was presented in the CY 2025 ESRD PPS proposed 
rule. This CBSA contains three counties, each with a different mean 
hourly wage and treatment count. Table 4 presents the mean hourly wage 
and treatment count used in the calculation.
[GRAPHIC] [TIFF OMITTED] TR12NO24.003

    Step 1. Calculate the treatment count-weighted mean hourly wage for 
each occupation for each CBSA by multiplying the mean hourly wage data 
from the BLS OEWS by the treatment count for each county within that 
CBSA and dividing by the total treatment count of all counties within 
the CBSA.

RN wage = [(200 * $45) + (300 * $40) + (500 * $50)]/1000 = $46.0
LPN wage = [(200 * $30) + (300 * $30) + (500 * $35)]/1000 = $32.5
Nurse aide wage = [(200 * $15) + (300 * $20) + (500 * $10)]/1000 = 
$14.0
Technicians wage = [(200 * $30) + (300 * $35) + (500 * $25)]/1000 = 
$29.0
Social worker wage = [(200 * $30) + (300 * $25) + (500 * $35)]/1000 = 
$31.0
Administration wage = [(200 * $20) + (300 * $25) + (500 * $20)]/1000 = 
$21.5
Dietitian wage = [(200 * $35) + (300 * $30) + (500 * $30)]/1000 = $31.0
Management wage = [(200 * $60) + (300 * $65) + (500 * $50)]/1000 = 
$56.5

    Step 2. Calculate the ESRD facility mean hourly wage in the CBSA by 
multiplying the treatment count-weighted mean hourly wage (from step 1) 
for each occupation for the CBSA with the corresponding weight of the 
NEFOM for each occupation and sum each category's amount to get the 
total. The NEFOM for CY 2025 that we presented in the CY 2025 ESRD PPS 
proposed rule is presented again in Table 5. For the purposes of 
ensuring the calculation in this section is as easy to understand as 
possible we are using the percentage values from the NEFOM rounded to 
the nearest tenth of a percent. This makes the wage values calculated 
in this step and step 4 more intuitive as they would represent a 
weighted average of the wages in the CBSA. We note that in the actual 
calculation of the wage index, as described in Addendum C, we calculate 
the number of FTEs per 1000 treatments for each occupation and use 
those as the weights, so that the weights have a higher level of 
precision.
[GRAPHIC] [TIFF OMITTED] TR12NO24.004


[[Page 89107]]


ESRD facility mean hourly wage for this CBSA = (0.300 * $46.0) + (0.040 
* $32.5) + (0.024 * $14.0) + (0.381* $29.0) + (0.047 * $31.0) + (0.107 
* $21.5) + (0.045 * $31.0) + (0.055 * $56.5) = $34.75

    Step 3. Calculate the treatment count-weighted mean hourly wage for 
each occupation at the national level by multiplying the mean hourly 
wage for the occupation in each CBSA by the treatment count of that 
CBSA and dividing by the aggregated treatment count nationally.
    To simplify this calculation, assume there are 3 CBSAs as presented 
in Table 6:
[GRAPHIC] [TIFF OMITTED] TR12NO24.005

    Step 4. Calculate the national ESRD facility mean hourly wage by 
multiplying the national mean hourly wage (from step 3) for each 
occupation by the corresponding weight of the NEFOM for each occupation 
and sum each category's amount to get the total. Similarly to step 2, 
we are using the percentages from the NEFOM as weights for the purposes 
of this example calculation.

National average ESRD facility wage = (0.300 * $46.90) + (0.040 * 
$32.58) + (0.024 * $18.67) + (0.381 * $32.28) + (0.047 * $32.61) + 
(0.107 * $19.52) + (0.045 * $31.49) + (0.055 * $56.64) = $36.27

    Step 5. Divide the ESRD facility mean hourly wage for each CBSA by 
the national ESRD facility mean hourly wage to create a raw wage index 
level.

Raw wage index value = $34.75/$36.27 = 0.95809

    Step 6. Multiply the raw wage index for each CBSA by a treatment 
weighted average of the CY 2025 ESRD PPS legacy wage index constructed 
using the established ESRD PPS methodology based on IPPS data and 
divide the product by the treatment weighted average of raw wage 
indices (which equals 1 by construction). This is to ensure that the 
treatment-weighted average of new BLS-based wage indices is the same as 
the weighted average of the current wage indices (for the purpose of 
this hypothetical calculation we have used a value of 1.00679).

Pre-floor wage index value = 0.95809 * 1.00679/1 = 0.9646

    Step 7. Apply the 0.6000 floor to the wage index by replacing any 
wage index values which fall below 0.6000 with 0.6000.

Final wage index value = 0.9646
d. Estimated Impacts of Change to Wage Index Methodology
    In the proposed rule, included a discussion on the estimated 
impacts of the new wage index methodology (89 FR 55778 through 55780). 
We discussed that this methodological change would be associated with 
significant changes in wage index values, and therefore payment 
amounts, for ESRD facilities. Full impacts for the final CY 2025 ESRD 
PPS wage index, alongside the updated CBSA delineations and rural 
transition policy discussed in section II.B.2.f of this final rule, are 
presented in Table 19 in section VII.C.5.a of this final rule, 
including application of the 5 percent cap on year-to-year wage index 
decreases. In the proposed rule we presented a table which included the 
impacts of this change with and without the 5 percent cap on wage index 
decreases. This table demonstrated how the application of the 5 percent 
cap mitigates negative changes for CY 2025 associated with the new wage 
index methodology.
    We noted that the 5 percent cap on wage index decreases would apply 
to ESRD facilities that are located in a CBSA (based on CY 2025 CBSA 
delineations) with a wage index value 5 percent lower than the CY 2024 
wage index value for their CBSA (based on CY 2024 CBSA delineations). 
The table in the proposed rule was presented for the sole purpose of 
illustrating the potential long-term ramifications of the proposed new 
wage index methodology once sufficient time has passed such that the 5 
percent cap on year-over-year decreases would no longer constrain the 
overall effect of this new methodology on wage index values.
    In the proposed rule, we discussed our analysis comparing the 
hypothetical results of applying this new wage index methodology in 
past years to the actual ESRD PPS wage index methodology based on the 
IPPS wage index for those years. We found that the application of the 
new wage index methodology consistently yields mean and median wage 
index values slightly higher than the actual mean and median wage index 
values used for those years, implying that the wage index resulting 
from this new methodology is relatively stable. Additionally, we found 
that the payment impacts based on facility type did not change much 
when using data from claim years 2019 through 2022, with most facility 
types that are projected to receive a payment increase for CY 2025 
associated with the new wage index methodology seeing a payment 
increase in past years. Similarly, most facility types that are 
projected to receive a payment decrease in CY 2025 associated with the 
proposed new wage index methodology were found to have received payment 
decreases in our hypothetical analysis of past years. Therefore, we 
determined that this new wage index methodology is relatively stable 
when analyzing the differences between the new proposed wage index and 
the ESRD PPS legacy wage index.

[[Page 89108]]

e. CY 2025 ESRD PPS Wage Index
    For CY 2025, we are updating the wage indices to account for 
updated wage levels in areas in which ESRD facilities are located. We 
proposed to use the new wage index methodology described previously, in 
subpart b of this section, according to the most recent available data. 
We believe that the use of this new wage index methodology is 
appropriate and responds to the feedback we have received from 
interested parties regarding the limitations of the current wage index. 
Specifically, the use of BLS OEWS data would allow for this new wage 
index methodology to be more responsive to differences in ESRD facility 
wage levels across the country. Additionally, by using occupational mix 
data from the freestanding ESRD facility cost reports, this new wage 
index methodology would better reflect the actual wage costs incurred 
by ESRD facilities and be most appropriate to use for the ESRD PPS due 
to several reasons specific to ESRD facilities. First, freestanding 
ESRD facility cost reports contain detailed occupational FTE data, 
which allows CMS to create a wage index that is tailored to the wage 
costs faced by ESRD facilities based on their unique staffing needs. 
Dissimilarities between hospital occupation mix and ESRD facility 
occupational mix make the use of the IPPS data less appropriate for 
ESRD facilities. In addition, the ESRD PPS has a lower labor-related 
share than most other Medicare payment systems.\24\ This new ESRD PPS 
wage index methodology addresses these specific circumstances.
---------------------------------------------------------------------------

    \24\ For example, under section 1886(d)(3)(E) of the Act, the 
IPPS applies a labor-related share of 62 percent for each hospital 
unless this would result in lower payments to the hospital than 
would otherwise be made.
---------------------------------------------------------------------------

    In the proposed rule, we recognized that there were several 
methodological limitations to using a wage index based on publicly 
available BLS OEWS data. Specifically, the BLS OEWS data source lacks 
information on employee benefits and the full cost of contract labor 
and includes information from hospitals and other healthcare providers. 
However, we stated that we believed that the benefits of using this new 
wage index methodology would outweigh these limitations, as the use of 
BLS OEWS wage data weighted by an occupational mix derived from 
freestanding ESRD facility cost report data would allow for a wage 
index that is more representative of the geographic variation in wages 
faced by ESRD facilities.
    For CY 2025, we also proposed to use OMB's most recent CBSA 
delineations as published in OMB Bulletin No. 23-01, which are based on 
the data from the 2020 decennial census, for the purposes of the CY 
2025 ESRD PPS wage index and rural facility adjustment. This was 
consistent with our historical practice of updating the CBSA 
delineations periodically according to the most recent OMB 
delineations, most recently in the CY 2021 ESRD PPS final rule (85 FR 
71430 through 71434). We discuss this policy in greater detail in 
section II.B.2.f of this final rule. For more information on the OMB 
delineations, we refer readers to the OMB Bulletin No. 23-01: https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf.
    To implement the proposed change in wage index methodology, we 
proposed to amend the regulations at 42 CFR 413.196(d)(2) and 
413.231(a). Effective January 1, 2025, the amended Sec.  413.196(d)(2) 
would state that CMS updates on an annual basis ``[t]he wage index 
using the most current wage data for occupations related to the 
furnishing of renal dialysis services from the Bureau of Labor 
Statistics and occupational mix data from the most recent complete 
calendar year of Medicare cost reports submitted in accordance with 
Sec.  413.198(b).'' The amended Sec.  413.231(a) would state that ``CMS 
adjusts the labor-related portion of the base rate to account for 
geographic differences in the area wage levels using an appropriate 
wage index (established by CMS) which reflects the relative level of 
wages relevant to the furnishing of renal dialysis services in the 
geographic area in which the ESRD facility is located.''
    For CY 2025, we proposed to update the ESRD PPS wage index to use 
the most recent BLS OEWS wage data and the most recent CY 2022 
freestanding ESRD facility cost report occupational mix and treatment 
volume data available. At the time the analysis was conducted for the 
proposed rule, the most recent BLS OEWS wage data available represented 
May 2022. We proposed that if more recent data become available after 
the development of this ESRD PPS rule and before the publication of the 
ESRD PPS final rule (for example, the April 2024 release of May 2023 
OEWS data, which was published after the analysis performed for the 
proposed rule), we would use such data, if appropriate, to determine 
the CY 2025 ESRD PPS wage index in the ESRD PPS final rule.
(1) Alternative CY 2025 ESRD PPS Wage Index Using Established 
Methodology
    In the proposed rule, we presented a version of the current ESRD 
PPS wage index constructed using our established methodology with the 
most recent available data, which we referred to as the ESRD PPS legacy 
wage index methodology. The purpose of presenting the legacy 
methodology with modifications was to illustrate an alternative to the 
new methodology described previously for consideration by interested 
parties to facilitate comments on the proposed rule. The inclusion of a 
CY 2025 version of the ESRD PPS legacy wage index methodology allowed 
for interested parties to compare wage index values under the current 
methodology and proposed new methodology. For the reasons previously 
discussed, we believed and continue to believe that the proposed new 
wage index methodology based on BLS OEWS data and ESRD Medicare cost 
report data is the most appropriate for ESRD facilities; however, we 
considered commenters' input on this proposal and the alternative wage 
index based on the established methodology (updated with the most 
recent data) when making a determination about the best approach in 
this final rule.
    In the CY 2025 ESRD PPS proposed rule we presented the ESRD PPS 
legacy wage index, which is based on the most recent pre-floor, pre-
reclassified hospital wage data collected annually under the IPPS, as 
an alternative wage index. Please see the proposed rule (89 FR 55781) 
for a detailed description of this alternative wage index, which 
followed our legacy methodology.
(2) Request for Comments on This Proposal
    In the proposed rule, we explained our belief that our new ESRD PPS 
wage index methodology more accurately estimates the geographic 
variation in wages paid by ESRD facilities when compared to the current 
ESRD PPS wage index based on the IPPS wage index. We acknowledged that 
this new methodology would represent a significant change to the 
established ESRD PPS wage index methodology, both by changing the data 
sources and the calculations for the wage index. We requested comments 
on all aspects of the new methodology, including the use of BLS OEWS 
data for CBSA-level wage estimates, the use of mean hourly wage (rather 
than median hourly wage), the use of freestanding ESRD facility cost 
reports for deriving occupational mix weights based on FTEs for each 
occupation per 1000 treatments as presented in the NEFOM, the use of 
the ESRD PPS legacy wage index for standardization, and the 
computational steps used to calculate the wage index.

[[Page 89109]]

We welcomed any insights into potential methodological improvements, 
particularly related to some of the limitations of the new data sources 
discussed previously, including the absence of the cost of employee 
benefits and the full cost of contract labor in the BLS data, and the 
inability of this methodology to capture differences in ESRD facility 
occupational mix across different geographic areas. In the proposed 
rule we stated that we would consider modifying the methodological 
steps used to calculate the wage index in the final rule, depending on 
the comments we received. Additionally, we requested comments on the 
proposed use of the new wage index methodology compared to the 
established wage index methodology based on the IPPS wage index which 
was used to create the alternative ESRD PPS legacy wage index. We also 
requested comments on the distributional implications of this wage 
index proposal, with specific consideration to rural areas and remote 
or isolated areas such as the United States Territories in the Pacific. 
Lastly, we requested comments on our proposal to begin using our new 
wage index methodology beginning on January 1, 2025.
    We invited public comment on our proposal for our new ESRD PPS wage 
index methodology and its use for CY 2025. Approximately 20 commenters 
including LDOs, SDOs, provider advocacy organizations, coalitions of 
dialysis organizations, a professional organization, several ESRD 
facilities, and MedPAC commented on the proposed new ESRD PPS wage 
index methodology. The following is a summary of the public comments 
received on these proposals and our responses.
    Comment: Most commenters who expressed an opinion on the new ESRD 
PPS wage index methodology, including a coalition of kidney 
organizations, several LDOs and MedPAC, stated that the use of the IPPS 
wage index within the ESRD PPS was flawed. Some commenters specified 
reasons why the IPPS methodology was not appropriate for the ESRD PPS 
including data lag and the fact that it is based on hospital cost 
report data. The majority of these commenters indicated that they 
believed the new wage index methodology would be an improvement over 
the IPPS wage index for the ESRD PPS. Many commenters supported the 
wage index proposal and requested that CMS finalize the proposal for CY 
2025.
    Response: We thank commenters for their opinions on the proposed 
new wage index methodology as well as their opinions on the ESRD PPS's 
current use of the IPPS wage index. We agree that the ESRD PPS wage 
index proposed for CY 2025 has advantages over use of the IPPS wage 
index when applied to the ESRD PPS. We appreciate the support for the 
new ESRD PPS wage index methodology, which we are finalizing in this 
rule.
    Comment: Many commenters expressed concerns over some of the 
impacts of the proposed new ESRD PPS wage index methodology. Among 
these comments, the most frequently mentioned impact was the wage index 
budget neutrality adjustment factor. Multiple commenters requested that 
we implement this new wage index methodology in a non-budget neutral 
manner. Several commenters noted that there was no statutory 
requirement for budget neutrality for the ESRD PPS wage index. Some 
commenters expressed concerns about payment adequacy within the ESRD 
PPS and stated a belief that the corresponding decrease to the ESRD PPS 
base rate would lead to inadequate payments. One commenter attributed 
the budget neutrality reduction to the occupational mix used in 
calculating the new wage index methodology.
    Response: We appreciate the thoughtful comments on the impacts of 
the proposed new ESRD PPS wage index methodology. We acknowledge that 
the new wage index methodology, implemented budget neutrally, would 
decrease the ESRD PPS base rate for CY 2025 relative to use of the 
legacy wage index methodology for CY 2025. However, as discussed in the 
proposed rule, we note that this decrease to the CY 2025 ESRD PPS base 
rate is predominantly due to the application of the 5 percent cap on 
year-over-year wage index decreases under Sec.  413.231(c), which 
raises the average ESRD PPS wage index. Although the ESRD PPS base rate 
would be decreased for CY 2025, as this cap becomes less impactful 
(that is, in future years, as fewer facilities would quality for the 
application of the 5 percent cap as a result of the change in wage 
index methodology), the ESRD PPS base rate would increase over time, 
eventually attaining the level at which it would have been otherwise. 
The occupational mix has minimal impact on the budget neutrality 
adjustment factor, as the NEFOM serves as weights for the wage index, 
which are applied equally to the individual CBSA wages and national 
wages in the wage index calculation and, therefore, are essentially 
cancel out concerns on their impact on the average wage index value.
    Although there is no explicit statutory requirement to implement 
the ESRD PPS wage index in a budget neutral manner, our longstanding 
philosophy within the ESRD PPS is that when we adjust for relative 
resource use and the costs for which we are adjusting are already 
included in the ESRD PPS base rate, those adjustments should be 
implemented budget neutrally. Under section 1881(b)(14)(A) of the Act 
our payment system is based on total costs from ESRD facility cost 
reports from 2007 and is increased annually based on the ESRDB market 
basket reflecting the changes over time in the prices of an appropriate 
mix of goods and services included in renal dialysis services. Labor-
related costs, including wages and benefits, were included in the cost 
reports used in the initial analysis (75 FR 49071 through 49083); 
therefore, we generally believe it is appropriate to implement any 
adjustment factors which are based on the allocation of those costs in 
a budget neutral manner.
    We have received many comments regarding concerns about payment 
adequacy in response to our proposed rule, many of which were combined 
with calls to implement the new ESRD PPS wage index in a non-budget 
neutral manner. While we acknowledge commenters' concerns about payment 
adequacy and address them in section II.B.1.b and below in section 
II.B.4 of this final rule, we note that the purpose of the ESRD PPS 
wage index is to estimate geographic variation in wages. It would not 
be appropriate to make changes to the ESRD PPS wage index methodology 
to attempt to increase total payments to address the commenters' 
perceived inadequacies. We note that the construction of the wage index 
budget neutrality factor ensures that the change in the CY 2024 and CY 
2025 wage indices does not result in an increase or decrease of 
estimated aggregate payments. Although for CY 2025 the wage index 
budget neutrality factor is lower than it has been in the past years, 
resulting in a larger decrease to the ESRD PPS base rate, this does not 
change the fact that aggregate payments are estimated to be unchanged 
implementing the wage index methodology for CY 2025. As noted 
previously, the main driver of the lower-than-typical budget neutrality 
factor is the application of the 5 percent cap in wage index decreases, 
which raises the average wage index value for CY 2025. Although each 
year's wage index budget neutrality factors are independent, they are 
derived using the prior year's wage index. The higher-than-typical 
average wage index value of CY 2025 results in

[[Page 89110]]

a smaller budget-neutrality factor. The smaller budget-neutrality 
factor results in a larger decrease to the ESRD PPS base rate. 
Consequently, this would likely lead to a higher budget-neutrality 
factor in future years where the average wage index value would be 
lower than in CY 2025, as ESRD facilities that received the 5 percent 
cap in CY 2025 would receive lower wage index values in CY 2026. This 
will likely result in an increase to the ESRD PPS base rate in CY 2026 
related to the wage index budget neutrality factor.
    Comment: MedPAC reiterated support for their wage index 
methodology, which was described in the June 2023 Report to Congress, 
as discussed earlier.\25\ MedPAC noted that their recommended 
methodology would include two features which our proposed new wage 
index methodology lacked: a methodology to smooth wage index values 
across adjacent CBSAs and a methodology to allow for variation in wage 
index values within a single CBSA.
---------------------------------------------------------------------------

    \25\ https://www.medpac.gov/wp-content/uploads/2023/06/Jun23_MedPAC_Report_To_Congress_SEC.pdf.
---------------------------------------------------------------------------

    Response: We thank MedPAC for their recommendations. We did not 
propose a smoothing methodology across CBSAs because we do not believe 
it would serve the purpose of the ESRD PPS wage index, which is to 
estimate geographic differences in area wages. Furthermore, a smoothing 
methodology would increase the complexity of the methodology and likely 
involve parameter choices that could be seen as arbitrary. The fact 
that ESRD facilities which are near each other but located in different 
CBSAs would have different wage index values is unavoidable and 
persists within the ESRD PPS legacy wage index. Under the stated 
rationalization for a smoothing methodology, ESRD facilities in 
different CBSAs which are geographically near each other would compete 
for labor. We agree with this evaluation of local labor markets, but we 
note that should these ESRD facilities and other healthcare employers 
in the area be competing for labor, their wages would likely reflect 
that, which would in turn be reflected in the BLS OEWS data and used in 
the new wage index methodology. As for the recommendation to allow 
variation within a single CBSA, we acknowledge that such a fine level 
of detail would have certain advantages if the precision of the wage 
index could be maintained. However, we do not believe that there is any 
way to allow such variation without using data sources which would be 
lower quality, when applied to the ESRD PPS, than the BLS OEWS. In 
addition, MedPAC recommends the use of American Community Survey (ACS) 
data, which could allow for some information on average wages, but that 
information would not be specific to the types of labor used in ESRD 
facilities. We proposed this new wage index methodology to create a 
wage index that is specific to ESRD facilities, so the use of such 
nonspecific data, like the ACS data, would not align with our goals of 
creating an ESRD-specific PPS wage index. Additionally, similar to the 
smoothing methodology, utilizing ACS data to allow for further 
variation of wage index values would increase the complexity of an 
already complex methodology. We believe that our new ESRD PPS wage 
index methodology as proposed, without either of these methodological 
steps (that is, not incorporating either smoothing across CBSAs or 
variation within CBSAs), strikes a balance between simplicity and 
accuracy by estimating geographic wages at the CBSA level using the 
highest quality, publicly-available data, without arbitrary model 
parameters. We did not propose and, for the reasons stated previously, 
we are not finalizing in this rule either of the commenter's 
suggestions of smoothing across CBSAs or accounting for variation 
within CBSAs.
    Comment: Several commenters expressed support for the use of the 
IPPS wage index for the ESRD PPS. Some commenters highlighted the lack 
of hospital-based ESRD facility data used in constructing the NEFOM and 
stated a belief that due to this lack of data the IPPS wage index would 
be more appropriate for hospital-based ESRD facilities. One commenter 
stated that this omission would unfairly penalize hospital-based ESRD 
facilities, particularly pediatric hospital-based ESRD facilities. One 
commenter requested we make changes to the methodology to utilize 
hospital-based ESRD facilities' cost report data in the occupational 
mix, as hospital-based ESRD facilities have hiring practices and 
occupational mixes more similar to hospitals. One commenter stated that 
the omission of hospital-based ESRD facility data would have 
distributional implications due to varying ranges of hospital-based 
ESRD facilities in different geographical areas.
    Response: We appreciate commenters' insight into the extent to 
which the ESRD PPS legacy wage index based on IPPS data is appropriate 
for ESRD facilities. We note that we generally agree that the use of 
the IPPS wage index for the ESRD PPS has historically been reasonably 
appropriate for estimating geographic variation in wages for many of 
the reasons the commenters stated, however, this does not change our 
belief that the new ESRD PPS wage index is more appropriate for the 
ESRD PPS moving forward compared to the legacy methodology based on the 
IPPS wage index. Many of the objections these commenters raised to the 
new methodology revolved around the fact that the NEFOM was based 
solely on freestanding ESRD facility cost reports and, therefore, did 
not include data from hospital-based ESRD facilities. While we agree 
that including data from hospital-based ESRD facilities into the NEFOM 
would be an improvement, we could not incorporate data from hospital-
based ESRD facility cost reports into the NEFOM in an appropriate way. 
As we explained in the proposed rule (89 FR 55770), hospital-based ESRD 
facilities lacked certain occupational categories which are present in 
freestanding ESRD facility cost reports, and therefore, in the NEFOM. 
The omission of these categories not only means that we do not have 
data on those occupations for hospital-based ESRD facilities, but it 
also makes it impossible to appropriately incorporate any data on 
occupations present in the hospital-based ESRD facility cost reports, 
since it would not be an appropriate comparison. We would have absolute 
numbers on the clinical staff of the hospital-based ESRD facility, 
which would be useful for other analyses, but without knowing the 
proportion of labor costs spent on the omitted hospital cost report 
categories, any attempt to incorporate the present data would rely on 
an assumption that the data reported for the categories not present in 
the cost report is comparable to that reported for those categories in 
freestanding ESRD facility cost reports. We did not believe that such 
an assumption was necessary as hospital-based ESRD facilities are a 
significant minority of the total population of ESRD facilities (about 
5 percent), meaning their inclusion in the NEFOM would not have a 
substantial impact; furthermore, we believe freestanding ESRD 
facilities are a good proxy for the average national occupational mix 
for hospital-based ESRD facilities. Since the NEFOM only serves as 
weights for the mean wages for the occupations, we believe that the 
lack of hospital-based data would not unfairly disadvantage hospital-
based ESRD facilities, or hospital-based pediatric ESRD facilities, 
since they would receive the same wage index as freestanding ESRD 
facilities in the same

[[Page 89111]]

area. Furthermore, any shift to the NEFOM associated with the 
hypothetical inclusion of hospital-based ESRD facility cost report 
data, should it be possible, would not have any specific impact on 
hospital-based ESRD facilities compared to other ESRD facilities, as 
the NEFOM would be applied in the wage index calculation for all ESRD 
facilities in the same way. Additionally, we note that our analysis 
shows that hospital-based ESRD facilities would, on average, receive 
increased payments under this proposed new methodology.
    We disagree with the claim that the IPPS wage index would be more 
appropriate for hospital-based ESRD facilities. Although hospital-based 
ESRD facilities' cost report data could not be incorporated into the 
NEFOM, we still believe that the freestanding ESRD facility cost report 
data is a reasonable proxy for hospital-based ESRD facilities. 
Furthermore, the new wage index methodology uses mean wage data from 
the BLS OEWS for occupations related to the furnishing of renal 
dialysis services, which we believe makes the new wage index 
methodology more appropriate for hospital-based ESRD facilities when 
compared to the IPPS wage index. While it is true that hospital-based 
ESRD facility data would be included in the IPPS wage index there are 
many other departments (including but not limited to the adults and 
pediatric unit, intensive care unit and surgical intensive care unit) 
included in the hospital cost reports which we would anticipate would 
be less similar to hospital-based ESRD facilities than freestanding 
ESRD facilities are. As we do not have comprehensive occupational mix 
data from hospital-based ESRD facilities, we cannot directly evaluate 
the claim about hospital-based ESRD facilities having more similar 
occupational mixes to hospitals overall than freestanding ESRD 
facilities, but we would not anticipate that this would be the case 
because of the unique types of labor required in furnishing renal 
dialysis services compared to other hospital services. Lastly, we would 
not anticipate the omission of hospital-based ESRD facilities from the 
NEFOM as having any geographic distributional implications, because the 
NEFOM only serves as a set of weights in the new wage index 
methodology, so any change to the NEFOM that could potentially arise 
from including hospital-based cost reports (if that were operationally 
feasible) would change the weights in the same way for all ESRD 
facilities.
    Comment: One commenter suggested allowing pediatric hospital-based 
ESRD facilities to continue using the IPPS-based legacy wage index.
    Response: We do not believe it would be appropriate for hospital-
based pediatric ESRD facilities to be allowed to receive a different 
wage index value, as we believe that this new wage index methodology is 
the most appropriate for all ESRD facilities, including pediatric and 
hospital-based ESRD facilities, for the reasons discussed previously. 
We do not believe that the IPPS wage index is more applicable for 
hospital-based pediatric ESRD facilities. We believe these ESRD 
facilities are likely more similar to freestanding ESRD facilities than 
other divisions of hospitals because the provision of renal dialysis 
services likely dictates the occupational mix more than the location of 
the ESRD facility. That is, pediatric hospital-based ESRD facilities 
utilize the occupations for which we have utilized BLS OEWS data, as 
those are the occupations relevant in furnishing renal dialysis 
services. Furthermore, as the ESRD PPS wage index is intended to 
reflect the wages in the geographic area in which an ESRD facility is 
located, it generally would not be appropriate for two ESRD facilities 
in the same geographic areas to have different methodologies determine 
their wage index values, as they would generally draw from the same 
geographic labor market.
    Comment: Several commenters expressed concerns with the BLS OEWS 
data used in the construction of the new ESRD PPS wage index 
methodology. An LDO and a coalition of dialysis organizations expressed 
concerns with the BLS OEWS data centered around the lack of data on 
employee benefits and limitations on traveling contract labor data. 
These comments emphasized both the importance of benefits in attracting 
staff and the necessity of using contract labor, which would include 
labor contracted across CBSAs. Another coalition of dialysis 
organizations suggested that we study these costs to ensure they are 
accounted for in this policy. One commenter noted that the BLS OEWS 
data was not based solely on ESRD facility wage costs and that BLS 
geographic area estimates do not stratify data by healthcare sector. 
One commenter noted that evidence shows that wages and benefits vary 
across labor markets. One commenter expressed a preference for a wage 
index derived only from ESRD facility wage data from ESRD facility cost 
reports.
    Response: We appreciate these detailed evaluations of the potential 
limitations of the data sources used in the proposed methodology. In 
the proposed rule we acknowledged that a lack of information on 
employee benefits was a limitation of using the BLS OEWS data source. 
However, we note that the omission of benefits would only have a 
significant impact on the resulting wage index if the geographic 
variation in benefit costs is different from the geographic variation 
in wages. We note that this condition is different from the 
consideration one commenter raised that wages and benefits both vary 
geographically. While we cannot say for certain whether the geographic 
variation in wages is exactly the same as the geographic variation in 
benefits, we believe that ESRD facility wages are likely a fair proxy 
for the way ESRD facility benefits vary geographically, particularly 
when compared to the IPPS wage index, which is based on many factors 
unrelated to the furnishing of renal dialysis services. Our analysis of 
cost report data indicates that the percentage of labor costs 
associated with benefits does not vary substantially by geographic 
region, with all census regions' shares being between 22 and 24 
percent. This is what we would expect to see if wages and benefits vary 
similarly across geographic regions. We agree with the commenter that 
benefits are an important tool in recruiting and retaining staff, but 
we note that wages are also an important tool, so we believe that 
generally ESRD facilities which need to expend additional money to 
attract more staff would likely use both increased wages and increased 
non-wage benefits. We note that employee benefits represent 9.5 percent 
of the cost weights in the 2020-based ESRDB (87 FR 67146) and, on 
average, represent approximately 23 percent of all compensation costs.
    We note that contract labor is directly included in this policy in 
two ways, both as a part of the NEFOM and in the BLS OEWS data, 
although we note that self-employed contract workers are not captured 
by the OEWS. However, we understand the concern that the commenters 
raised regarding traveling contract laborers that may be included in 
the data for a different CBSA from where the ESRD facility is located. 
We anticipate that many contract laborers would be included in the BLS 
OEWS survey data for the CBSA in which the ESRD facility where they 
work is located. We note that the BLS OEWS data allows for the 
reporting of a worker's site of work; however, we wish to clarify that 
worksite reporting does not change the CBSA for which an employee would 
be counted. That is, a contract worker employed by an agency that is 
physically located in one CBSA but works in a different CBSA would be 
included in the wage estimates for the

[[Page 89112]]

CBSA in which their employing agency is located. We wish to reiterate 
that, as the wage index is relative, this would only have a significant 
impact on the wage index methodology if the way in which traveling 
contract labor is utilized varies geographically from other wages. We 
intend to continue to monitor and evaluate the performance of the new 
wage index methodology, including the extent to which contract labor is 
utilized and would consider making changes to the methodology in future 
rulemaking, if warranted. We believe the BLS OEWS wage data would 
better approximate the labor costs of ESRD facilities even if the 
omitted traveling contract labor differed greatly compared to the 
included wages, because contract labor hours are generally a small 
portion of total hours for ESRD facilities. Our data suggest that 
contract labor hours accounted for 1.3 percent and 1.1 percent of RN 
and Technician hours in 2022, respectively.
    We recognize that the BLS OEWS data used in this methodology is not 
based solely on ESRD facility wage data; however, we note that this is 
also true for the IPPS wage index. We have decided on several 
occupations related to furnishing renal dialysis services for which to 
utilize BLS OEWS data. We believe it is appropriate to include data 
from other healthcare employers, as it is likely that ESRD facilities 
compete with other employers for labor. It is technically correct to 
say that BLS OEWS does not stratify their geographic area data by 
healthcare sector; however, we do not believe this is a flaw in the 
methodology, as the occupations we have chosen to utilize are, 
generally, healthcare specific. Table 1 in this final rule describes 
the full occupation titles for all of the occupations included in this 
wage index methodology. Many of these are inherently healthcare 
specific, such as nurses or health technologists and technicians. 
However, for those categories that may not be healthcare specific, such 
as administrative staff, we are using BLS data from the category that 
is healthcare specific (that is, Medical Secretaries and Administrative 
Assistants (SOC code 43-6013)). We believe that these categories are 
the most appropriate for the types of labor employed by ESRD 
facilities. Insofar as these categories do not separate data by type of 
healthcare facility, we believe this is appropriate, as different 
healthcare employers likely compete with each other for labor. 
Similarly, we do not believe a wage index based only on ESRD facility 
cost report data would be appropriate, because ESRD facilities compete 
against other healthcare employers and, furthermore, in certain CBSAs 
the number of ESRD facilities could be very small, leading to the ESRD 
facilities present having a very large impact on the cost report data 
and, therefore, the wage data for that CBSA.
    Comment: Some commenters expressed an opinion that the data sources 
used in the proposed methodology were appropriate despite some of the 
limitations we discussed in the proposed rule. Several commenters 
stated that the omission of hospital-based ESRD facility cost report 
data from the NEFOM was reasonable and did not jeopardize the 
methodology as a whole. Other commenters stated that the OEWS data 
provided a better estimation of geographic wages even if it did not 
include benefit data and certain contract labor wages. Some commenters 
supported the occupations we have chosen and stated they were 
appropriate for the ESRD PPS. Some commenters, including MedPAC, 
suggested that we continue to monitor the validity of data sources and 
the resulting wage indices.
    Response: We thank commenters for their support and agree that the 
data sources used in the new wage index methodology are generally 
appropriate for such a methodology. We intend to continue to monitor 
both the data sources and the ESRD PPS wage index to ensure they remain 
appropriate for use in the ESRD PPS.
    Comment: Several commenters, including MedPAC and a coalition of 
dialysis organizations noted that several adjustments used in the ESRD 
PPS, such as the case-mix adjustments, are derived from a model which 
might be influenced by a change in the ESRD PPS wage index. MedPAC and 
one LDO requested that we conduct analysis in future years to determine 
whether some of the adjustment factors should be changed.
    Response: We appreciate the commenters' thoughts on the 
interconnected relationship between the ESRD PPS wage index and the 
other adjustments used within the ESRD PPS. We note that we have not 
routinely updated the case-mix or facility-level adjustment factors 
when we have made updates to the ESRD PPS wage index in the past. 
However, we acknowledge that the new wage index methodology would 
result in more significant facility-level changes than past routine 
updates to the ESRD PPS wage index. We did not propose any changes to 
the ESRD PPS case-mix adjustments or facility-level adjustments for CY 
2025. One reason for this was because the proposed new wage index 
methodology would represent a substantial change to the ESRD PPS, and 
we believe it is appropriate to avoid making multiple significant 
methodological changes to the wage index and other adjustment factors 
concurrently as payments to ESRD facilities could change substantially 
in multiple different ways. We generally believe it is most appropriate 
to update all of the case-mix and facility-level adjustment factors 
concurrently because of the interconnected nature of the factors. By 
this we mean that the case-mix and facility-level adjustment factors 
are originally derived from a cost-regression from the CY 2011 ESRD PPS 
final rule, and updated in the CY 2016 ESRD PPS final rule, which 
includes all such adjustments. By including multiple variables in the 
regression as adjustment factors we can derive the appropriate 
adjustment factor for each of the facility-level and case-mix 
adjustment, as the regression isolates the marginal impact of that 
facility-level or case-mix characteristic on the cost variable. This 
does not mean that it is inappropriate to update only one of these 
adjustment factors, but when we do so we generally intend to be 
cautious as not to change the adjustment factor in a way that would 
lead to duplicative payment from other adjustment factors, which could 
theoretically happen if there were two independent variables which are 
highly correlated. This is part of the reason why we proposed to update 
the LVPA adjustment factors in a manner which was budget neutral within 
the LVPA, rather than reduce the ESRD PPS base rate. We are considering 
how to update the case-mix and facility-level adjustment factors in a 
way which would best align relative payments with resource use and 
cost. We did not propose to update the case-mix and facility-level 
adjustment factors in the CY 2025 ESRD PPS proposed rule because we did 
not believe we had the proper data to make the most appropriate updates 
to the case-mix and facility-level adjustment factors at that time. As 
we explained in the CY 2024 ESRD PPS final rule, additional data would 
serve to provide moredata to better inform CMS's pursuit of equitable 
payment policies in the future by helping us evaluate and monitor the 
accuracy of our patient-level adjustment factors (88 FR 76397). 
Specifically, we do not yet have the data from either the updated 
reporting requirement effective January 1, 2025, for time on machine or 
the updates to the cost reports to better capture data on the costs for 
pediatric patients. We believe it is most appropriate to wait until we 
have these additional data sources and update the

[[Page 89113]]

case-mix and facility-level adjustment factors at that time as these 
additional data sources may allow us to better allocate resource use. 
Although sometimes substantial changes are unavoidable, they can create 
challenges for ESRD facilities when planning for future payment years, 
so we believe it is most prudent to make such a substantial change when 
we have the most appropriate data. We are not finalizing any changes to 
the case-mix or facility-level adjustment factors related to the new 
ESRD PPS wage index methodology, but we intend to consider whether such 
changes would be appropriate in future years.
    Comment: Some commenters expressed concerns with the use of a 
single national occupational mix for all ESRD facilities. Several 
interested parties expressed concerns with the application of a wage 
index based on a national occupational mix to the U.S. Territories in 
the Pacific, stating that they believed a regional occupational mix 
would be more appropriate. One commenter suggested CMS allow some ESRD 
facilities to continue to receive the legacy wage index based on the 
IPPS wage index.
    Response: The NEFOM's purpose in the wage index methodology is to 
weight the BLS OEWS mean wage data so that the resulting wage index 
would be more representative of the actual wage costs faced by ESRD 
facilities. We believe that a single national occupational mix achieves 
this goal in the most straightforward way. The new wage index 
methodology is the most appropriate estimation of wages for ESRD 
facilities. Although some types of ESRD facilities, such as ESRD 
facilities located in U.S. Territories, may have some other costs that 
are higher due to their location, if these costs are not directly 
related to wages it would not be appropriate for them to be reflected 
in the wage index methodology. As discussed earlier, we do not believe 
it would be appropriate for different ESRD facilities in a given CBSA 
to receive different wage index values, so we are not finalizing any 
exceptions to the new wage index methodology that would allow certain 
ESRD facilities or facility types to receive the legacy wage index.
    Comment: One commenter stated that it would not be appropriate to 
apply a different wage index value to hospital-based ESRD facilities 
compared to other units of the hospital as they would have the same 
hiring practices.
    Response: We recognize that hospital-based ESRD facilities likely 
share some practices with the hospital in which they are located. 
However, we do not agree with this assertion. We believe it is 
reasonable for a hospital-based ESRD facility to receive a different 
wage index from other units in the hospital, as the labor employed by 
ESRD facilities is different from the labor employed by other parts of 
a hospital. We note that under the current payment systems, hospitals 
functionally receive different payment rates for labor for different 
units, as the payment rates are based on more than the wage index, 
including the labor-related share and the base payment rate. 
Furthermore, we do not believe it would be appropriate for hospital-
based ESRD facilities to receive different payment rates from similar 
ESRD facilities in the same CBSA, as we would generally expect ESRD 
facilities in the same CBSA to face similar labor costs both in mean 
hourly wage and in the types of labor employed.
    Comment: One commenter stated a concern that the NEFOM had a large 
portion of dialysis technicians which, according to the commenter, 
would hurt independent ESRD facilities.
    Response: We believe the commenter is saying that independent ESRD 
facilities utilize dialysis technicians at a lower rate than LDOs, and 
therefore would likely utilize more nurse labor. Our analysis of 
occupational mix data does not indicate that this statement is true. 
Our analysis showed that independent ESRD facilities had a slightly 
lower ratio of nurses to technicians compared to LDOs. The largest 
difference we found between independent ESRD facilities and LDOs was 
that independent ESRD facilities had higher rates of administrative 
staff and management, likely due to economies of scale for these 
occupations leading to larger organizations requiring relatively fewer 
of these staff compared to direct patient care staff. We would note 
that our analysis did find that regional dialysis organizations 
utilized significantly fewer technicians compared to both LDOs and 
independent facilities, instead hiring significantly more nurse aides 
(which are more similar in wages to technicians than RNs). Separate 
from this analysis, we acknowledge the commenter's stated belief that 
some ESRD facilities would have an occupational mix that differs from 
the NEFOM, but we disagree with the statement that this would ``hurt'' 
those ESRD facilities. The purpose of the ESRD PPS wage index is to 
best estimate the geographic variation in wages and, to that point, 
this new wage index better estimates how wages faced by ESRD facilities 
vary across different geographic areas. In this methodology, the NEFOM 
serves to weight the BLS OEWS wage data in a way that is generally 
appropriate for ESRD facilities. While some ESRD facilities would 
certainly have occupational mixes that differ from the NEFOM, we do not 
believe it would be more appropriate to pay according to each ESRD 
facility's occupational mix. ESRD facilities make hiring decisions 
based on their local labor market and other relevant factors, which may 
result in occupational mixes that differ from the NEFOM. This is 
consistent with the philosophy behind a PPS where we provide payment to 
ESRD facilities, which they can allocate to costs in the most efficient 
and appropriate manner for them.
    Comment: One commenter stated that CMS did not adequately 
demonstrate that the proposed new wage index methodology would more 
accurately reflect ESRD facilities' labor markets. This commenter 
believed that implementing the new wage index methodology would be 
detrimental for some ESRD facilities.
    Response: We understand the commenter's apprehension regarding such 
a significant methodological change. We believe that we have adequately 
explained why the proposed new ESRD PPS wage index methodology better 
estimates the realities of the labor markets for ESRD facilities. With 
respect to the commenter's desire for CMS to ``demonstrate'' the 
accuracy of the wage index methodology, we note that by its nature the 
wage index reflects an estimate of the general economic conditions in a 
labor market, and there is no more objective measure of those 
conditions against which its accuracy could be measured. We conducted 
an analysis of the cost versus payment ratio under the proposed new 
ESRD PPS wage index methodology and the legacy wage index methodology 
which found that, on average, ESRD facilities had a cost versus payment 
ratio of 0.997 under the proposed new methodology (without the 
application of the 5 percent cap) and 0.991 under the legacy 
methodology. Using this metric, the proposed new wage index methodology 
better aligns payment with resource use compared to the legacy 
methodology.
    Comment: Several commenters expressed support for the 5 percent cap 
on wage index decreases. Some of these commenters stated that they 
believed the 5 percent cap would help smooth the transition between the 
legacy and proposed new methodologies. One LDO stated that they did not 
believe any other sort of transition would be necessary given the 5 
percent cap. MedPAC reiterated support for a symmetrical cap on wage 
index increases. Another LDO suggested that a

[[Page 89114]]

symmetric cap on wage index increases could ameliorate some of the 
impact of this new wage index methodology on the ESRD PPS base rate 
resulting from budget neutrality.
    Response: We appreciate the continued support for the cap on year-
over-year wage index decreases. We agree that this 5 percent cap would 
help mitigate the negative impacts of this policy on certain ESRD 
facilities in certain years, allowing for a transition period for these 
ESRD facilities to adjust their business planning. We did not propose 
any changes to the 5 percent cap policy for CY 2025 and are not 
finalizing any changes. When we finalized the 5 percent cap in the CY 
2023 ESRD PPS final rule (87 FR 67161), we explained why we did not 
believe a symmetrical cap on increases would be appropriate. We still 
believe that capping increases in wage index values would be 
inappropriate, as the new wage index value is the most appropriate for 
these ESRD facilities. The purpose of the cap is to increase the 
predictability of ESRD PPS payment for ESRD facilities and mitigate 
instability and significant negative impacts to ESRD facilities 
resulting from significant changes to the wage index. In the CY 2023 
ESRD PPS final rule we explained that the transition policies are not 
intended to curtail the positive impacts of certain wage index changes, 
so it would not be appropriate to also apply the 5 percent cap to wage 
index increases (87 FR 67159). Although, we appreciate the suggestion 
for ameliorating the other commenters' budget neutrality concerns, as 
discussed, we do not believe that a cap on increases to wage index 
values would be appropriate, and we are not finalizing a cap on 
increases to wage index values.
    Comment: One commenter raised concerns that the ESRD PPS wage index 
methodology did not include overtime wages. Specifically, the commenter 
emphasized that some geographic areas have laws which dictate rates for 
overtime, for example time-and-a-half, which would lead to higher 
relative costs compared to ESRD facilities in areas which did not have 
such legislation.
    Response: We acknowledge that the BLS OEWS mean hourly wage data is 
not intended to capture overtime by its definition of wages. However, 
we do not believe that this is an issue with the methodology. Our goal 
in designing the new ESRD PPS wage index methodology was to better 
estimate geographic variation in wages, which this new methodology 
does. We interpret the commenter's main concern to be that because some 
geographic areas have legislation which dictates certain overtime 
rates, overtime costs would likely vary differently from non-overtime 
wages. Although the commenter is accurate in noting that regulations 
regarding overtime differ across the country, since overtime rates are 
generally based on non-overtime hourly wages, we believe it's 
reasonable to assume that on average places with higher non-overtime 
wages would generally have higher overtime wages. While non-overtime 
wages paid by ESRD facilities may not be a perfect proxy for overtime 
wages paid by ESRD facilities, we believe that they are a fairly good 
proxy and that use of the BLS OEWS data is nonetheless superior to 
using the IPPS wage index. In other words, we believe that most 
variation between geographic areas is captured by the variation in base 
wages utilized by the proposed new wage index methodology.
    We appreciate the commenter raising this concern, and we have 
considered how we could incorporate overtime labor costs into this 
methodology. There are some technical limitations to the inclusion of 
overtime labor costs into this methodology, as overtime is not included 
in the BLS OEWS data source, and the source of the increased cost 
resulting from overtime could derive from either different overtime 
payment rates or different overtime utilization amounts. We did not 
propose to include overtime in the mean wage data used in the proposed 
new wage index methodology, and we are not finalizing any such changes 
in this final rule. We will consider proposing changes to account for 
overtime wages, if appropriate and feasible, in future rulemaking 
years.
    Comment: One commenter expressed concern that we did not present 
the uncapped wage index value for each ESRD facility.
    Response: The uncapped wage index value for each ESRD facility was 
available in Addendum A to the CY 2025 ESRD PPS proposed rule, as the 
uncapped wage index value for an ESRD facility is simply the wage index 
value for the CBSA in which the ESRD facility is located. We did not 
include that value in Addendum B, as that could have caused confusion, 
since the wage index after the application of the 5 percent cap would 
apply for CY 2025.
    Comment: One commenter expressed support for the 0.6000 wage index 
floor. Several commenters requested CMS perform further analysis on the 
wage index floor and expressed a belief that such analysis would 
support an increase in the wage index floor. Commenters specifically 
suggested that a wage index floor of 0.7000 would be appropriate. These 
commenters specifically highlighted Puerto Rico and enumerated certain 
labor costs which they stated contributed to the cost of care in Puerto 
Rico.
    Response: We thank commenters for the continued support of the wage 
index floor. We did not propose to change the wage index floor for CY 
2025 and are not finalizing any changes in this final rule. We will 
continue to monitor the appropriateness of the current wage index 
floor, as well as the extent to which ESRD facilities in U.S. 
Territories may face certain higher costs and will consider any further 
changes through notice-and-comment rulemaking in future years.
    Comment: MedPAC reiterated concerns that a wage index floor is not 
appropriate, as it distorts area wage indices.
    Response: We appreciate the continued evaluation of the impact of 
the wage index floor. We did not propose, and are not finalizing, any 
changes to the wage index floor. We will take these concerns into 
consideration when determining whether further changes to the wage 
index floor are needed in future rulemaking.
    Comment: Several commenters, including one letter from several 
interested parties concerning the U.S. Pacific Territories, expressed 
concerns over the impact of the proposed wage index methodology on the 
U.S. Pacific Territories. This letter from the interested parties 
stated that they believed that this new wage index methodology was a 
``one-size fit all'' approach that would have negative impacts on 
marginalized communities. This letter expressed some support for the 
alternative state-level occupational mix which we discussed in the 
proposed rule, which would result in higher payments to for ESRD 
facilities in the Pacific Census region and expressed criticism for our 
choice to propose the simpler methodology using a national occupation 
mix. One ESRD facility located in the Northern Marianas Island noted 
that ESRD facilities in these regions face higher costs due to the 
nature of the isolated regions requiring importation of goods, 
including medication. This commenter requested that we develop a new 
methodology that would better account for actual wages rather than 
state-level wages.
    Response: We thank the commenters for their insight on the impact 
of the proposed wage index policy on ESRD facilities in the U.S. 
Pacific Territories. We note that the purpose of the wage

[[Page 89115]]

index is to reflect the geographic variation in wages faced by ESRD 
facilities. We believe that this new wage index methodology achieves 
this goal, especially when compared to the legacy methodology based on 
the IPPS wage index. We recognize that this new policy will lead to a 
decrease in payment to ESRD facilities in the U.S. Pacific Territories. 
However, we note that the BLS OEWS data indicates that this is 
appropriate, as the new ESRD PPS wage index methodology represents the 
most recently available BLS OEWS mean wage estimates for the U.S. 
Pacific Territories. We do not agree with the characterization of this 
policy as a ``one size fits all'' approach, as this methodology uses 
BLS OEWS data which is CBSA specific.
    We considered as an alternative state-level or regional 
occupational mixes rather than the proposed NEFOM reflecting the 
national occupational mix. Our concern with the state-level 
occupational mix policy was that it was a significantly more 
complicated alternative to a policy that already represented a 
significant increase in complexity to the legacy methodology. In 
addition, the use of a state-level occupational mix for weighting the 
mean hourly wage data would allow it to be possible that an area could 
have lower average hourly wages for all occupations but receive a 
higher wage index when compared to another area. It is accurate that 
the state-level occupational mix alternative would lead to higher 
payments to ESRD facilities in the U.S. Pacific Territories compared to 
the proposed methodology, but we wish to clarify that payments to these 
ESRD facilities would decrease under either methodology, because the 
main driver of the decrease in wage index values is the OEWS mean 
hourly wage data. The difference between payments for ESRD facilities 
in the U.S. Pacific Territories using state-level occupational mix data 
and the proposed national occupational mix was less than one percent.
    We acknowledge that for the U.S. Pacific Territories the CBSA-level 
OEWS data serves functionally as a territory-level wage measure due to 
each of these territories containing exactly one CBSA; however we 
believe that this is appropriate. We note that the current IPPS wage 
index is also determined at the CBSA level and, therefore, combines the 
wages for the entire territory for each of Guam, American Samoa and the 
Northern Marianas Islands. Lastly, we appreciate the insight into 
additional costs paid by ESRD facilities in the U.S. Pacific 
Territories. We note that many of the additional costs listed were non-
labor costs, and that the wage index serves to estimate the geographic 
difference in wages. We acknowledge that there is some evidence that 
non-labor costs may be relatively higher in regions which require 
importation of most goods, including the U.S. Pacific Territories; 
however, it would not be appropriate to address these higher costs 
through the wage index. We intend to carefully evaluate both the labor 
and non-labor costs for the U.S. Pacific Territories and other outlying 
regions of the United States and will consider whether any additional 
policies are warranted in future rulemaking.
    Comment: One association commented that they commissioned an 
analysis of the impacts of the proposed new wage index methodology, 
which found that independent and small ESRD facilities would be worse 
off within industry segments under the new wage index methodology.
    Response: Our analysis does not concur exactly with the conclusion 
the commenter drew about the new wage index methodology. As we 
presented in Table 6 of the proposed rule, our analysis showed that 
small ESRD facilities would receive higher payments under the new wage 
index methodology. Our analysis does show that independent ESRD 
facilities would receive lower payments. However, since the new wage 
index methodology is derived from the best available wage data, we 
believe this is appropriate, as the underlying BLS OEWS mean wage data 
indicates that the areas in which these independent ESRD facilities are 
located have lower relative mean wages compared to the legacy wage 
index.
    Comment: One commenter expressed concerns that hospital cost report 
data was excluded from the calculation of the wage index budget 
neutrality factor.
    Response: We wish to clarify that hospital cost reports were not 
included in the analysis for the NEFOM because of differences in the 
labor categories between the hospital-based and freestanding ESRD 
facility cost reports. Hospital-based ESRD facilities were included in 
the claims data that were used for determining the budget neutrality 
adjustment factor for the CY 2025 ESRD PPS wage index. We agree with 
the commenter that it is important to include hospital-based ESRD 
facilities in any impacts analysis, including the analysis used to 
determine average payments under the final CY 2025 ESRD PPS wage index, 
which was used to determine the wage index budget-neutrality factor. 
Omitting these hospital-based ESRD facilities would reduce the accuracy 
of the analysis without any good reason.
    Comment: A few commenters recommended CMS allow ESRD facilities to 
reclassify their CBSA for the wage index, similar to the IPPS, which 
allows hospitals to reclassify.
    Response: We appreciate this suggestion, and we recognize that many 
ESRD facilities stated that they would be better suited for an adjacent 
CBSA. However, our belief is that allowing reclassifications would not 
be appropriate for the ESRD PPS, as we believe the most appropriate 
wage index for an ESRD facility is for the CBSA in which it is located. 
We believe our new wage index methodology better estimates the actual 
wages paid by ESRD facilities in a given CBSA by utilizing data from 
the BLS OEWS. We did not propose to allow reclassifications under the 
proposed new wage index methodology, similar to how we did not allow 
reclassifications under the legacy methodology, and we are not 
finalizing any such changes in this final rule. We discuss our 
reasoning for not allowing reclassifications for the wage index for the 
ESRD PPS in further detail in the CY 2024 ESRD PPS final rule (88 FR 
76360 through 76361).
    Comment: One commenter, while discussing the proposed wage index 
budget-neutrality adjustment factor, stated an expectation that we 
would adjust the base rate down in future years according to this 
policy.
    Response: We want to clarify that we do not anticipate significant 
repeated downward adjustments to the ESRD PPS base rate as a result of 
this proposal. The lower-than-typical wage index budget-neutrality 
adjustment factor is primarily a result of the application of the 5 
percent cap on year-over-year wage index decreases, which is 
particularly impactful in CY 2025 due to the significant proposed 
change to the wage index methodology. We note that although this 5 
percent cap could apply for multiple years in a row as a result of the 
adoption of the new wage index methodology, each year it is applied, 
the affected ESRD facilities' wage index values would become closer to 
the wage index values for their CBSAs, until their wage index values 
would be equal their CBSA's wage index value. In future years we 
anticipate the 5 percent cap would cause fewer ESRD facilities to 
receive wage index values higher than that of their CBSA, so the wage 
index budget-neutrality factor for CY 2026 would be higher than the 
wage index budget-neutrality factor for CY 2025. We note that the wage 
index budget-neutrality adjustment factor is multiplicative, so a 
``higher'' value would lead to either a smaller decrease in the ESRD 
PPS base rate, should the

[[Page 89116]]

value still remain below 1, or to an increase to the ESRD PPS base 
rate, should the value rise above 1.
    Comment: One commenter generally supported the idea of the proposal 
but noted the complexity of the proposal and requested additional time 
to review the new wage index methodology and impacts. One LDO suggested 
further analysis and potentially another TEP to continue to refine and 
test the methodology.
    Response: We believe the 60-day timeframe provided a sufficient 
opportunity for interested parties to review the proposed rule and 
provide comments. To help interested parties understand the 
complexities and impacts of this proposal we included 3 addenda to the 
proposed rule. Addendum B included facility level impacts for all of 
our proposed policies, including the proposed change in the wage index 
methodology, as well as a side-by-side comparison of wage index values 
under the proposed new wage index and the legacy wage index based on 
IPPS data. Addendum C included a detailed methodological breakdown for 
this proposed new wage index methodology. We believe that this provided 
the public with ample information to thoroughly review the policy in 
the time available. In the proposed rule, we explained that we believe 
it would be beneficial to implement this proposed new wage index 
methodology alongside the more-routine updates to the CBSA delineations 
according to OMB 23-01. Additionally, we believe that this new wage 
index methodology is more appropriate for ESRD facilities and, 
therefore, should be implemented as soon as feasible. Similarly, we 
believe that we have sufficient information to determine that this 
policy is an improvement to the use of the IPPS wage index for the ESRD 
PPS and that holding another TEP would be an unnecessary delay for this 
policy. We are not finalizing any delay to the implementation date for 
this new wage index methodology, but we intend to carefully monitor the 
new ESRD PPS wage index, maintain a dialogue with interested parties, 
and consider further modifications to the methodology in future 
rulemaking.
    Final Rule Action: After considering the comments received on this 
proposal, we are finalizing the use of the new ESRD PPS wage index 
methodology for CY 2025 without modification. Consistent with prior 
years, we are updating the CY 2025 proposed ESRD PPS wage index with 
the most recent available data. Most notably, this includes the release 
of the May 2023 BLS OEWS data as well as updated CY 2022 cost report 
data. We note that, contrary to our expectation, some CY 2022 cost 
report data was still not available at the time of the analysis 
conducted for this final rule, so we are finalizing to use CY 2021 cost 
report data where necessary. We believe that omitting these ESRD 
facilities without CY 2022 cost report data would be inappropriate, and 
CY 2021 cost report data is the most reasonable proxy for this missing 
data. Additionally, we are finalizing the proposed updates to 42 CFR 
413.196(d)(2) and 413.231(a) to codify the new ESRD PPS wage index 
methodology with one change. To avoid confusion in connection with the 
use of the phrase ``most recent complete year of Medicare cost 
reports,'' as some CY 2022 freestanding ESRD facility cost reports are 
not available, we are finalizing to instead revise 413.196(d)(2) to 
read ``most recent full year of Medicare cost reports.'' This change 
clarifies our original intention to use the most recent completed cost-
reporting CY, which is CY 2022 because CY 2023 cost reports beginning 
in November of 2023 (and ending November of 2024) would not be finished 
at the time of this final rule's publishing. This avoids confusion 
insofar as the word ``complete'' could refer either to the year (as 
intended) or the dataset of cost reports (which is not complete, as 
some CY 2022 cost reports were still not available at the time of this 
final rulemaking).
    The final CY 2025 ESRD PPS wage index is set forth in Addendum A to 
this final rule and is available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices. Addendum A 
provides a crosswalk between the CY 2024 wage index and the proposed CY 
2025 wage index. Addendum B to this final rule provides an ESRD 
facility level impact analysis. Addendum B is available on the CMS 
website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices.
f. Implementation of New OMB Labor Market Delineations
(1) Background
    As previously discussed in this final rule, the wage index used for 
the ESRD PPS was historically calculated using the most recent pre-
floor, pre-reclassified hospital wage data collected annually under the 
IPPS and is assigned to an ESRD facility based on the labor market area 
in which the ESRD facility is geographically located. In the CY 2025 
ESRD PPS proposed rule, we proposed a new wage index methodology that 
would similarly be based on the labor market in which an ESRD facility 
is located. ESRD facility labor market areas are delineated based on 
the CBSAs established by OMB. In accordance with our established 
methodology, we have historically adopted through rulemaking CBSA 
changes that are published in the latest OMB bulletin. Generally, OMB 
issues major revisions to statistical areas every 10 years, based on 
the results of the decennial census. However, OMB occasionally issues 
minor updates and revisions to statistical areas in the years between 
the decennial censuses.
    In the CY 2015 ESRD PPS final rule (79 FR 66137 through 66142), we 
finalized changes to the ESRD PPS wage index based on the newest OMB 
delineations, as described in OMB Bulletin No. 13-01 \26\ issued on 
February 28, 2013. We implemented these changes with a 2-year 
transition period (79 FR 66142). OMB Bulletin No. 13-01 established 
revised delineations for United States Metropolitan Statistical Areas, 
Micropolitan Statistical Areas, and Combined Statistical Areas based on 
the 2010 Census. OMB Bulletin No. 13-01 also provided guidance on the 
use of the delineations of these statistical areas using standards 
published on June 28, 2010, in the Federal Register (75 FR 37246 
through 37252).
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    On July 15, 2015, OMB issued OMB Bulletin No. 15-01,\27\ which 
updated and superseded OMB Bulletin No. 13-01 issued on February 28, 
2013. These updates were based on the application of the 2010 Standards 
for Delineating Metropolitan and Micropolitan Statistical Areas to the 
United States Census Bureau population estimates for July 1, 2012, and 
July 1, 2013.
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    On August 15, 2017, OMB issued OMB Bulletin No. 17-01,\28\ which 
updated and superseded OMB Bulletin No. 15-01 issued on July 15, 2015. 
These updates were based on the application of the 2010 Standards for 
Delineating Metropolitan and Micropolitan Statistical Areas to the 
United States Census Bureau population estimates for July 1, 2014, and 
July 1,

[[Page 89117]]

2015. In OMB Bulletin No. 17-01, OMB announced a new urban CBSA, Twin 
Falls, Idaho (CBSA 46300).
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    On April 10, 2018, OMB issued OMB Bulletin No. 18-03 \29\ which 
updated and superseded OMB Bulletin No. 17-01 issued on August 15, 
2017. On September 14, 2018, OMB issued OMB Bulletin No. 18-04,\30\ 
which updated and superseded OMB Bulletin No. 18-03 issued on April 10, 
2018. OMB Bulletin Numbers 18-03 and 18-04 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. 
These updates were based on the application of the 2010 Standards for 
Delineating Metropolitan and Micropolitan Statistical Areas to the 
United States Census Bureau population estimates for July 1, 2015, and 
July 1, 2016. In the CY 2021 ESRD PPS final rule (85 FR 71430 through 
71434), we finalized changes to the ESRD PPS wage index based on the 
most recent OMB delineations from OMB Bulletin No 18-04. This was the 
most recent time we have updated the labor market delineations used for 
the ESRD PPS and, therefore, reflects the labor market delineations we 
used for CY 2024 (88 FR 76360).
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    \29\ https://www.whitehouse.gov/wp-content/uploads/2018/04/OMB-BULLETIN-NO.-18-03-Final.pdf.
    \30\ https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf.
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    In the July 16, 2021, Federal Register (86 FR 37777), OMB finalized 
a schedule for future updates based on results of the decennial Census 
updates to commuting patterns from the American Community Survey, an 
ongoing survey conducted by the Census Bureau. In accordance with that 
schedule, on July 21, 2023, OMB released Bulletin No. 23-01. A copy of 
OMB Bulletin No. 23-01 may be obtained at https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf. According to OMB, 
the delineations reflect the 2020 Standards for Delineating Core Based 
Statistical Areas (``the 2020 Standards''), which appeared in the 
Federal Register on July 16, 2021 (86 FR 37770 through 37778), and the 
application of those standards to Census Bureau population and journey-
to-work data (that is, 2020 Decennial Census, American Community 
Survey, and Census Population Estimates Program data).
    In the CY 2025 ESRD PPS proposed rule, we explained that we believe 
it is important for the ESRD PPS to use, as soon as reasonably 
possible, the latest available labor market area delineations to 
maintain a more accurate and up-to-date payment system that reflects 
the reality of population shifts and labor market conditions. We 
believe that using the most current OMB delineations would increase the 
integrity of the ESRD PPS wage index system by creating a more accurate 
representation of geographic variations in wage levels, especially 
given the proposed new wage index methodology discussed previously. We 
carefully analyzed the impacts of adopting the new OMB delineations and 
found no compelling reason to delay implementation. Therefore, we 
proposed to adopt the updates to the OMB delineations announced in OMB 
Bulletin No. 23-01 effective for CY 2025 under the ESRD PPS for use in 
determining both the wage index and the rural adjustment for ESRD 
facilities. We proposed that this would be implemented along with the 
new ESRD PPS wage index methodology, if finalized, or along with the 
alternative ESRD PPS legacy wage index based on IPPS data, should the 
proposed new wage index methodology not be finalized.
    As previously discussed, we finalized a 5 percent cap on any 
decrease to a provider's wage index from its wage index in the prior 
year in the CY 2023 ESRD PPS final rule (87 FR 67161). We did not 
propose any additional transition policy for the CY 2025 wage index as 
we believe the 5 percent cap effectively mitigates the negative impact 
of large wage index decreases for an ESRD facility in a single year. In 
addition, we proposed to phase out the rural adjustment for ESRD 
facilities that are transitioning from rural to urban based on these 
CBSA revisions, as discussed in section II.B.2.f.(2) of this final 
rule. For a further discussion of changes to OMB's CBSA delineations, 
including a list of changes to specific CBSAs, see the FY 2025 IPPS 
proposed rule (89 FR 36139).
    We invited public comment on our proposal to use the updated CBSA 
delineations. We received four comments regarding our proposal to use 
the updated CBSA delineations. The following is a summary of the public 
comments received on this proposal and our responses.
    Comment: One commenter expressed specific support for our use of 
the updated CBSA delineations according to the most recent OMB 
delineations set forth in OMB Bulletin No. 23-01. Several other 
comments referenced our proposal to update the CBSA delineations; 
however, no other comment expressed a strong opinion on this policy. 
These comments that referenced the proposal generally included it 
alongside other proposals that appeared to be the focus of the comment, 
such as the new wage index methodology.
    Response: We appreciate the commenters for reviewing the proposal 
to update CBSA delineations and appreciate the commenter for expressing 
support for the updated delineations.
    Final Rule Action: After reviewing the comments received, we are 
finalizing our use of the most recent CBSA delineations from OMB 
Bulletin 23-01 for ESRD PPS wage index and rural adjustment for CY 2025 
and beyond, consistent with prior updates to CBSA delineations.
(2) Proposal To Phase Out the Rural Facility Adjustment for Facilities 
Affected by Changes to CBSAs
    In the CY 2016 ESRD PPS final rule (80 FR 69001), we established a 
policy to provide a 0.8 percent payment adjustment to the base rate for 
ESRD facilities located in a rural area. This adjustment was based on a 
regression analysis, which indicated that the per diem cost of 
providing renal dialysis services for rural facilities was 0.8 percent 
higher than that of urban facilities after accounting for the influence 
of the other variables included in the regression. This 0.8 percent 
adjustment has been part of the ESRD PPS each year since it was 
finalized beginning for CY 2016, and its inclusion in the ESRD PPS is 
codified at Sec.  413.233.
    As previously discussed in this final rule, we proposed a change to 
the ESRD PPS wage index methodology as well as changes to the CBSA 
delineations. In the CY 2023 ESRD PPS final rule, we finalized a policy 
to cap year-to-year decreases in the wage index for any ESRD facility 
at 5 percent (87 FR 67161). The primary purpose of this change was to 
mitigate the negative effect associated with an ESRD facility being 
reclassified into a lower wage index CBSA as a result of changes in 
OMB's most recent CBSA delineations. We anticipated that the proposed 
change to the CBSA delineations and the changes to the wage index 
methodology, if finalized, would lead to numerous ESRD facilities 
having a significant decrease in wage index value in CY 2025 compared 
to CY 2024.
    As previously discussed, we are finalizing the adoption of OMB 
Bulletin No. 23-01, which will determine whether an ESRD facility is 
classified as urban or rural for purposes of the rural facility 
adjustment in the ESRD PPS.

[[Page 89118]]

Although the rural facility adjustment is not directly related to the 
wage index, the application of both is determined by the CBSA in which 
an ESRD facility is located and, therefore, is potentially subject to 
significant changes associated with the new CBSA delineations. It is 
reasonable to conclude that these proposed shifts in the CBSA 
delineations, in combination with the wage index methodological changes 
finalized in this final rule, could lead to a year-over-year decrease 
in payment greater than what a 5 percent decrease to the wage index 
would cause even if the decrease in the wage index value alone would be 
less than 5 percent. To mitigate the scope of changes that would impact 
ESRD facilities in any single year, we proposed to implement a 3-year 
phase out of the rural facility adjustment for ESRD facilities that are 
located in a CBSA that was categorized as rural in CY 2024 and is 
recategorized as urban in CY 2025, as a result of the updates to the 
CBSA delineations associated with the proposed adoption of OMB Bulletin 
No. 23-01.
    We stated that overall, we believe implementing updated OMB 
delineations would result in the rural facility adjustment being 
applied where it is appropriate to adjust for higher costs incurred by 
ESRD facilities in rural locations. However, in the proposed rule we 
recognized that implementing these changes would have different effects 
among ESRD facilities and that the loss of the rural facility 
adjustment could lead to some hardship for ESRD facilities that had 
anticipated receiving the rural facility adjustment in CY 2025. 
Therefore, we stated it would be appropriate to consider whether a 
transition period should be used to implement these changes. For ESRD 
facilities located in a county that transitioned from rural to urban in 
OMB Bulletin 23-01, we considered whether it would be appropriate to 
phase out the rural facility adjustment for affected ESRD facilities. 
Adoption of the updated CBSAs in OMB Bulletin 23-01, which we are 
finalizing as proposed, will change the status of 44 ESRD facilities 
currently designated as ``rural'' to ``urban'' for CY 2025 and 
subsequent CYs. As such, these 44 newly urban ESRD facilities would no 
longer receive the 0.8 percent rural facility adjustment. Consistent 
with the rural transition policy proposed for IPFs and IRFs for FY 2025 
(89 FR 23188, 89 FR 22267 through 22268) we proposed a 3-year, budget 
neutral phase-out of the rural facility adjustment for ESRD facilities 
located in the 54 rural counties that would become urban under the new 
OMB delineations, given the potentially significant payment impacts for 
these ESRD facilities. We believed that a phase-out of the rural 
facility adjustment transition period for these 44 ESRD facilities 
would be appropriate, because we expected these ESRD facilities would 
experience a steeper and more abrupt reduction in their payments 
compared to other ESRD facilities. We proposed to adopt these new CBSA 
delineations in a year in which we also proposed substantial 
methodological changes to our wage index. We noted that, while these 
proposed changes, would increase payment accuracy across the ESRD PPS, 
we also recognize that some ESRD facilities could lose the rural 
facility adjustment and receive a significantly lower wage index value 
in the same year. We stated that it would be appropriate for this 
transition policy to be budget-neutral compared to ending the rural 
adjustment for these facilities in CY 2025 because it is an extension 
of the rural facility adjustment, which was implemented budget-
neutrally, and a result of the change in CBSA delineations, which was 
proposed to be implemented budget-neutrally alongside the wage index 
changes. The reasoning behind this proposal is similar to the reasoning 
behind the 5 percent cap on year-to-year decreases in wage index 
values, which was finalized in the CY 2023 ESRD PPS final rule (87 FR 
67161), as it would ameliorate unexpected negative impacts to certain 
ESRD facilities. This rural phase-out in combination with the 5 percent 
cap policy would best reduce the negative effects on any single ESRD 
facility resulting from changes to the CBSA delineations. Therefore, we 
proposed to phase out the rural facility adjustment for these 
facilities to reduce the impact of the loss of the CY 2024 rural 
facility adjustment of 0.8 percent over CYs 2025, 2026, and 2027, 
consistent with the similar IPF and IRF proposals previously discussed. 
This policy would allow ESRD facilities that are classified as rural in 
CY 2024 and would be classified as urban in CY 2025 to receive two-
thirds of the rural facility adjustment for CY 2025, or a 0.53 percent 
adjustment. For CY 2026, these ESRD facilities would receive one-third 
of the rural facility adjustment, or a 0.27 percent adjustment. For CY 
2027, these ESRD facilities would not receive a rural facility 
adjustment. We believed, and continue to believe, that a 3-year budget-
neutral phase-out of the rural facility adjustment for ESRD facilities 
that transition from rural to urban status under the new CBSA 
delineations would best accomplish the goals of mitigating the loss of 
the rural facility adjustment for existing CY 2024 rural ESRD 
facilities. The purpose of the gradual phase-out of the rural facility 
adjustment for these ESRD facilities is to mitigate payment reductions 
and promote stability and predictability in payments for existing rural 
ESRD facilities that may need time to adjust to the loss of their CY 
2024 rural payment adjustment or that experience a reduction in 
payments solely because of this re-designation. This policy would be 
specifically for the 44 ESRD facilities that are rural in CY 2024 that 
become urban in CY 2025. We did not propose a transition policy for 
urban ESRD facilities that become rural in CY 2025 because these ESRD 
facilities will receive the full rural facility adjustment of 0.8 
percent beginning January 1, 2025, so they would not experience the 
same adverse effects as an ESRD facility that unexpectedly loses the 
rural facility payment adjustment. We noted that we understand that 
compared to rural payment adjustments in other Medicare payment 
systems, the ESRD PPS rural facility adjustment is not large in 
magnitude (for example, the rural adjustments for IPFs and IRFs are 17 
percent and 14.9 percent, respectively), but we stated that it is 
important for ESRD facilities to be able to reasonably predict what 
their payments from the ESRD PPS would be in the next year.
    We invited public comment on our proposal for a rural transition 
policy. One interested party commented on this proposal. The following 
is a summary of the public comment received on this proposal and our 
response.
    Comment: One commenter expressed support for the rural transition 
policy and stated that this policy would avoid disruption of patient 
care.
    Response: We thank the commenter and agree that this policy would 
help to stabilize payments for ESRD facilities in CBSAs which are 
losing their rural status for CY 2025.
    Final Rule Action: After reviewing the comments on this proposal, 
we are finalizing the rural transition phase-out policy as proposed. 
For ESRD facilities that were in CBSAs designated as rural for CY 2024, 
but that would be designated as urban for CY 2025, claims for renal 
dialysis services provided to all adult ESRD patients would receive 2/
3rds of the rural adjustment, or a 0.53 percent adjustment factor, for 
CY 2025 and 1/3rd of the rural adjustment, or a 0.27 percent adjustment 
factor, for CY 2026. Similarly, this transition would be applied for 
the current rural facility adjustment factor of 0.978 used for the

[[Page 89119]]

MAP calculation to determine the outlier payment made under Sec.  
413.237 for any eligible adult ESRD patient. This 0.978 adjustment 
factor represents a 2.2 percent reduction to the predicted MAP amount, 
so we will apply 2/3rds of the adjustment factor for CY 2025 and 1/3rd 
of the adjustment factor for CY 2026. For CY 2025 the rural transition 
adjustment factor applied to the outlier MAP calculation will be 0.9853 
and for CY 2026 the rural facility transition adjustment factor applied 
to the outlier MAP calculation will be 0.9927.
3. CY 2025 Update to the Outlier Policy
a. Background
    Section 1881(b)(14)(D)(ii) of the Act requires that the ESRD PPS 
include a payment adjustment for high-cost outliers due to unusual 
variations in the type or amount of medically necessary care, including 
variability in the amount of erythropoiesis stimulating agents (ESAs) 
necessary for anemia management. Some examples of the patient 
conditions that may be reflective of higher facility costs when 
furnishing dialysis care are frailty and obesity. A patient's specific 
medical condition, such as secondary hyperparathyroidism, may result in 
higher per treatment costs. The ESRD PPS recognizes that some patients 
require high-cost care, and we have codified the outlier policy and our 
methodology for calculating outlier payments at Sec.  413.237.
    Section 413.237(a)(1) enumerates the following items and services 
that are eligible for outlier payments as ESRD outlier services: (i) 
Renal dialysis drugs and biological products that were or would have 
been, prior to January 1, 2011, separately billable under Medicare Part 
B; (ii) Renal dialysis laboratory tests that were or would have been, 
prior to January 1, 2011, separately billable under Medicare Part B; 
(iii) Renal dialysis medical/surgical supplies, including syringes, 
used to administer renal dialysis drugs and biological products that 
were or would have been, prior to January 1, 2011, separately billable 
under Medicare Part B; (iv) Renal dialysis drugs and biological 
products that were or would have been, prior to January 1, 2011, 
covered under Medicare Part D, including renal dialysis oral-only drugs 
effective January 1, 2025; and (v) Renal dialysis equipment and 
supplies, except for capital-related assets that are home dialysis 
machines (as defined in Sec.  413.236(a)(2)), that receive the 
transitional add-on payment adjustment as specified in Sec.  413.236 
after the payment period has ended.\31\
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    \31\ Under Sec.  413.237(a)(1)(vi), as of January 1, 2012, the 
laboratory tests that comprise the Automated Multi-Channel Chemistry 
panel are excluded from the definition of outlier services.
---------------------------------------------------------------------------

    In the CY 2011 ESRD PPS final rule (75 FR 49142), CMS stated that 
for purposes of determining whether an ESRD facility would be eligible 
for an outlier payment, it would be necessary for the ESRD facility to 
identify the actual ESRD outlier services furnished to the patient by 
line item (that is, date of service) on the monthly claim. Renal 
dialysis drugs, laboratory tests, and medical/surgical supplies that 
are recognized as ESRD outlier services were specified in Transmittal 
2134, dated January 14, 2011.\32\ We use administrative issuances and 
guidance to continually update the renal dialysis service items 
available for outlier payment via our quarterly update CMS Change 
Requests, when applicable. For example, we use these issuances to 
identify renal dialysis oral drugs that were or would have been covered 
under Part D prior to 2011 to provide unit prices for determining the 
imputed MAP amounts. In addition, we use these issuances to update the 
list of ESRD outlier services by adding or removing items and services 
that we determined, based our monitoring efforts, are either 
incorrectly included or missing from the list.
---------------------------------------------------------------------------

    \32\ Transmittal 2033 issued August 20, 2010, was rescinded and 
replaced by Transmittal 2094, dated November 17, 2010. Transmittal 
2094 identified additional drugs and laboratory tests that may also 
be eligible for ESRD outlier payment. Transmittal 2094 was rescinded 
and replaced by Transmittal 2134, dated January 14, 2011, which 
included one technical correction. https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/R2134CP.pdf.
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    Under Sec.  413.237, an ESRD facility is eligible for an outlier 
payment if its imputed (that is, calculated) MAP amount per treatment 
for ESRD outlier services exceeds a threshold. In past years, the MAP 
amount has reflected the average estimated expenditure 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 MAP per treatment plus the fixed dollar 
loss (FDL) amount. As described in the following paragraphs, the ESRD 
facility's predicted MAP amount is the national adjusted average ESRD 
outlier services MAP amount per treatment, further adjusted for case-
mix and facility characteristics applicable to the claim. We use the 
term ``national adjusted average'' in this section of this final rule 
to more clearly distinguish the calculation of the average ESRD outlier 
services MAP amount per treatment from the calculation of the predicted 
MAP amount for a claim. The average ESRD outlier services MAP amount 
per treatment is based on utilization from all ESRD facilities, whereas 
the calculation of the predicted MAP amount for a claim is based on the 
individual ESRD facility and patient characteristics of the monthly 
claim. In accordance with Sec.  413.237(c), ESRD facilities are paid 80 
percent of the per treatment amount by which the imputed MAP amount for 
outlier services (that is, the actual incurred amount) exceeds this 
threshold. ESRD facilities are eligible to receive outlier payments for 
treating both adult and pediatric dialysis patients.
    In the CY 2011 ESRD PPS final rule and codified in Sec.  
413.220(b)(4), using 2007 data, we established the outlier percentage--
which is used to reduce the per treatment ESRD PPS base rate to account 
for the proportion of the estimated total Medicare payments under the 
ESRD PPS that are outlier payments--at 1.0 percent of total payments 
(75 FR 49142 through 49143). We also established the FDL amounts that 
are added to the predicted outlier services MAP amounts. The outlier 
services MAP amounts and FDL amounts are different for adult and 
pediatric patients due to differences in the utilization of separately 
billable services among adult and pediatric patients (75 FR 49140). As 
we explained in the CY 2011 ESRD PPS final rule (75 FR 49138 through 
49139), the predicted outlier services MAP amounts for a patient are 
determined by multiplying the adjusted average outlier services MAP 
amount by the product of the patient-specific case-mix adjusters 
applicable using the outlier services payment multipliers developed 
from the regression analysis used to compute the payment adjustments.
    Lastly, in the CY 2023 ESRD PPS final rule, we finalized an update 
to the outlier methodology to better target 1.0 percent of total 
Medicare payments (87 FR 67170 through 67177). We explained that for 
several years, outlier payments had consistently landed below the 
target of 1.0 percent of total ESRD PPS payments (87 FR 67169). 
Commenters raised concerns that the methodology we used to calculate 
the outlier payment adjustment since CY 2011 results in underpayment to 
ESRD facilities, as the base rate has been reduced by 1.0 percent since 
the establishment of the ESRD PPS to balance the outlier payment (85 FR 
71409, 71438 through 71439; 84 FR 60705 through 60706; 83 FR 56969). In 
response to these

[[Page 89120]]

concerns, beginning with CY 2023, we began calculating the adult FDL 
amounts based on the historical trend in FDL amounts that would have 
achieved the 1.0 percent outlier target in the 3 most recent available 
data years. We stated in the CY 2023 ESRD PPS final rule that we would 
continue to calculate the adult and pediatric MAP amounts for CY 2023 
and subsequent years following our established methodology. In that 
same CY 2023 ESRD PPS final rule, we provided a detailed discussion of 
the methodology we use to calculate the MAP amounts and FDL amounts (87 
FR 67167 through 67169).
    For CY 2025, we proposed several methodological and policy changes 
to the ESRD PPS outlier policy to address a number of concerns that 
interested parties have raised in recent years. We noted that although 
the 1.0 percent outlier target was achieved in CY 2023, it was not 
achieved in the majority of the years since the establishment of the 
ESRD PPS in 2011. We stated that we expect each of these proposed 
changes would support the ability of the ESRD PPS to continue targeting 
outlier payments at 1.0 percent in CY 2025 and subsequent years. We 
discuss each of these proposed changes in detail in the following 
sections.
b. Expansion of ESRD Outlier Services
(1) Background and Current Issues
    In the CY 2011 ESRD PPS final rule we finalized a policy that only 
renal dialysis services that were or would have been separately 
billable prior to the inception of the ESRD PPS would be eligible for 
the outlier payment. In the CY 2011 ESRD PPS proposed rule we explained 
that we believed that any unusual variation in the cost of the renal 
dialysis services comprising the base rate under the ESRD PPS would 
likely to be due to variation in the items and services that were, at 
that time, separately billable under Part B or renal dialysis service 
drugs and biological products that were then covered under Part D (74 
FR 49988). We received some comments at that time that requested CMS 
consider alternative ways to determine outlier eligibility, including 
expanding eligibility to all renal dialysis services. However, we noted 
that we did not have adequate data at that time to include all 
Composite Rate Services (that is, renal dialysis services included in 
the composite payment system established under section 1881(b)(7) of 
the Act and the basic case-mix adjusted composite payment system 
established under section 1881(b)(12) of the Act, as defined in 
regulation at Sec.  413.171) in the outlier calculation (74 FR 49989, 
75 FR 49135).
    In the CY 2019 ESRD PPS proposed rule we issued a comment 
solicitation on the potential expansion of outlier payments to 
composite rate supplies, drugs, and biological products (83 FR 34332). 
In this RFI, we detailed that such a change could promote appropriate 
payment for composite rate drugs once the TDAPA period has ended. 
Commenters' responses to this comment solicitation were mixed (83 FR 
56969 through 56970). One commenter expressed that such a change would 
promote and incentivize the development of innovative new therapies and 
devices to treat the highly vulnerable ESRD adult and pediatric patient 
populations. Some commenters responded specifically regarding the TDAPA 
that extending availability of outlier payments would be particularly 
important when no additional money is being added to the base rate for 
the drug, as is the case with most drugs and biological products 
receiving the TDAPA. However, some commenters, including MedPAC, did 
not agree that such an expansion of the outlier eligible services would 
improve care, generally indicating that expanding the list of ESRD 
outlier services would hamper the outlier payment's functionality. One 
commenter stated that the purpose of the outlier adjustment was to pay 
for unusually costly patients, not new drugs and biological products, 
which the commenter noted the outlier payment was unable to do 
adequately. MedPAC commented that an outlier policy should act as a 
stop-loss insurance for medically necessary care, and outlier payments 
are needed when the ESRD PPS' payment adjustments do not capture all of 
the factors affecting providers' costs of delivering care. To that end, 
MedPAC stated that to develop an effective outlier policy, CMS must 
first develop accurate patient-level and facility-level payment 
adjustments. MedPAC further cautioned that should CMS expand the list 
of eligible ESRD outlier services, we should be clear as to what would 
qualify for the outlier payment.
    In subsequent years, we took steps to expand the outlier policy to 
include certain potentially costly renal dialysis services that would 
have been included in the composite rate prior to the ESRD PPS. In the 
CY 2020 ESRD PPS final rule we finalized that any new and innovative 
renal dialysis equipment or supply would be eligible for the outlier 
adjustment after the end of the TPNIES period, regardless of whether it 
would have been separately billable prior to 2011 (84 FR 60697). In 
that rule, we explained that we believed allowing these items to be 
outlier eligible after the end of the TPNIES period would allow for 
these new and innovative supplies to be competitive with the other 
equipment and supplies also accounted for in the ESRD PPS base rate by 
establishing a level playing field where products could gain market 
share by offering the best practicable combination of price and quality 
(84 FR 60693). In the CY 2021 ESRD PPS final rule, we finalized that 
capital-related assets that are home dialysis machines will not become 
ESRD outlier services at the end of the TPNIES payment period (85 FR 
71399). We explained that as assets, capital-related home dialysis 
machines are distinct from operating expenses such as the disposable 
supplies and leased equipment with no conveyed ownership rights. Unlike 
assets, these latter items are generally accounted for on a per patient 
basis and therefore, when used in excess of the average, constitute 
outlier use, which makes them eligible for outlier payments (85 FR 
71424).
    The definition of ESRD outlier services is codified at Sec.  
413.237(1)(a). Currently, drugs and biological products that were or 
would have been paid under the composite rate are not considered ESRD 
outlier services, and costs for these drugs are not included in the 
calculation for outlier payments on ESRD PPS claims. Current 
regulations at Sec.  413.171 define Composite Rate Services as: ``Items 
and services used in the provision of outpatient maintenance dialysis 
for the treatment of ESRD and included in the composite payment system 
established under section 1881(b)(7) and the basic case-mix adjusted 
composite payment system established under section 1881(b)(12) of the 
Act.'' Under our longstanding policy, drugs and biological products 
that are substitutes for composite rate drugs and biological products 
are considered to be included in the composite rate portion of the ESRD 
PPS. In the CY 2011 ESRD PPS final rule (75 FR 49048), we cited 
existing guidance in the Medicare Benefit Policy Manual, Pub. 100-02, 
chapter 11, section 30.4.1, which explicitly stated, ``drugs used in 
the dialysis procedure are covered under the facility's composite rate 
and may not be billed separately. Drugs that are used as a substitute 
for any of these items, or are used to accomplish the same effect, are 
also covered under the composite rate.'' This guidance remains in 
effect and was subsequently re-designated to section 20.3.F of the same 
chapter.
    In the CY 2024 ESRD PPS final rule (88 FR 76391), we finalized a 
policy to

[[Page 89121]]

pay, beginning for CY 2024, a post-TDAPA add-on payment adjustment for 
any new renal dialysis drug or biological product that is considered 
included in the ESRD PPS base rate that has previously been paid for 
using the TDAPA under Sec.  413.234(c)(1). This post-TDAPA add-on 
payment adjustment generally will be applied for a period of 3 years 
following the end of the TDAPA period for those products. We finalized 
that the post-TDAPA add-on payment adjustment amount will be calculated 
based on the most recent available 12 months of claims data and the 
latest available full calendar quarter of average sales price (ASP) 
data (88 FR 76396). We explained that we divide the total expenditure 
of the new renal dialysis drug or biological product by the total 
number of ESRD PPS treatments furnished during the same 12-month 
period. In addition, we finalized that we adjust the post-TDAPA add-on 
payment adjustment amount paid on claims by the patient-level case-mix 
adjustment factors; accordingly, we apply a reduction factor to the 
post-TDAPA add-on payment adjustment amount to account for the 
application of the patient-level case-mix adjustment factors. We 
codified these policies by revising Sec.  413.234(c)(1)(i) and adding 
regulations at Sec.  413.234(b)(1)(iii), (c)(1)(ii), (c)(3), and (g) 
that describe the post-TDAPA add-on payment adjustment and the 
calculation we use to determine the post-TDAPA add-on payment 
adjustment amount. In addition, we amended Sec.  413.230 by adding 
reference to the post-TDAPA add-on payment adjustment in the 
calculation of the ESRD PPS per treatment payment amount.
    In the same CY 2024 ESRD PPS final rule, we summarized comments 
regarding the outlier policy as it pertains to the post-TDAPA add-on 
payment adjustment (88 FR 76396). One commenter pointed out that the CY 
2024 ESRD PPS proposed rule did not indicate whether the ESRD PPS 
outlier adjustment would apply to products for which a post-TDAPA add-
on payment adjustment is calculated. In response, CMS stated that under 
current policy, after the end of the TDAPA period, a drug or biological 
product is considered an eligible outlier service only if it meets the 
requirements of Sec.  413.237(a)(1). We clarified that any renal 
dialysis drug or biological product included in the calculation of the 
post-TDAPA add-on payment adjustment would be considered an eligible 
ESRD outlier service only if it meets the requirements of Sec.  
413.237(a)(1). However, we further clarified that under current policy, 
Korsuva[supreg], the only renal dialysis drug with a TDAPA period 
ending in CY 2024, would not be considered an eligible ESRD outlier 
service after the end of its TDAPA period, because it is a substitute 
for diphenhydramine hydrochloride, which was included in the composite 
rate prior to 2011, and therefore does not meet the requirements of 
Sec.  413.237(a)(1) (that is, it would not have been, prior to January 
1, 2011, separately billable under Medicare Part B).
    Most recently, we have heard concerns from interested parties that 
excluding drugs and biological products that are substitutes for--or 
are used to achieve the same effect as--composite rate drugs and 
biological products from the definition of ESRD outlier services could 
limit the ability of the ESRD PPS outlier adjustment to appropriately 
recognize the drivers of cost for renal dialysis services. We 
considered these concerns, as well as the comments we received in 
response to prior rulemaking, to develop proposed changes to the 
definition of ESRD outlier services.
(2) Definition of ESRD Outlier Services
    Effective for CY 2025, we proposed to change the definition of ESRD 
outlier services at Sec.  413.237(a)(1) to include drugs and biological 
products that were or would have been included in the composite rate 
prior to the establishment of the ESRD PPS. We noted that this proposal 
would expand outlier eligibility to longstanding drugs and biological 
products that were historically included in the composite rate, as well 
as newer drugs and biological products that are currently included in 
the calculation of the post-TDAPA add-on payment adjustment. As 
discussed in section II.B.3.c of this final rule, we proposed and are 
finalizing technical changes to the calculation of outlier payments 
that will appropriately account for the post-TDAPA add-on payment 
adjustment for ESRD outlier services that are drugs and biological 
products.
    In the CY 2025 ESRD PPS proposed rule, we stated that we considered 
the original intent behind the policy to limit outlier payments to 
drugs that were or would have been separately billable prior to 2011, 
which was that these drugs were likely the main drivers of the 
variation in the costs of treatment (74 FR 49988). We explained that we 
continue to believe an important aspect of the outlier adjustment 
should be its ability to target ESRD cases that are unusually costly. 
We noted that if the outlier adjustment methodology failed to recognize 
the main drivers of variation in the costs of ESRD treatment, then it 
could result in cases that are not unusually costly qualifying for the 
outlier adjustment, which would mean the impact of the outlier 
adjustment would be diluted. We also noted that many of the responses 
to the comment solicitation in the CY 2019 ESRD PPS proposed rule 
expressed concerns that expanding the scope of ESRD outlier services 
would potentially dilute the impact of the outlier adjustment. We 
explained that for CY 2025 we considered the potential impact of 
expanding the definition of ESRD outlier services to include additional 
drugs and biological products not currently included. We stated that we 
agree with the commenters who noted that the purpose of the outlier 
payment is not to pay for new drugs and biological products (83 FR 
56969). We further stated that in the CY 2011 ESRD PPS final rule (75 
FR 49134), CMS established the current outlier policy, including the 
1.0 percent outlier target, because it struck an appropriate balance 
between our objective of paying an adequate amount for the costliest, 
most resource-intensive patients while providing an appropriate level 
of payment for those patients who do not qualify for outlier payments. 
We noted that under our current policy, new renal dialysis drugs and 
biological products that are paid for using the TDAPA are not 
considered ESRD outlier services. As we explained in the CY 2016 ESRD 
PPS final rule (80 FR 69023), this is because during the TDAPA period 
we make a payment adjustment for the specific drug in addition to the 
base rate, whereas outlier services have been incorporated into the 
base rate. In contrast, we noted that the post-TDAPA add-on payment 
adjustment is paid on all claims, and drugs that are included in the 
post-TDAPA add-on payment adjustment amount are considered included in 
the ESRD PPS base rate. We explained that as a result, the amount paid 
under the post-TDAPA add-on payment adjustment does not correspond to 
the amount of a drug or biological product used on a claim, which would 
not be accounted for in any existing payment adjustment other than the 
outlier adjustment. For example, we stated that our analysis shows that 
patients using Korsuva[supreg] have costs of approximately $150 per 
treatment; however, because this drug is not recognized as an ESRD 
outlier service, these costs are not accounted for in determining the 
payment amount for the claim. Beginning April 1, 2024, the CY 2024 
post-TDAPA add-on payment adjustment for Korsuva[supreg]

[[Page 89122]]

increases the payment amount per treatment by approximately $0.25, 
which is adjusted by the patient-level case-mix adjusters applicable to 
the claim. In aggregate, the post-TDAPA add-on payment adjustment 
accounts for 65 percent of the cost of furnishing Korsuva[supreg]; 
however, this payment is spread across all ESRD PPS treatments.
    In the proposed rule, we explained that we did not propose to 
expand outlier eligibility to drugs and biological products that are 
paid for using the TDAPA during the TDAPA period, as the TDAPA amount 
is based on the full price (100 percent of ASP) for the amount of such 
drugs that is utilized and billed on the claim.
    We further explained that we considered only expanding the 
definition of ESRD outlier services to include drugs and biological 
products that were previously paid for using the TDAPA. We noted the 
suggestion of past commenters that new renal dialysis drugs and 
biological products are likely to be drivers of cost, because these 
drugs are typically more expensive. We explained that we recognized the 
importance of supporting access to new renal dialysis drugs and 
biological products under the ESRD PPS through the establishment of the 
post-TDAPA add-on payment adjustment beginning in CY 2024 (88 FR 
76391). We further noted that in the CY 2024 ESRD PPS final rule we 
agreed with commenters who expressed concerns that the ESRD PPS' 
current mechanisms may not fully account for the costs of these new 
drugs (88 FR 76388). We noted that several commenters stated that the 
outlier adjustment and the ESRDB market basket updates cannot 
adequately account for these costs, and several organizations noted 
that if additional renal dialysis drugs and biological products with 
significant costs were incorporated into the outlier payment 
calculation, the threshold to qualify for outlier payments would 
increase dramatically, thus adversely affecting access to products 
traditionally eligible for the outlier payment adjustment. We described 
comments which expressed that this increase in the outlier threshold 
may also raise health equity concerns because, as we noted in the CY 
2023 ESRD PPS final rule (87 FR 67170 through 67171), the outlier 
adjustment protects access for beneficiaries whose care is unusually 
costly. We recognized that if the outlier threshold were to increase 
significantly due to significant use of a new renal dialysis drug or 
biological product after the end of the TDAPA period, then ESRD 
facilities might be incentivized to avoid treating costlier 
beneficiaries.
    We stated that we believe it would be appropriate for the 
definition of ESRD outlier services to include all drugs and biological 
products that previously were paid for using the TDAPA. We explained 
that the inclusion of these drugs and biological products would help 
ensure appropriate payment when a patient's treatment is exceptionally 
expensive due to an ESRD facility furnishing such drugs or biological 
products to the patient whose treatment requires them. In the CY 2011 
ESRD PPS proposed rule, we explained that significant variations in 
formerly separately billable items and services could impair access to 
appropriate care, as an ESRD facility may have a disincentive to 
provide adequate treatment to those ESRD patients likely to have 
significantly higher than average costs (74 FR 49988). We stated in the 
CY 2025 ESRD PPS proposed rule that we believe ESRD facilities may face 
similar disincentives for furnishing drugs and biological products that 
previously received payment under the TDAPA. We further stated that we 
believe this change would also align with the statutory authority for 
the outlier adjustment under section 1881(b)(14)(D)(ii) of the Act by 
protecting patients' access to medically necessary care through a 
payment adjustment that more fully recognizes unusual variations in the 
type or amount of such care. Specifically, we explained that we believe 
this change would encourage ESRD facilities to take on ESRD patients 
who would potentially require expensive new drugs and biological 
products, promoting health equity for these patients who require 
costlier care. Additionally, we noted that the technical changes we 
proposed, and which we are finalizing in section II.B.3.c of this final 
rule, would limit the impact of such drugs and biological products on 
the outlier threshold calculation, thereby enabling the ESRD PPS 
outlier adjustment to continue to protect access for beneficiaries 
whose care is unusually costly.
    We stated that in light of the past comments that we described in 
the proposed rule, we further considered whether expanding eligibility 
to all renal dialysis drugs and biological products that are Composite 
Rate Services, as defined at Sec.  413.171, would be appropriate. We 
reiterated that the purpose of the outlier adjustment is to protect 
access for beneficiaries whose care is unusually costly. We stated that 
although we continue to expect that the main drivers of cost would be 
drugs and biological products that were previously separately billable 
under Part B or Part D, or were previously paid for using the TDAPA, we 
nevertheless recognize that some patients could require higher 
utilization of composite rate drugs and biological products, which may 
result in the overall cost of their renal dialysis care being unusually 
high. For example, as we noted in section II.B.3.e of the proposed 
rule, our analysis identified that certain composite rate drugs are 
significant drivers of cost for pediatric patients, and therefore the 
proposed inclusion of those drugs as ESRD outlier services would 
improve the ability of the ESRD PPS outlier adjustment to target 
payment for pediatric patients whose care is exceptionally costly. We 
stated that including composite rate drugs and biological products in 
the calculation of the outlier adjustment could appropriately support 
care for such ESRD patients, because payments under the outlier 
adjustment would better align with resource use.
    We explained that we also considered the comments from MedPAC in 
response to the CY 2019 ESRD PPS proposed rule. Specifically, MedPAC 
stated that to develop an effective outlier policy, CMS must first 
develop accurate patient-level and facility-level payment adjustments. 
As we stated in the CY 2024 ESRD PPS final rule, interested parties 
have encouraged CMS to develop a patient cost model that is based on a 
single patient-level cost variable that accounts for all composite rate 
and formerly separately billable services (88 FR 76399). We noted that 
we finalized the collection of time on machine data, beginning for CY 
2025, which we stated would allow for a higher proportion of composite 
rate costs to be allocated to patients with longer renal dialysis 
treatment times, and ultimately inform CMS refinements to existing 
patient-level adjusters, including age and comorbidities (88 FR 76400). 
We stated that we believe expanding the definition of ESRD outlier 
services could further support our understanding of the costs of 
Composite Rate Services, because it would encourage more comprehensive 
reporting of renal dialysis drugs and biological products that were 
formerly included in the composite rate for the purposes of calculating 
outlier payments. We further stated that this increased reporting would 
in turn support future revisions to patient-level adjustment factors 
that consider more complete information about costs at the patient 
level.
    We stated that we do not agree that the proposed inclusion of 
composite rate drugs and biological products would dilute the impact of 
the outlier

[[Page 89123]]

adjustment, as some commenters in response to the CY 2019 ESRD PPS 
proposed rule suggested. Rather, we explained that our analysis 
indicates the inclusion of these drugs and biological products would 
appropriately recognize the situations when the provision of these 
services is unusually costly, which we estimate would increase the 
amount of outlier payment per outlier-eligible claim, thereby more 
effectively protecting access for beneficiaries whose care is 
exceptionally costly. We stated that if we made no changes to our 
outlier methodology or the definition of ESRD outlier services for CY 
2025, the average outlier payment for outlier-eligible cases among 
pediatric patients would be $25.02, and the average outlier payment for 
adult patients would be $53.45. We noted that under the proposed 
changes to outlier eligibility, the average outlier payment for 
pediatric and adult patients would increase to $73.24 and $57.16, 
respectively. Furthermore, we explained that the inclusion of composite 
rate drugs and biological products would increase the pediatric MAP 
amount by a large amount, reflecting the utilization of certain high-
cost composite rate drugs. We explained that although the proposed CY 
2025 adult MAP amount was lower than the final CY 2024 adult MAP 
amount, the proposed adult MAP amount for CY 2025 was approximately 
$0.79 higher than it would have been absent the proposed policy changes 
in this rule, which we stated demonstrates that the inclusion of 
composite rate drugs and biological products would result in a higher 
MAP amount for adults.
    In summary, we stated that the inclusion of composite rate drugs 
and biological products as ESRD outlier services would include more 
costs in the calculation of the ESRD PPS outlier adjustment for each 
case. We explained that as a result, fewer claims would qualify for 
outlier payments, but the amount of outlier payment per claim would be 
higher. Therefore, we stated that rather than diluting the impact of 
the outlier adjustment, these proposed changes would increase the 
impact of the outlier adjustment.
    We proposed to amend the language at 42 CFR 413.237 by adding a new 
paragraph (a)(1)(vii), which would add to the list of renal dialysis 
services defined as ESRD outlier services the following: ``Renal 
dialysis drugs and biological products that are Composite Rate Services 
as defined in Sec.  413.171.''
    We invited public comment on our proposal to include renal dialysis 
drugs and biological products that are composite rate services in the 
definition of ESRD outlier services. Approximately 13 commenters 
commented on this proposal. These commenters included LDOs, drug 
manufacturers, a nonprofit dialysis organization, a nonprofit kidney 
care alliance, a professional organization of nephrologists, a 
coalition of dialysis organizations, and MedPAC. The following is a 
summary of the public comments received on this proposal and our 
responses.
    Comment: Several commenters expressed support for the proposed 
definition of ESRD outlier services. One LDO stated its belief that new 
drugs regardless of their status as a former composite rate service 
should be eligible for outlier payment. Similarly, a professional 
organization of nephrologists stated that if the proposed definition of 
ESRD outlier services is finalized, it would educate its members about 
this change and the importance of pediatric dialysis units 
appropriately billing for use of alteplase and other qualifying drugs 
to collect the outlier payment when appropriate. This commenter 
requested that CMS highlight any specific requirements for billing.
    MedPAC likewise expressed support for expanding ESRD outlier 
services to include drugs and biological products that were or would 
have been included in the composite rate prior to the ESRD PPS. MedPAC 
reiterated its position that CMS should develop an outlier policy that 
addresses variation in the total cost of providing the entire ESRD PPS 
payment bundle, thereby avoiding the potential for misidentifying 
outliers (for example, a patient with very high costs for outlier-
eligible services may have offsetting, lower costs for outlier-
ineligible services). MedPAC further explained that considering the 
cost of the full ESRD PPS payment bundle would be more patient-centric 
and would align the ESRD PPS outlier policy with the policies that 
Medicare uses for other PPSs. One commenter expressed that CMS's 
continued reliance upon a distinction between ``composite rate'' and 
other products continues to confound the goals of moving the ESRD PPS 
toward a modern standard of care.
    Response: We appreciate the comments in support of the proposed 
change to the definition of ESRD outlier services. We agree with 
commenters that the proposed definition would more broadly recognize 
ESRD PPS patients whose care is costlier. Regarding the commenter's 
statement that the distinction between renal dialysis drugs and 
biological products that were formerly separately billable and those 
that were or would have been historically paid under the composite rate 
does not best serve the goals of the ESRD PPS, we note that this 
distinction derives from the statutory definition of renal dialysis 
services in section 1881(b)(14)(B)(iii) of the Act. However, we 
recognize that providing payment under the ESRD PPS outlier adjustment 
for former composite rate and non-composite rate services would better 
serve CMS's goals, specifically CMS's longstanding efforts to develop a 
comprehensive patient cost model for the purposes of considering future 
refinements to the ESRD PPS adjustment factors.
    In response to the request for specific billing guidance, we direct 
readers to the Medicare Claims Processing Manual (CPM), Chapter 8. ESRD 
facilities are instructed to report all renal dialysis drugs and 
biological products on the claim. Specific information about revenue 
codes and other billing requirements are found in section 50.2 of 
Chapter 8 of the CPM.
    Comment: Several commenters, including LDOs, drug manufacturers, a 
nonprofit dialysis organization, a coalition of dialysis organizations, 
and a professional organization of nephrologists expressed that the 
proposed change to the definition of ESRD outlier services does not 
address what commenters stated is an underlying lack of payment 
adequacy for new drugs that are renal dialysis services. One LDO 
acknowledged that access to outlier funds is a small step in the right 
direction but stated that CMS policy for incorporating such drugs into 
the PPS is insufficient to adequately compensate dialysis providers. 
This commenter further stated that new drugs that represent a 
substantial clinical improvement should be incorporated into the 
bundled payment with new money regardless of their placement in a 
functional category. As an example of how the commenter believes the 
current policy is flawed, this commenter noted that lack of adequate 
payment has artificially depressed access to Korsuva[supreg] treatment 
and that nephrologists are reluctant to prescribe a therapy that does 
not have adequate long-term funding. Several commenters stated that 
approximately 16 percent of the ESRD patient population has severe 
pruritus for which Korsuva[supreg] is indicated. These commenters noted 
that if all of these patients were to receive Korsuva[supreg], the 
total outlier payment for that one drug would be $350 million for CY 
2025, more than three times the current outlier pool. Another commenter 
stated that changes still need to be made to fix the base rate and 
support innovation in

[[Page 89124]]

new drugs, biological products, and devices for pediatric kidney 
patients.
    Several commenters stated that CMS should not finalize the proposed 
definition of ESRD outlier services but should instead advance funding 
mechanisms that would appropriately safeguard patient access to new 
drugs and biological products after the two-year TDAPA period expires.
    Response: We appreciate the commenters' concerns regarding payment 
for new renal dialysis drugs and biological products under the ESRD 
PPS. As the commenters pointed out, and as we have previously stated, 
the purpose of the ESRD PPS outlier adjustment is not to pay for new 
drugs and biological products. Rather, the purpose of the ESRD PPS 
outlier adjustment is to protect access to care for beneficiaries whose 
care is exceptionally costly. In the proposed rule, we stated that 
including new renal dialysis drugs that previously received payment 
using the TDAPA would help ensure appropriate payment when a patient's 
treatment is exceptionally expensive due to an ESRD facility furnishing 
such drugs or biological products to the patient whose treatment 
requires them.
    We disagree with commenters who stated that lack of adequate 
payment has artificially depressed access to Korsuva[supreg] treatment 
and that nephrologists are reluctant to prescribe a therapy that the 
commenters stated does not have adequate long-term funding. 
Nephrologists and ESRD patients make decisions about which drugs and 
biological products best serve the patients' needs, and these decisions 
depend on a number of factors including but not limited to 
considerations about the efficacy for the individual patient, side 
effects and interactions with other drugs and biological products the 
patient may be taking, and considerations related to affordability for 
the patient. As we explained in the CY 2019 ESRD PPS final rule, the 
purpose of providing the TDAPA for drugs that fall into an existing 
functional category is to help ESRD facilities to incorporate new drugs 
and make appropriate changes in their businesses to adopt such drugs; 
provide additional payment for such associated costs, as well as 
promote competition among drugs and biological products within the ESRD 
PPS functional categories (83 FR 56935). A new renal dialysis drug or 
biological product must demonstrate to patients and nephrologists that 
it presents value relative to existing treatment options, and the TDAPA 
further allows new products to become competitive by providing payment 
at 100 percent of ASP for the new drug or biological product. We expect 
that nephrologists and patients would consider all relevant factors and 
all available treatment options, and make the most appropriate decision 
for each patient. We do not believe we can infer that utilization of 
Korsuva[supreg] was depressed due to lack of adequate payment during 
the TDAPA period, because payment under the TDAPA for Korsuva[supreg] 
was based on 100 percent of ASP. Furthermore, in the CY 2024 ESRD PPS 
final rule, we finalized a policy to pay a post-TDAPA add-on payment 
adjustment for a period of 3 years following the payment of TDAPA. We 
stated that one goal of the post-TDAPA add-on payment adjustment is to 
support continued access to new renal dialysis drugs and biological 
products and to support ESRD facilities' long-term planning and 
budgeting for such drugs after the TDAPA period (88 FR 76393). 
Therefore, we believe that ESRD PPS policy provides appropriate and 
adequate payment in the short term during the 2-year TDAPA period, in 
the medium term during the 3 years of payment under the post-TDAPA add-
on payment adjustment following the payment of TDAPA, and during the 
long term when such new renal dialysis drugs and biological products 
are paid for under the ESRD PPS base rate with no adjustment and are 
expected to compete with other drugs and biological products in the 
ESRD PPS.
    We also cannot assume that utilization of Korsuva[supreg] should be 
higher than it was during the TDAPA period or that it would increase in 
response to the proposed outlier policy changes. We note that 
utilization of Korsuva[supreg] during the TDAPA period was 
significantly lower than the 16 percent figure cited by the commenters. 
We anticipate that the utilization of Korsuva[supreg] in CY 2025 would 
align with the levels of utilization observed during the TDAPA period, 
as these levels best reflect the actual prescribing patterns of 
nephrologists for that drug. Nevertheless, if utilization for 
Korsuva[supreg] were to increase significantly in CY 2025, then under 
our longstanding outlier methodology we would take such changes in 
utilization into consideration when establishing the FDL and MAP 
amounts prospectively in future years. As we have stated, we establish 
the outlier FDL and MAP amounts each year at a level that our analysis 
indicates would effectively protect access for the costliest 
beneficiaries while maintaining an appropriate ESRD PPS base rate for 
all other beneficiaries.
    Lastly, we do not believe that the current definition of ESRD 
outlier services better supports payment for new renal dialysis drugs 
and biological products than the proposed definition, because it 
excludes new renal dialysis drugs and biological products that are 
substitutes for drugs and biological products that were included in the 
composite rate. That is, the current definition of ESRD outlier 
services excludes certain new renal dialysis drugs and biological 
products that may be significant drivers of cost, and therefore we do 
not believe it would be more appropriate to maintain the existing 
definition of ESRD outlier services. We believe our proposed definition 
of ESRD outlier services would be more appropriate, because it would 
recognize all renal dialysis drugs and biological products that are 
significant drivers of cost for ESRD patients. Therefore, as discussed 
later in this final rule, we are finalizing our proposed revision to 
the definition of ESRD outlier services. We refer readers to section 
II.B.4 of this CY 2025 ESRD PPS final rule for a discussion about 
payment for innovation and the ESRD PPS base rate.
    Comment: MedPAC reiterated its prior concerns from the CY 2019 ESRD 
PPS proposed rule about how CMS estimates the ESRD PPS's case-mix 
adjustments, including patient-level adjustments, and the accuracy of 
the adjustments' coefficients. MedPAC stated that these coefficients 
are used to calculate the Medicare allowable payment amount, which when 
combined with the fixed dollar loss amount, determines which treatments 
will receive an outlier payment. Therefore, MedPAC stated that to 
ensure the ability of the outlier policy to account for beneficiaries 
with high costs, the agency must improve the accuracy of the ESRD PPS's 
patient- and facility-level payment adjustments.
    Response: We agree with MedPAC's assessment of the importance of 
accurate ESRD PPS case-mix adjustments for the ESRD PPS outlier 
adjustment. As we noted in the proposed rule, we believe expanding the 
definition of ESRD outlier services could further support our 
understanding of the costs of Composite Rate Services, because it would 
encourage more comprehensive reporting of renal dialysis drugs and 
biological products that were formerly included in the composite rate 
for the purposes of calculating outlier payments. In addition, we 
anticipate that this increased reporting would support future revisions 
to patient-level adjustment factors that consider more

[[Page 89125]]

complete information about the cost of furnishing renal dialysis 
services to a patient.
    Comment: One commenter stated that a smaller outlier percentage on 
the order of 0.5 percent would be preferable to maintaining the 
existing 1.0 percent outlier percentage. This commenter encouraged CMS 
to consider exercising its discretion to set a lower outlier 
percentage.
    Response: While we agree that section 1881(b)(14)(D)(ii) of the Act 
provides the Secretary with discretion to set an appropriate outlier 
percentage under the ESRD PPS, we note that we continue to believe the 
1.0 percent target is more appropriate than a lower outlier percentage. 
As discussed in the CY 2011 ESRD PPS final rule (75 FR 49134), we 
established the 1.0 percent outlier percentage because it struck an 
appropriate balance between our objective of paying an adequate amount 
for the costliest, most resource-intensive patients while providing an 
appropriate level of payment for those patients who do not qualify for 
outlier payments. We continue to believe the 1.0 percent target strikes 
the appropriate balance, and as we further noted in the CY 2023 ESRD 
PPS final rule (87 FR 67171), a reduced outlier percentage may not 
provide the appropriate level of payment for outlier cases and may not 
protect access for beneficiaries whose care is unusually costly. This 
is because if we were to decrease the target outlier percentage, we 
would need to significantly increase the FDL amounts, which would make 
it more difficult for ESRD facilities to receive outlier payment based 
on their claims. We did not propose to reduce the outlier percentage 
for CY 2025, and we are not finalizing any such reduction in this rule.
    Comment: Several commenters expressed concern about the burden of 
reporting renal dialysis drugs and biological products that were or 
would have been paid under the composite rate before the establishment 
of the ESRD PPS, and about the reliability of such reported data. One 
commenter stated that these drugs would not make any difference in a 
facility getting an outlier payment because of the relatively 
inexpensive cost of such drugs compared to new high-cost drugs on the 
market now or in the future. Other commenters acknowledged that the 
reporting of information on composite rate drugs is not as 
comprehensive as other data elements but stated that this is because 
ESRD facilities have never been required to report information about 
composite rate drugs and biological products because such information 
does not serve any ESRD PPS-related purpose. Several commenters stated 
that the observed disparity in alteplase utilization described in the 
CY 2025 ESRD PPS proposed rule is a difference in reporting and not a 
meaningful clinical or operational difference. An LDO and a coalition 
of dialysis organizations expressed concerns about CMS's ability to 
calculate MAP and FDL amounts for CY 2025 given the lack of complete 
information about utilization of composite rate drugs and biological 
products.
    Response: We appreciate the concerns that commenters raised about 
the completeness of data on the utilization of composite rate drugs and 
the perceived burden associated with reporting these drugs on ESRD PPS 
claims. We disagree with the commenters who stated that composite rate 
drugs and biological products would not make any difference in a 
facility receiving payment under the outlier adjustment. As we 
explained in the proposed rule, we found that certain composite rate 
drugs such as alteplase were significant drivers of cost for pediatric 
patients. Although we acknowledge that some composite rate drugs and 
biological products are relatively low-cost, our analysis has found 
that this is not generally true of all composite rate drugs. We believe 
it would be most appropriate to make payment under the outlier 
adjustment for any renal dialysis drugs and biological products that do 
cause a patient's ESRD treatment to be exceptionally costly.
    We further disagree with the commenters who stated that the 
proposed definition of ESRD outlier services would expand reporting 
burden for ESRD facilities. Section 60.2 of Chapter 8 of the CPM states 
that effective January 1, 2011, section 153b of the MIPPA requires that 
all drugs and biologicals used in the treatment of ESRD are included in 
the ESRD PPS payment amount and must be billed by the ESRD facility. 
Although we acknowledge that many ESRD facilities have not historically 
included composite rate drugs and biological products on ESRD PPS 
claims, we remind readers that ESRD facilities have long been 
encouraged to report all renal dialysis drugs and biological products 
on ESRD PPS claims, including composite rate drugs. In the CY 2016 ESRD 
PPS final rule (80 FR 69033), we clarified that ESRD facilities should 
begin reporting on their monthly claims those composite rate drugs that 
are on the consolidated billing list. Therefore, the proposal to change 
the definition of ESRD outlier services would not change the 
requirements for ESRD facilities to report composite rate drugs on ESRD 
PPS claims. In fact, we observe in our analysis of ESRD PPS claims data 
that hospital-based ESRD facilities are already more consistently 
reporting composite rate items and services, which in part explains the 
outsized impact of composite rate drugs and biological products on the 
FDL and MAP amounts for pediatric patients, who more frequently receive 
renal dialysis services from hospital-based ESRD facilities. In 
addition to reporting differences, we believe the differential rates of 
alteplase utilization between pediatric patients and adult patients 
could be related to higher rates of catheter use among pediatric 
patients.
    Lastly, we do not agree with the concerns that commenters 
articulated about CMS's ability to calculate MAP and FDL amounts for CY 
2025 given the lack of complete information about utilization of 
composite rate drugs and biological products. Our longstanding 
methodology for prospectively setting the MAP and FDL amounts uses the 
best available year of ESRD PPS claims, which is generally the most 
recent available year, to simulate claims for the upcoming CY. 
Additionally, we use the three most recent years to calculate the FDL 
amount which would have achieved the 1 percent outlier target. In any 
given year, changes in utilization of ESRD outlier services from the 
historical claims data to the upcoming CY can result in over- or under-
estimates of the outlier percentage. CMS relies on the information 
reported by ESRD facilities for accurate modeling of ESRD PPS outlier 
payments. To the extent that the proposed change to the definition of 
ESRD outlier services further encourages ESRD facilities to report when 
composite rate drugs and biological products are used, we believe this 
would result in future claims data that is more complete and better fit 
for not only estimating future outlier payments, but also for analyzing 
comprehensive patient-level cost information to potentially inform 
future revisions to ESRD PPS adjustment factors.
    Comment: Several commenters, including LDOs, drug manufacturers, a 
nonprofit dialysis organization, and a coalition of dialysis 
organizations, expressed concern that the proposed change to the 
definition of ESRD outlier services could result in outlier payments 
that exceed the 1.0 percent outlier percentage. Some commenters stated 
that since the 1.0 percent outlier percentage was achieved in CY 2023, 
CMS should use caution before making

[[Page 89126]]

further changes to the outlier policy. One commenter suggested that CMS 
might be required to reduce the ESRD PPS base rate if the 1.0 percent 
outlier percentage is exceeded in future years.
    Response: We are reiterating that our longstanding methodology 
establishes FDL and MAP amounts prospectively. That is, we establish 
the outlier FDL and MAP amounts each year at a level that our analysis 
indicates will effectively protect access for the costliest 
beneficiaries while maintaining an appropriate ESRD PPS base rate for 
all other beneficiaries. If our analysis indicates that the FDL and MAP 
amounts would result in outlier payments that are below 1.0 percent, we 
would reduce the FDL and MAP amounts accordingly in the subsequent 
year. Alternatively, if our analysis indicates that the FDL and MAP 
amounts would result in outlier payments that are above 1.0 percent, we 
would increase the FDL and MAP amounts accordingly in the subsequent 
year. In this methodology, we do not make modifications to the base 
rate in response to either exceeding or falling short of the 1.0 
percent outlier percentage target.
    Final Rule Action: After consideration of the comments, we are 
finalizing our proposal to amend the language at 42 CFR 413.237 by 
adding a new paragraph (a)(1)(vii), which adds the following to the 
list of renal dialysis services defined as ESRD outlier services: 
``Renal dialysis drugs and biological products that are Composite Rate 
Services as defined in Sec.  413.171.'' The final CY 2025 FDL and MAP 
amounts are discussed in section II.B.3.e of this final rule.
c. Changes to Predicted MAP Calculation for Outlier Eligibility
    As we discussed in the CY 2023 ESRD PPS final rule (87 FR 67169), a 
claim is eligible for outlier payment when its imputed MAP amount 
exceeds the sum of the predicted MAP amount and the fixed dollar loss 
threshold. The predicted MAP amount for a claim is based on the 
national average MAP amount, adjusted by the case-mix adjustment 
factors that apply for that claim's patient-level and facility-level 
characteristics. As a result, when a claim's adjustment factors 
increase the payment amount per treatment, the claim's predicted MAP is 
also increased. This is because we expect that more complex patients 
would require a higher amount of spending for outlier services. 
However, this higher expected cost is recognized through a higher per 
treatment payment amount. In other words, a more complex patient must 
have even higher costs than are already accounted for in the adjustment 
factors compared to a less complex patient to be considered unusually 
costly. By increasing the predicted MAP based on the case-mix 
adjustment factors, the ESRD PPS outlier policy ensures that only cases 
that are unusually costly are considered for outlier payment.
    As previously discussed in this final rule, we finalized a post-
TDAPA add-on payment adjustment in the CY 2024 ESRD PPS final rule. The 
post-TDAPA add-on payment adjustment for certain new renal dialysis 
drugs and biological products is generally applied for 3 years after 
the end of the TDAPA period (88 FR 76388 through 76397). The amount of 
this post-TDAPA add-on payment adjustment that is applied to an ESRD 
PPS claim is adjusted by any applicable patient-level case-mix 
adjustments under Sec.  413.235, and this adjusted amount is added to 
the payment amount for each ESRD PPS treatment billed. We explained in 
the CY 2024 ESRD PPS final rule that during this 3-year post-TDAPA add-
on payment period, a drug or biological product would be eligible for 
the outlier add-on payment if it met all of the other criteria for the 
outlier payment (88 FR 76396). The only drug or biological product 
which was set to end its TDAPA period in CY 2024 (and therefore would 
receive the post-TDAPA add-on payment adjustment that year) was 
Korsuva[supreg], which is a substitute for a composite rate drug and, 
therefore, not outlier eligible under existing Sec.  413.237(a)(1) (88 
FR 76396). Accordingly, we did not propose any changes to the ESRD PPS 
outlier methodology to account for the post-TDAPA add-on payment 
adjustment in the CY 2024 ESRD PPS proposed rule as that would not have 
affected payments for CY 2024.
    As discussed in section II.B.3.b of this final rule, we are 
finalizing our proposal to expand outlier eligibility to include renal 
dialysis drugs and biological products that are Composite Rate Services 
as defined in Sec.  413.171. This means that new drugs and biological 
products that are included in the calculation of the post-TDAPA add-on 
payment adjustment amount will become outlier eligible after the end of 
the TDAPA period, regardless of whether they are substitutes for 
composite rate drugs or biological products.
    Accordingly, in the CY 2025 ESRD PPS proposed rule, we also 
proposed changes to the ESRD PPS outlier methodology to account for any 
future drugs and biological products which are outlier eligible during 
the post-TDAPA period. We proposed to add the case-mix adjusted post-
TDAPA add-on payment adjustment amount to the predicted MAP for a 
patient. We stated that this is appropriate because the post-TDAPA add-
on payment adjustment amount represents average utilization of a drug 
or biological product, and is added to the payment amount, adjusted by 
the case-mix adjusters for the patient. We stated that this proposal 
would prevent duplicate payment for these drugs and biological products 
by accounting for the portion of the cost for these drugs or biological 
products which is included in the ESRD PPS bundled payment. We noted 
that this change would not affect the calculation of the imputed MAP 
for a claim, because a claim's imputed MAP would include the actual 
utilization of the drug or biological product that is included in the 
calculation of the post-TDAPA add-on payment adjustment, if that drug 
or biological product is billed on the claim.
    We explained that we considered modifying the average MAP amount to 
account for outlier eligible drugs and biological products that are 
already included in the calculation of the post-TDAPA add-on payment 
adjustment amount, rather than proposing to modify the predicted MAP 
amount for each claim. However, we noted two main limitations with 
taking such an approach. First, the average MAP is set annually for an 
entire year and does not change from quarter to quarter; in contrast, 
the post-TDAPA add-on payment adjustment amount can change from quarter 
to quarter depending on when a drug or biological product's TDAPA 
period ends, and depending on the number of drugs and biological 
products included in the calculation. Second, our longstanding 
methodology for calculating the predicted MAP for outlier payments 
applies the outlier services multipliers to the average MAP. However, 
when we calculate the post-TDAPA add-on payment adjustment amount for a 
claim, we apply the ESRD PPS case-mix adjusters, which are different 
from the outlier services multipliers. We stated that we believe it 
would be most appropriate to continue to apply the ESRD PPS case-mix 
adjusters to the post-TDAPA add-on payment adjustment amount for the 
purposes of outlier calculation, so that the estimate of a claim's 
expected spending would align with the calculation used for the post-
TDAPA add-on payment adjustment. For these reasons, we stated that we 
believe that it is more appropriate and more operationally feasible to 
apply the case-mix adjusted post-TDAPA add-on payment adjustment amount 
to the predicted MAP for claims during the

[[Page 89127]]

quarters in which the drug or biological product is receiving the post-
TDAPA add-on payment adjustment, rather than publishing different 
average MAPs for different quarters of a single year.
    For CY 2025, we explained that the impact of this technical 
modification would be a small increase to the pediatric and adult FDL 
amounts, due to the small post-TDAPA add-on payment adjustment amount 
calculated for each quarter of CY 2025, which is discussed in section 
II.B.6 of this final rule. We noted that without this proposed 
methodological change, the pediatric FDL amount would increase by 
$0.68. Likewise, we noted that the adult FDL amount would increase by 
$0.89. We stated that this proposed methodological change would avoid 
those increases, resulting in the proposed CY 2025 adult and pediatric 
MAP and FDL amounts shown in Table 7 of the proposed rule. We noted 
that although the effect would be small for CY 2025, the increase would 
be larger in potential future situations when utilization of a drug or 
biological product during the post-TDAPA period could be higher.
    We invited public comment on our proposal to apply the case-mix 
adjusted post-TDAPA add-on payment adjustment amount to the predicted 
MAP for claims during the quarters in which the drug or biological 
product is receiving the post-TDAPA add-on payment adjustment. Two 
commenters commented on this proposal. The following is a summary of 
the public comments received on these proposals and our responses.
    Comment: MedPAC reiterated its concerns about how CMS estimates the 
ESRD PPS case-mix adjustments and recommended that CMS must improve the 
accuracy of the patient- and facility-level adjustments.
    Response: We appreciate the recommendation, and as discussed 
earlier in this final rule, we believe that the proposed change to the 
definition of ESRD outlier services, combined with the collection of 
time on machine data beginning January 1, 2025, will contribute to 
CMS's ability to develop a patient cost model for the purposes of 
considering future refinements to the patient- and facility-level 
adjustments. We believe the application of the case-mix adjusted post-
TDAPA add-on payment adjustment to the predicted MAP is the most 
technically appropriate methodology for calculating the predicted MAP 
in CY 2025 and future years. We would incorporate any relevant 
revisions to the patient-level case-mix adjustments into this 
calculation in future years, as appropriate.
    Comment: One commenter stated that CMS should not include TDAPA or 
TPNIES values in outlier calculation for any future drugs or equipment 
and supplies that may be eligible for these adjustments as they are 
clearly not eligible for outlier services during the TDAPA or TPNIES 
period.
    Response: We agree that under our longstanding policy, which CMS 
established in the CY 2016 ESRD PPS final rule (80 FR 69023), it would 
not be appropriate to include the payment amount for a new drug or 
biological product in the outlier calculation during the TDAPA period. 
Accordingly, we have excluded drugs that are receiving the TDAPA from 
the outlier calculation, and our calculations of the FDL and MAP 
amounts do not include TDAPA utilization as outlier-eligible 
utilization for drugs and biological products that will be paid under 
the TDAPA in the upcoming CY. However, we note that under Sec.  
413.220(b)(4), we established the outlier percentage is 1.0 percent of 
total payments (75 FR 49142 through 49143). By definition, total ESRD 
PPS expenditures for the non-outlier components include the base rate, 
TDAPA, TPNIES, post-TDAPA add-on payment adjustment, and other 
applicable adjustments. Additionally, since the TPNIES and TDAPA are 
components of the non-outlier portion of the total ESRD PPS spending, 
to remove them would shrink the base for which the total outlier target 
payment amount is calculated, and therefore increase the FDL and 
outlier threshold. In addition, as we finalized in the CY 2023 ESRD PPS 
final rule, we rely on historical TDAPA and TPNIES spending amounts to 
calculate the ``alternative'' retrospective FDL calculations for ESRD 
outlier services, which allows our projection of the FDL to 
appropriately account for increased utilization of ESRD outlier 
services in years when a new renal dialysis drug or biological product 
becomes an ESRD outlier service after the end if its TDAPA period (87 
FR 67172 through 67175).
    We are clarifying that we did not propose to include TDAPA or 
TPNIES values in the outlier calculation for CY 2025. Rather, the 
proposed incorporation of the post-TDAPA add-on payment adjustment to 
the predicted MAP would apply only for ESRD outlier services if the 
TDAPA period for such drugs or biological products has already ended, 
as they are excluded from the outlier calculation during the TDAPA 
period based on our longstanding policy, as discussed in the prior 
paragraph.
    Final Rule Action: After consideration of the comments received, we 
are finalizing our proposal to apply the case-mix adjusted post-TDAPA 
add-on payment adjustment amount to the predicted MAP for claims during 
the quarters in which the drug or biological product is receiving the 
post-TDAPA add-on payment adjustment.
d. Technical Modifications to the Inflation Factors Used for the 
Outlier Calculations
(1) Background
    In the CY 2011 ESRD PPS final rule we finalized our ESRD PPS 
outlier methodology, which included our methodology for updating data 
from past years to the CY for which CMS is establishing payment rates 
(75 FR 49134). In the CY 2023 ESRD PPS final rule, we finalized an 
update to the outlier methodology to better target 1.0 percent of total 
Medicare payments (87 FR 67170 through 67177) by prospectively 
calculating the adult FDL amounts based on the historical trend in FDL 
amounts that would have achieved the 1.0 percent outlier target in the 
3 most recent available data years. In that final rule we also 
clarified our longstanding methodology for updating data from prior 
years for the purposes of the outlier calculations (87 FR 67167). For 
drugs and biological products, we use a blended 4-quarter moving 
average of the ESRDB market basket price proxies for pharmaceuticals to 
inflate drug prices to the CY for which CMS is establishing payment 
rates. For laboratory tests, we inflate prices to the CY for which CMS 
is establishing payment rates using a CPI forecast to estimate changes 
for years in which a new data reporting period will take place for the 
purpose of setting Clinical Laboratory Fee Schedule (CLFS) rates.\33\ 
For supplies, we apply a 0 percent inflation factor, because these 
prices are based on predetermined fees or prices established by the 
Medicare contractor.
---------------------------------------------------------------------------

    \33\ Since 2018, there has been no updated reporting for most 
clinical diagnostic laboratory tests; therefore, the forecast 
estimate used since CY 2018 for the ESRD PPS outlier methodology has 
been 0.
---------------------------------------------------------------------------

    In the CY 2023 ESRD PPS final rule (87 FR 67173), we noted that 
MedPAC supported the proposed revisions to the FDL methodology, but 
also urged CMS to refine its approach for applying the pricing data 
that the agency uses to project future spending for outlier services, 
particularly for drugs. Specifically, MedPAC suggested CMS use a drug 
price inflation factor based on ASP values and noted that the ASP data 
that CMS uses to determine

[[Page 89128]]

facilities' actual outlier payments might be a more accurate data 
source on drug prices than the ESRDB market basket pharmaceutical price 
proxies that are currently used.
    For CY 2025, we stated that we have undertaken analysis of prices 
for ESRD outlier services and proposed several technical changes to the 
inflation factors, which are discussed in the following sections.
(2) Changes to the Inflation Factor for Outlier Eligible Drugs and 
Biological Products
    As described earlier, we use a blended 4-quarter moving average of 
the ESRDB market basket price proxy for Pharmaceuticals to inflate drug 
prices to the upcoming CY for the purpose of estimating spending for 
outlier drugs and biological products in that CY. In the proposed rule, 
we explained that historically, this 4-quarter moving average is a 
positive factor, meaning that our longstanding methodology for modeling 
outlier spending amounts assumes that prices for ESRD outlier drugs and 
biological product will increase. For example, we noted that the 
projection of the CY 2025 price growth for ESRD outlier drugs and 
biological products, based on the ESRDB market basket price proxy for 
Pharmaceuticals for the CY 2025, was 1.9 percent, based on the IGI 1st 
quarter 2024 forecast with historical data through the 4th quarter of 
2023.
    We explained that to compare the actual changes in prices for ESRD 
outlier drugs and biological products against the assumed rate of 
change derived from the ESRDB market basket price proxies, we 
constructed an index of prices for ESRD outlier drugs and biological 
products. As we discussed in section II.B.3.b of the proposed rule, we 
proposed to expand the definition of ESRD outlier services to include 
renal dialysis drugs and biological products that were or would have 
been included in the composite rate prior to the establishment of the 
ESRD PPS. Accordingly, our constructed drug price index included these 
drugs and biological products as well as drugs and biological products 
that have historically been included in the definition of ESRD outlier 
services.
    We stated that because the list of ESRD outlier drugs and 
biological products changes over time, we proposed to derive a chained 
Laspeyres price index of the drugs and biological products included in 
the definition of the ESRD outlier services. We explained that a 
chained Laspeyres price index does not require a fixed basket of drugs 
and biological products during the observation window. We explained 
that we constructed and then trended forward the year-over-year change 
in price index levels for this outlier drug index to calculate a 
projected inflation factor for ESRD outlier drugs and biological 
products for CY 2025, using the following steps:
    Step 1: We obtained the annual list of ESRD outlier service drugs 
and biological products that appear in ESRD PPS claims during the CYs 
2017 through 2023. These include both composite rate and formerly 
separately billable drugs and biological products.
    Step 2: We obtained quarterly ASP for each drug and biological 
product during the same period 2017 through 2023, substituting annual 
ASP when quarterly information was not available.
    Step 3: We obtained quarterly utilization data for each drug and 
biological product for the period 2017 through 2023.
    Step 4: For each quarter, we established the base period as the 
prior quarter and held utilization fixed at the base period. We then 
constructed a Laspeyres price index based on all drugs and biological 
products that had price information in that quarter and the prior 
quarter.
    Step 5: We chained together the quarterly indices starting from the 
1st quarter 2017 through the 4th quarter 2023 to express price changes 
in the 4th quarter 2017 relative to the 1st quarter 2017. This step was 
repeated for all prior quarters, keeping the starting period fixed at 
the 1st quarter 2017.
    Step 6: We calculated the percentage change between the current and 
prior 4th quarter chained price index for each year for CY 2021, 2022, 
and 2023, which we used as the annual drug price inflation factor for 
each year.
    Step 7: Using the chained price indexes for the three most recent 
CYs (2021, 2022, and 2023), we used a linear regression to project 
forward these three historical inflation factors to determine the CY 
2025 inflation factor.
    Using this methodology, we calculated a projected inflation factor 
of -0.7 percent, meaning that prices for ESRD outlier drugs and 
biological products were projected to be 0.7 percent lower in CY 2025 
relative to the prices of the ESRD outlier drugs and biological 
products in than in CY 2024. We noted that our analysis of year-over 
year changes in prices for ESRD outlier drugs and biological products 
shows a consistent, downward trend in prices, which stands in contrast 
to the positive inflation factors we have historically used to model 
outlier payments. As a result, we stated that our modeling of outlier 
spending in prior years has assumed that outlier prices will increase, 
when the ASP data shows that, overall, the prices have decreased.
    Based on the results of our analysis, we stated that we believe 
applying an inflation factor based on the actual change in prices for 
ESRD outlier drugs and biological products would enable the ESRD PPS 
outlier adjustment to better target 1.0 percent of outlier payments in 
CY 2025, because such an inflation factor would better reflect the 
observed historical trend in spending and utilization for such drugs 
and biological products. We noted that although we have historically 
used the ESRDB market basket price proxy for Pharmaceuticals as the 
basis of our inflation assumptions for outlier modeling, and we believe 
that market basket price proxies would continue to be a reasonable and 
technically appropriate source for such assumptions, the market basket 
price proxies serve a distinctly different purpose than the inflation 
factors used in the outlier modeling. As we explained in the CY 2023 
ESRD PPS final rule (87 FR 67147), we select the most appropriate wage 
and price proxies currently available to represent the rate of price 
change for each cost category in the ESRDB market basket. In contrast, 
we explained that the purpose of the inflation factors used in our 
outlier modeling is to represent the expected rate of change in price 
and utilization, so that we can prospectively set accurate FDL and MAP 
amounts that will result in outlier payments that equal 1.0 percent of 
total ESRD PPS payments. We stated that decreasing our estimates of 
future outlier spending, as we proposed to do, would result in lower 
FDL and MAP amounts, thereby increasing the number of claims that could 
be eligible for the outlier payment adjustment and the amount of 
outlier payments that would be paid on each claim. We stated that 
revising our assumptions about future spending for ESRD outlier drugs 
and biological products would improve the ability of the ESRD outlier 
adjustment to pay for the costliest ESRD PPS claims. Therefore, we 
proposed to use the projected inflation factor for ESRD outlier 
services that are drugs and biological products derived from the 
historical trend in prices and utilization for ESRD outlier drugs, as 
described in the previous paragraph.
(3) Changes to the Inflation Factors for Outlier Eligible Laboratory 
Tests and Supplies
    In the proposed rule, we explained that CMS uses different 
methodologies for the inflation factors for laboratory

[[Page 89129]]

tests and supplies. We explained that we inflate laboratory test prices 
to the upcoming CY using a CPI forecast to estimate changes for years 
in which a new data reporting period will take place for the purpose of 
setting CLFS rates; however, the forecast estimate used since CY 2018 
for the ESRD PPS outlier methodology has been 0, because there has been 
no updated reporting for most clinical diagnostic laboratory tests 
since the CY 2018 CLFS. We further explained that for supplies, we 
apply a 0 percent inflation factor, because these prices are based on 
predetermined fees or prices established by the Medicare contractor. In 
the CY 2011 ESRD PPS proposed rule, we explained that we chose to use 
these factors so that the MAP would be based on pricing mechanisms 
currently in place for these services (74 FR 49991).
    In the CY 2025 ESRD PPS proposed rule, we noted that the ESRDB 
market basket uses price proxies for goods and services included in 
furnishing renal dialysis services to determine the ESRDB market basket 
update. For example, we stated that the market basket price proxy for 
laboratory services is the PPI Industry for Medical and Diagnostic 
Laboratories (BLS series code #PCU621511621511) representing the change 
in the price of laboratory services conducted by medical and diagnostic 
laboratories reported on the ESRD facility cost reports. Similarly, we 
stated that the market basket price proxy for supplies is the PPI 
Commodity for Surgical and Medical Instruments (BLS series code 
#WPU1562) representing the change in the price of medical supplies 
reported on the ESRD facility cost reports.
    We stated that we considered whether these longstanding assumptions 
about price changes for laboratory tests and supplies would be 
appropriate for modeling changes in spending for outlier-eligible 
laboratory tests and supplies. Unlike with drugs and biological 
products, we explained that we do not have detailed historical pricing 
data for ESRD outlier laboratory tests and supplies to permit us to 
perform a similar analysis for these services as we did for drugs and 
biological products. However, we stated that we can compare the 
historical inflation factors we have used to the growth in the market 
basket price proxies for these categories of renal dialysis services. 
For supplies, we noted that we would typically assume a 0 percent 
update; however, we noted that the average 10-year historical growth in 
the PPI Commodity for Surgical and Medical Instruments is 0.9 percent. 
Likewise, we stated that in years when there is a CLFS data reporting 
period, we would typically use an inflation factor for laboratory tests 
based on a CPI projection, reduced by the productivity adjustment, 
through June of the year prior to the update year; however, we noted 
that the average 10-year historical annual growth for the PPI Industry 
for Medical and Diagnostic Laboratories was -0.4 percent.
    Beginning for CY 2025, we proposed to use the ESRDB market basket 
price proxies for laboratory tests and supplies for the purpose of 
calculating the growth in estimated spending for these outlier services 
in the upcoming CY. We stated that these would replace the current 
inflation factors which are used for laboratory tests and supplies. 
Compared to the current inflation factors we use, we stated that we 
anticipate the market basket price proxies for laboratory tests and 
supplies would more appropriately reflect the change in prices of the 
laboratory tests and supply costs that are used by ESRD facilities. We 
stated that we believe using the market basket price proxies would 
better allow the ESRD PPS to estimate the changes in the prices of 
laboratory tests and supplies, which would improve the ability for CMS 
to target outlier payments at 1.0 percent of total ESRD PPS payments. 
We noted that decreasing our estimates of future outlier spending would 
result in lower FDL and MAP amounts, thereby increasing the number of 
claims that could be eligible for the outlier payment adjustment and 
the amount of outlier payment that would be paid on each claim. We 
further stated that revising our assumptions about future spending for 
ESRD outlier drugs and biological products would improve the ability of 
the ESRD PPS outlier adjustment to pay for the costliest ESRD PPS 
claims.
    We invited public comments on our proposed changes to the inflation 
factors for outlier eligible drugs and biological products, laboratory 
tests, and supplies. Approximately 4 commenters including MedPAC, a 
non-profit kidney organization, a coalition of dialysis organizations, 
and one LDO commented on these proposed technical changes. The 
following is a summary of the public comments received on these 
proposals and our responses.
    Comment: MedPAC expressed support for CMS's proposal to modify its 
method for calculating the increase in future spending for outlier 
drugs and biological products. MedPAC stated that this proposal is 
consistent with the Commission's comment letter on the CY 2024 proposed 
rule, in which the Commission urged CMS to use a drug price inflation 
factor based on ASP values to project future spending for outlier 
services. MedPAC further noted that the ASP data used by CMS to 
determine facilities' actual outlier payments might be a more accurate 
data source for drug prices than the ESRDB market basket pharmaceutical 
price proxies that are currently used.
    Response: We appreciate the support for the proposed technical 
changes to the inflation factors.
    Comment: Some commenters stated that since the 1.0 percent outlier 
percentage was achieved in CY 2023, CMS should not finalize the 
proposed changes to the inflation factors. In particular, commenters 
expressed concern that the proposed inflation factor for drugs and 
biological products is negative as compared to the ESRDB price proxy 
that CMS has historically used. Commenters suggested that CMS might be 
required to reduce the ESRD PPS base rate if the 1.0 percent outlier 
percentage is exceeded in future years.
    Response: We appreciate the concerns of commenters about these 
proposed technical modifications. CMS's analysis of year-over-year 
price changes for ESRD outlier drugs and biological products reveals a 
consistent downward trend. However, should prices for outlier drugs and 
biological products begin to increase as reflected in the ASP prices, 
such changes would be reflected in future updates to the chained 
Laspeyres drug price index.
    We are reiterating that our longstanding methodology establishes 
FDL and MAP amounts prospectively. That is, we establish the outlier 
FDL and MAP amounts each year at a level that our analysis indicates 
will effectively protect access for the costliest beneficiaries while 
maintaining an appropriate ESRD PPS base rate for all other 
beneficiaries. If our analysis indicates that the FDL and MAP amounts 
would result in outlier payments that are below 1.0 percent, we would 
reduce the FDL and MAP amounts accordingly in the subsequent year. 
Alternatively, if our analysis indicates that the FDL and MAP amounts 
would result in outlier payments that are above 1.0 percent, we would 
increase the FDL and MAP amounts accordingly in the subsequent year. In 
this methodology, we do not make modifications to the base rate in 
response to either exceeding or falling short of the 1.0 percent 
outlier percentage.
    Final Rule Action: After consideration of the comments, we are 
finalizing our proposed changes to the inflation factors for outlier 
eligible drugs and biological products, laboratory tests, and supplies. 
For ESRD outlier drugs and biological

[[Page 89130]]

products, we will use the projected inflation factor for ESRD outlier 
services that are drugs and biological products derived from the 
historical trend in ASP prices and utilization for ESRD outlier drugs. 
For ESRD outlier laboratory tests and supplies, we will use the growth 
in the PPI Industry for Medical and Diagnostic Laboratories and the PPI 
Commodity for Surgical and Medical Instruments, respectively. In 
section II.B.3.e of this final rule, we present the final CY 2025 MAP 
and FDL amounts calculated using these inflation factors.
e. CY 2025 Update to the Outlier Services MAP Amounts and FDL Amounts
    For CY 2025, we proposed to update the MAP amounts for adult and 
pediatric patients using the latest available CY 2023 claims data. We 
proposed to update the ESRD outlier services FDL amount for pediatric 
patients using the latest available CY 2023 claims data, and to update 
the ESRD outlier services FDL amount for adult patients using the 
latest available claims data from CY 2021, CY 2022, and CY 2023, in 
accordance with the methodology finalized in the CY 2023 ESRD PPS final 
rule (87 FR 67170 through 67174). We stated that the latest available 
CY 2023 claims data showed outlier payments represented approximately 
1.0 percent of total Medicare payments. We did not receive any comments 
on this proposal, and we are finalizing the CY 2025 FDL and MAP amounts 
based on the latest available data.
    We are updating the ESRD outlier services FDL amount for pediatric 
patients using the latest available CY 2023 claims data and updating 
the ESRD outlier services FDL amount for adult patients using the 
latest available claims data from CY 2021, CY 2022, and CY 2023, in 
accordance with the methodology finalized in the CY 2023 ESRD PPS final 
rule (87 FR 67170 through 67174). The latest available CY 2023 claims 
data shows that outlier payments represented approximately 1.0 percent 
of total Medicare payments.
    The impact of this final update is shown in Table 7, which compares 
the outlier services MAP amounts and FDL amounts used for the outlier 
policy in CY 2024 with the updated estimates for this final rule for CY 
2025. The estimates for the final CY 2025 MAP amounts, which are 
included in column II of Table 7, are inflation adjusted to reflect 
projected 2025 prices for ESRD outlier services, in accordance with the 
final changes to the inflation factors discussed in section II.B.3.d of 
this final rule.
[GRAPHIC] [TIFF OMITTED] TR12NO24.006

    As demonstrated in Table 7, the estimated FDL per treatment that 
determines the CY 2025 outlier threshold amount for adults (column II; 
$45.41) is lower than that used for the CY 2024 outlier policy (column 
I; $71.76). The lower threshold is accompanied by a decrease in the 
adjusted average MAP for outlier services from $36.28 to $31.02. For 
pediatric patients, there is an increase in the FDL amount from $11.32 
to $234.26. There is a corresponding increase in the adjusted average 
MAP for outlier services among pediatric patients, from $23.36 to 
$59.60. We note that this substantial increase in the outlier threshold 
for pediatric patients reflects the inclusion of certain composite rate 
drugs for outlier consideration, notably Healthcare Common Procedure 
Coding System (HCPCS) code J2997 (Injection, alteplase recombinant, 1 
mg). As a result, we estimate that a smaller proportion of pediatric 
patients will receive outlier payments, but the

[[Page 89131]]

average outlier payment amounts will be significantly higher.
    We estimate that the percentage of patient months qualifying for 
outlier payments in CY 2025 will be 7.05 percent for adult patients and 
6.09 percent for pediatric patients, based on the 2023 claims data and 
methodology changes in sections II.B.3.c and II.B.3.d of this final 
rule.
f. Outlier Percentage
    In the CY 2011 ESRD PPS final rule (75 FR 49081) and under Sec.  
413.220(b)(4), we reduced the per treatment base rate by 1.0 percent to 
account for the proportion of the estimated total payments under the 
ESRD PPS that are outlier payments as described in Sec.  413.237. In 
the 2023 ESRD PPS final rule, we finalized a change to the outlier 
methodology to better achieve this 1.0 percent target (87 FR 67170 
through 67174). Based on the CY 2023 claims, outlier payments 
represented approximately 1.0 percent of total payments, which has been 
our policy goal since the establishment of the ESRD PPS outlier 
adjustment. We believe the methodological changes to the outlier 
calculation and the change to the definition of ESRD outlier services, 
which we are finalizing for CY 2025, will continue to effectively set 
the outlier MAP and FDL amounts for CY 2025 and future years, enabling 
the ESRD PPS to continue targeting outlier payments at 1.0 percent of 
total payments. We also note that the recalibration of the FDL amounts 
will result in no change in payments to ESRD facilities for 
beneficiaries with renal dialysis items and services that are not 
eligible for outlier payments.
4. Final Impacts to the CY 2025 ESRD PPS Base Rate
a. ESRD PPS Base Rate
    In the CY 2011 ESRD PPS final rule (75 FR 49071 through 49083), CMS 
established the methodology for calculating the ESRD PPS per-treatment 
base rate, that is, the ESRD PPS base rate, and calculating the per-
treatment payment amount, which are codified at Sec. Sec.  413.220 and 
413.230. The CY 2011 ESRD PPS final rule also provides a detailed 
discussion of the methodology used to calculate the ESRD PPS base rate 
and the computation of factors used to adjust the ESRD PPS base rate 
for projected outlier payments and budget neutrality in accordance with 
sections 1881(b)(14)(D)(ii) and 1881(b)(14)(A)(ii) of the Act, 
respectively. Specifically, the ESRD PPS base rate was developed from 
CY 2007 claims (that is, the lowest per patient utilization year as 
required by section 1881(b)(14)(A)(ii) of the Act), updated to CY 2011, 
and represented the average per treatment MAP for composite rate and 
separately billable services. In accordance with section 1881(b)(14)(D) 
of the Act and our regulation at Sec.  413.230, the per-treatment 
payment amount is the sum of the ESRD PPS base rate, adjusted for the 
patient specific case-mix adjustments, applicable facility adjustments, 
geographic differences in area wage levels using an area wage index, 
and any applicable outlier payment, training adjustment add-on, the 
TDAPA, the TPNIES, the post-TDAPA add-on payment adjustment, and the 
TPEAPA for CYs 2024, 2025 and 2026.
b. Annual Payment Rate Update for CY 2025
    We are finalizing an ESRD PPS base rate for CY 2025 of $273.82. 
This will be a 1.0 percent increase from the CY 2024 ESRD PPS base rate 
of $271.02. This final update reflects several factors, described in 
more detail as follows:
    Wage Index Budget-Neutrality Adjustment Factor: We compute a wage 
index budget-neutrality adjustment factor that is applied to the ESRD 
PPS base rate. For CY 2025, we did not propose any changes to the 
methodology used to calculate this factor, which is described in detail 
in the CY 2014 ESRD PPS final rule (78 FR 72174). We computed the CY 
2025 wage index budget-neutrality adjustment factor using treatment 
counts from the 2023 claims and facility-specific CY 2024 payment rates 
to estimate the total dollar amount that each ESRD facility would have 
received in CY 2024. The total of these payments became the target 
amount of expenditures for all ESRD facilities for CY 2025. Next, we 
computed the estimated dollar amount that would have been paid for the 
same ESRD facilities using the proposed CY 2025 ESRD PPS wage index and 
proposed labor related share for CY 2025. As discussed in section 
II.B.2 of this final rule, the ESRD PPS wage index for CY 2025 includes 
the new wage index methodology based on BLS data, and the use of the 
most recent OMB delineations based on 2020-census data.\34\ The total 
of these payments becomes the new CY 2025 amount of wage adjusted 
expenditures for all ESRD facilities. The wage index -budget-neutrality 
factor is calculated as the target amount divided by the new CY 2025 
amount. When we multiplied the wage index budget-neutrality factor by 
the applicable CY 2025 estimated payments, aggregate Medicare payments 
to ESRD facilities would remain budget neutral when compared to the 
target amount of expenditures. That is, the wage index budget-
neutrality adjustment factor ensures that the wage index updates and 
revisions do not increase or decrease aggregate Medicare payments. The 
final CY 2025 wage index budget-neutrality adjustment factor is 
0.988600. This final CY 2025 wage index budget-neutrality adjustment 
factor reflects the impact of all final wage index policy changes, 
including the CY 2025 ESRD PPS wage index using the new ESRD PPS wage 
index methodology based on BLS data, the 5 percent cap on year-to-year 
decreases in wage index values, the updated CBSA delineations, the 3 
year rural phase-out for ESRD facilities in currently-rural CBSAs that 
will become urban under the new delineations, and the labor-related 
share (which we did not propose to change from CY 2024). We note that 
the application of the 5 percent cap on wage index decreases has a 
sizable impact on the budget-neutrality factor this year due to the new 
wage index methodology. That is, because a substantial number of ESRD 
facilities would have experienced a greater than 5 percent decrease in 
their wage index value as a result of the new wage index methodology, 
the budget-neutrality adjustment factor needed to offset the effect of 
limiting those decreases to 5 percent is larger than we expect it would 
be in a typical year. We note that the final CY 2025 wage index budget-
neutrality factor does not include any impacts associated with the 
TPEAPA, as was the case with last year's combined wage index-TPEAPA 
budget-neutrality factor. This is consistent with how we have 
historically applied budget neutrality for case-mix adjusters, 
including pediatric case-mix adjusters. We do not routinely apply a 
budget-neutrality factor to account for changes in overall payment 
associated with changes in patient case-mix in years in which we do not 
propose any changes to the case-mix adjustment amount. Although the 
TPEAPA was established under the authority in section 
1881(b)(14)(D)(iv) of the Act, which does not require budget 
neutrality, we stated in the CY 2024 ESRD PPS final rule that we were 
implementing the TPEAPA in a budget neutral manner because it was 
similar to the pediatric case-mix adjusters, and it accounts for costs 
which would have been included in the cost reports used in the analysis 
conducted when we created the ESRD PPS bundled payment in the CY 2011 
ESRD PPS final rule (88

[[Page 89132]]

FR 76378). Because the adjustment to maintain budget neutrality 
associated with the TPEAPA was accounted for in the CY 2024 combined 
wage index and TPEAPA budget neutrality factor, it would not be 
appropriate to apply a budget-neutrality factor for the TPEAPA for CY 
2025.
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    Market Basket Update: Section 1881(b)(14)(F)(i)(I) of the Act 
provides that, beginning in 2012, the ESRD PPS payment amounts are 
required to be annually increased by an ESRD market basket percentage 
increase. As discussed in section II.B.1.b.(1) of this final rule, the 
latest CY 2025 projection of the ESRDB market basket percentage 
increase is 2.7 percent. In CY 2025, this amount must be reduced by the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act, as required by section 1881(b)(14)(F)(i)(II) of the Act. As 
previously discussed in section II.B.1.b.(2) of this final rule, the 
latest CY 2025 projection of the productivity adjustment is 0.5 
percentage point, thus yielding a final CY 2025 productivity-adjusted 
ESRDB market basket update of 2.2 percent for CY 2025. Therefore, the 
final CY 2025 ESRD PPS base rate is $273.82 (($271.02 x 0.988600) x 
1.022 = $273.82). In the CY 2025 ESRD PPS proposed rule (89 FR 55766), 
the productivity-adjusted ESRDB market basket update was 1.8 percent 
(reflecting a 2.3 percent market basket percentage increase reduced by 
a 0.5 percentage point productivity adjustment). We proposed that if 
more recent data became available after the publication of the proposed 
rule and before the publication of the final rule (for example, a more 
recent estimate of the market basket percentage increase or 
productivity adjustment), we would use such data, if appropriate, to 
determine the CY 2025 ESRDB market basket update in the final rule.
    We invited public comment on our proposed CY 2025 ESRD PPS base 
rate. Approximately 25 unique commenters including LDOs; SDOs, patient 
advocacy organizations; nonprofit dialysis associations; two coalitions 
of dialysis organizations; professional organizations; and MedPAC 
commented on the proposed payment rate. Many of these comments 
primarily focused on the proposed CY 2025 productivity-adjusted ESRDB 
market basket update, which we discuss and respond to in section 
II.B.1.b.(5) of this final rule. The following is a summary of the 
other public comments received on the proposed CY 2025 ESRD PPS base 
rate and our responses.
    Comment: All commenters supported increasing the ESRD PPS base 
rate. Most commenters indicated a belief that the proposed CY 2025 ESRD 
PPS payment rates were too low. Commenters generally stated that the 
cause of these lower-than-appropriate payment rates was a combination 
of the proposed CY 2025 ESRDB market basket percentage increase and 
prior ESRDB market basket percentage increases being lower-than-
appropriate. Only MedPAC stated a belief that the proposed CY 2025 ESRD 
PPS payment rate was appropriate.
    Response: We appreciate the support for increasing payments under 
the ESRD PPS. We agree with MedPAC that payment rates under the ESRD 
PPS are generally appropriate. We concur with the commenters' general 
consensus that perceived inadequacies in the proposed CY 2025 ESRD PPS 
base rate are related to the perceived inadequacies of the ESRDB market 
basket. We have primarily addressed commenters' concerns related to the 
ESRDB market basket update in section II.B.1.b.(5) of this final rule. 
We wish to reiterate that the ESRD PPS base rate is calculated annually 
using the ESRDB market basket update and applying any applicable 
budget-neutrality factors, so the ESRD PPS base rate for a given year 
is constructed using several factors which are each derived from the 
best available data, as described in section II.B.1 and in section 
II.B.4. While we understand the concerns of commenters regarding the 
payment rates, we strongly believe that any change to this methodology 
should be data driven. We will take commenters' concerns into 
consideration for future rulemaking years to determine if any changes 
to the ESRD PPS base rate calculation or ESRDB market basket 
methodology are appropriate. Any changes to the ESRD market basket 
methodology or ESRD PPS base rate calculation would be made through 
notice and comment rulemaking.
    Comment: Several commenters stated a belief that increasing the 
ESRD PPS base rate by 0.8 percent was not sufficient.
    Response: We note that the proposed ESRDB productivity-adjusted 
market basket increase for CY 2025 was 1.8 percent (reflecting a 
proposed ESRDB market basket increase of 2.3 percent reduced by the 
statutorily-mandated proposed productivity adjustment estimated to be 
0.5 percentage point). The proposed 0.8 percent increase to the ESRD 
PPS base rate was lower than the market basket increase as it also 
reflected the application of the proposed wage index budget-neutrality 
adjustment factor of 0.990228. Since the wage index budget neutrality 
factor is calculated to ensure that the changes between the CY 2024 and 
CY 2025 wage indices do not result in an increase or decrease of 
estimated aggregate payments, the application to the ESRD PPS base rate 
does not result in a decrease to total ESRD PPS payments.
    Comment: One commenter noted that the proposed CY 2025 ESRD PPS 
base rate of $273.20 is only $43.57 more than the CY 2011 ESRD PPS base 
rate of $229.63. This commenter stated a belief that this has 
contributed to the ongoing net closures of ESRD facilities in recent 
years.
    Response: We acknowledge that the ESRD PPS base rate has not 
increased as much as costs have for ESRD facilities; however, we note 
that the ESRD PPS base rate is not meant to be interpreted as an 
average or typical payment rate for renal dialysis services furnished 
to ESRD patients, because the ESRD PPS base rate is adjusted by several 
factors including the wage index and several case-mix and facility-
level adjusters. Generally, these adjusters are implemented in a 
budget-neutral manner, which usually decreases the ESRD PPS base rate 
to account for the usually positive adjustment factor. For example, 
when we updated the case-mix adjustment factors in the CY 2016 ESRD PPS 
final rule, we applied a refinement budget-neutrality adjustment factor 
of 0.960319, which decreased the ESRD PPS base rate by approximately 
nine and a half dollars without reducing total estimated payments for 
CY 2016 (80 FR 69013). Thus, we do not believe it is appropriate to 
judge the payment adequacy of the ESRD PPS based on the base rate alone 
without accounting for the other adjustment factors, which heavily 
influence the actual payment amount received by ESRD facilities. The 
actual payment rate is generally higher than the unadjusted ESRD PPS 
base rate. The ESRD PPS base rate incorporates offsetting adjustments 
to maintain budget neutrality which, as discussed, have generally 
reduced the ESRD PPS base rate, so it should not be evaluated in 
isolation. As these adjustment factors have generally increased since 
the inception of the ESRD PPS in CY 2011, we believe that this increase 
in the ESRD PPS base rate from CY 2011 to CY 2025 is appropriate.
    Comment: Many commenters who opined that the current payments under 
the ESRD PPS were too low included potential implications of a lower-
than-appropriate payment rate. These implications included concerns 
related to quality of care, ability for ESRD facilities to remain open, 
ability for ESRD facilities to remain staffed, reduction of the hours 
of operation at ESRD facilities, and access concerns.

[[Page 89133]]

One commenter highlighted potential health equity concerns related to 
what they characterized as lower-than-appropriate payments. This 
commenter stated that dialysis patients are disproportionately African 
American/Black, live in medically underserved areas and are low income, 
so lower-than-appropriate payments would risk perpetuating health 
disparities.
    Response: We appreciate the commenter's concerns regarding the wide 
range of potential implications of the proposed payment rate update. We 
note that we are statutorily required to increase the ESRD PPS base 
rate by a ESRDB market basket increase factor that reflects the 
forecasted change in prices of an appropriate mix of goods and services 
included in renal dialysis services. The final CY 2025 market basket 
update is 2.2 percent according to the latest available projection of 
the ESRDB market basket and productivity adjustment, which we note is 
0.4 percentage point higher than the proposed ESRDB market basket 
update. We recognize that many commenters are concerned about payment 
adequacy, and we agree that it is important to ensure payments to ESRD 
facilities are adequate. We note that MedPAC's 2024 Report to Congress 
\35\ projected a 2024 aggregate FFS Medicare margin for ESRD facilities 
of 0.0 percent. While we understand why interested parties may perceive 
these margins as being too low, we note that they indicate that in 
general ESRD facilities are being paid a reasonable amount given their 
costs.
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    We appreciate the thoughtful comments on the health equity 
implications of the ESRD PPS payment rate. We agree with the commenters 
that appropriate payments for renal dialysis services are important due 
to the potential vulnerability of many ESRD beneficiaries and the 
health disparities they may experience. We did not propose any changes 
to the ESRD PPS payment update methodology to further account for 
health equity, and we are statutorily required to update ESRD PPS 
payments based on the change in prices as measured by the ESRDB market 
basket. We intend to continue to consider a wide range of potential 
options for how we can address health equity concerns, for example, 
through refined case-mix and facility-level adjustment factors, in 
future rulemaking.
    Comment: We received some comments which specifically discussed 
ESRD facilities in Puerto Rico and the appropriateness of the current 
ESRD PPS base rate there. One comment stated that relative rates 
between MA and FFS Medicare were larger than in the mainland United 
States. This commenter also mentioned several cost factors that were 
unique to Puerto Rico, including energy issues, laboratory costs, costs 
related to the importations of goods to areas outside the mainland 
United States, local legislation on administrative staff at ESRD 
facilities, and high property insurance rates.
    Response: We appreciate the insight into the specific costs related 
to operating ESRD facilities in Puerto Rico. We believe that the ESRDB 
market basket appropriately accounts for all of the costs which the 
commenters described; however, we acknowledge that there could be 
geographic variation in these costs which would not be captured by the 
ESRDB market basket update. We understand that MA payment is critical 
for many ESRD facilities; however, MA payment rates are not the subject 
of this ESRD PPS rulemaking, and we are not substantively responding to 
any comments regarding MA payment rates in this final rule. We may 
consider how we could address the unique costs associated with the 
geographic isolation of U.S. Territories in the ESRD PPS in future 
policymaking.
    Comment: Several commenters stated that the ESRD PPS does not 
adequately support innovation. These commenters generally expressed 
that payments under the ESRD PPS are not enough to incentivize new 
products, drugs, biological products, or other efficiencies to be 
developed for treatment of ESRD. Many of these comments were combined 
with more specific concerns regarding outlier payments for renal 
dialysis drugs that received the TDAPA after the end of the TDAPA 
period and the post-TDAPA add-on payment adjustment amounts, which we 
address in sections II.B.3 and II.B.6 respectively.
    Response: Under section 1881(b)(14)(A)(ii) of the Act, the ESRD PPS 
is based on a fixed bundle of goods and services using data from 2007, 
2008 or 2009, whichever had the lower per-patient utilization. 
Therefore, in the CY 2011 ESRD PPS final rule, we derived the ESRD PPS 
base rate from 2007 cost report data (75 FR 49152) which has been, and 
continues to be, annually updated based on the ESRDB market basket, 
reflecting the changes over time in the prices of an appropriate mix of 
the goods and services involved in furnishing renal dialysis services. 
Per this statutory scheme, the ESRD PPS is not designed to provide 
additional payment for new and innovative good or services through the 
ESRD PPS base rate. To promote innovation and achieve other objectives, 
we have finalized several policies using the statutory authority at 
section 1881(b)(14)(D)(iv) of the Act to provide temporarily increased 
payment to ESRD facilities that use certain new and innovative renal 
dialysis services. These include the TDAPA for certain new renal 
dialysis drugs and biological products (80 FR 69023), the TPNIES for 
certain new and innovative renal dialysis equipment and supplies (84 FR 
60684), the TPNIES for certain capital related assets that are home 
dialysis machines when used in the home for a single patient (85 FR 
71416) and, most recently, the post-TDAPA add-on payment adjustment for 
certain new drugs and biological products after the TDAPA period ends 
(88 FR 76388 through 76397). All of these add-on payment adjustments 
serve to provide increased payment compared to the ESRD PPS base rate, 
which we believe appropriately recognizes innovation through increased 
payment. As the statute specifically requires that the ESRD PPS be 
based on a fixed bundle of goods and services, we do not believe it 
would be appropriate to directly increase the ESRD PPS base rate for 
new goods and services which are broadly similar to goods and services 
within the ESRDB market basket, such as drugs and biological products 
in existing ESRD PPS functional categories.
    Final Rule Action: We are not finalizing any changes to our 
methodology for calculating the ESRD PPS base rate. The final CY 2025 
ESRD PPS base rate is $273.82, as described previously in this final 
rule.
5. Update to the Average per Treatment Offset Amount for Home Dialysis 
Machines
    In the CY 2021 ESRD PPS final rule (85 FR 71427), we expanded 
eligibility for the TPNIES under Sec.  413.236 to include certain 
capital-related assets that are home dialysis machines when used in the 
home for a single patient. To establish the TPNIES basis of payment for 
these items, we finalized the additional steps that the Medicare 
Administrative Contractors (MACs) must follow to calculate a pre-
adjusted per treatment amount, using the prices they establish under 
Sec.  413.236(e) for a capital-related asset that is a home dialysis 
machine, as well as the methodology that CMS uses to calculate the 
average per treatment offset amount for home dialysis machines that is 
used in the MACs' calculation, to account for the cost of the home 
dialysis machine that is already in the ESRD PPS base

[[Page 89134]]

rate. For purposes of this final rule, we refer to this as the ``TPNIES 
offset amount.''
    The methodology for calculating the TPNIES offset amount is set 
forth in Sec.  413.236(f)(3). Section 413.236(f)(3)(v) states that 
effective January 1, 2022, CMS annually updates the amount determined 
in Sec.  413.236(f)(3)(iv) by the ESRD bundled market basket percentage 
increase factor minus the productivity adjustment factor. The TPNIES 
for capital-related assets that are home dialysis machines is based on 
65 percent of the MAC-determined pre-adjusted per treatment amount, 
reduced by the TPNIES offset amount, and is paid for 2 CYs.
    There are currently no capital-related assets that are home 
dialysis machines set to receive TPNIES for CY 2025, as the TPNIES 
payment period for the Tablo[supreg] System ended on December 31, 2023, 
and there are no TPNIES applications for CY 2025. However, as required 
by Sec.  413.236(f)(3)(v), we proposed to update the TPNIES offset 
amount annually according to the methodology described previously.
    We are finalizing a CY 2025 TPNIES offset amount for capital-
related assets that are home dialysis machines of $10.22, based on the 
final CY 2025 ESRDB productivity-adjusted market basket update of 2.2 
percent (final 2.7 percent market basket percentage increase reduced by 
the final 0.5 percentage point productivity adjustment). Applying the 
final update factor of 1.022 to the CY 2024 offset amount resulted in 
the CY 2025 offset amount of $10.22 ($10.00 x 1.022 = $10.22). This is 
slightly higher than the proposed CY 2025 TPNIES offset amount for 
capital related assets that are home dialysis machines of $10.18. We 
did not receive any comments on our proposal to update the TPNIES 
offset for capital-related assets for CY 2025.
6. Post-TDAPA Add-On Payment Adjustment Updates
a. Updates to the Post-TDAPA Add-On Payment Adjustment Amounts for CY 
2025
    In the CY 2024 ESRD PPS final rule we finalized an add-on payment 
adjustment for certain new renal dialysis drugs and biological 
products, which would be applied for 3 years after the end of the TDAPA 
period (88 FR 76388 through 76397). This adjustment, known as the post-
TDAPA add-on payment adjustment, is adjusted by the patient-level case-
mix adjuster and is applied to every ESRD PPS claim. In that final rule 
we also clarified that for each year of the post-TDAPA period we would 
update the post-TDAPA add-on payment adjustment amounts based on 
utilization and ASP of the drug or biological product. For CY 2024 
there is one drug, Korsuva[supreg] (difelikefalin), included in the 
calculation of the post-TDAPA add-on payment adjustment. In the CY 2024 
ESRD PPS final rule (88 FR 76397), we finalized that the post-TDAPA 
add-on payment adjustment amount for Korsuva[supreg] would be $0.2493 
and would begin on April 1, 2024.
    For CY 2025, we will have two drugs included in the calculation of 
the post-TDAPA add-on payment adjustment. The post-TDAPA add-on payment 
adjustment period for one of these drugs, Korsuva[supreg], began on 
April 1, 2024, so, conditional upon the continued receipt of the latest 
full calendar quarter of ASP data as described in Sec.  413.234(c)(3), 
Korsuva[supreg] will be included in the calculation for the post-TDAPA 
add-on payment adjustment for the entirety of CY 2025. The other drug, 
Jesduvroq (daprodustat), began its 2-year TDAPA period on October 1, 
2023, so its post-TDAPA add-on payment adjustment period will begin on 
October 1, 2025, conditional upon the continued receipt of the latest 
full calendar quarter of ASP data.
    In the CY 2025 ESRD PPS proposed rule we presented the proposed 
post-TDAPA add-on payment adjustment amounts for Korsuva[supreg] and 
Jesduvroq based on the most recently available utilization data at the 
time. Consistent with the methodology finalized in the CY 2024 ESRD PPS 
final rule (88 FR 76388 through 76389), we proposed to update these 
calculations with the most recent available data in the final rule.
    Based on the most recent utilization data, and following the 
calculation explained in the CY 2024 ESRD PPS final rule (88 FR 76388 
through 76389) and Sec.  413.234(g), the final post-TDAPA add-on 
payment adjustment amount for Korsuva[supreg] is $0.4601 for all 4 
quarters of CY 2025, an increase from the proposed post-TDAPA add-on 
payment adjustment amount of $0.4047. Under that same methodology, the 
current estimate of the post-TDAPA add-on payment adjustment amount for 
Jesduvroq is $0.0096 for only the last quarter of CY 2025, an increase 
from the proposed post-TDAPA add-on payment adjustment amount of 
$0.0019. We note that utilization data available for Jesduvroq 
available at the time the analysis was conducted for this final rule 
includes only data from October 2023 through June 2024. Table 8 shows 
the final post-TDAPA add-on payment adjustment amounts for each quarter 
of CY 2025.
[GRAPHIC] [TIFF OMITTED] TR12NO24.007


[[Page 89135]]


    We invited public comment on our proposed CY 2025 post-TDAPA add-on 
payment adjustment amounts. Approximately 8 commenters including 
coalitions of dialysis organizations and several drug manufacturers 
commented on the proposed post-TDAPA add-on payment adjustment amounts. 
The following is a summary of the public comments received on these 
proposals and our responses.
    Comment: We received several comments that reiterated concerns 
about the post-TDAPA add-on payment adjustment calculation that we 
addressed in the CY 2024 ESRD PPS final rule, in which we finalized the 
post-TDAPA add-on payment adjustment (88 FR 76388 through 76397). 
Commenters requested CMS calculate the post-TDAPA add-on payment 
adjustment amount based only on TDAPA claims that included the drug or 
biological product and then only apply the post-TDAPA add-on payment 
adjustment to claims with that drug or biological product. Commenters 
generally stated that this methodology would better support innovation 
and expressed access concerns for expensive drugs and biological 
products with low utilization after the TDAPA period. Some commenters 
included figures that they believed would be more appropriate amounts 
for the post-TDAPA add-on payment adjustment amount for 
Korsuva[supreg], generally calculated using the suggested 
methodological changes.
    Response: We did not propose a new methodology for the calculation 
of the post-TDAPA add-on payment adjustment for the same reasons we did 
not finalize the requested methodology in the CY 2024 ESRD PPS final 
rule (88 FR 76395). Specifically, calculating the post-TDAPA add-on 
payment adjustment amount by dividing the total payment for the drug or 
biological product across only those patients who utilize it would 
directly incentivize utilization of a particular drug or biological 
product, which can result in overutilization. We note that in future 
rulemaking we may propose changes to the case-mix adjustment factors, 
which could result in higher payments for treatments provided to some 
patients who utilize drugs or biological products that previously 
received the TDAPA, should the analysis show that treating these 
patients is more costly.
    Final Rule Action: After reviewing the comments, we are finalizing 
a post-TDAPA addon payment adjustment amount of $0.4601 for 
Korsuva[supreg] that would be included in the calculation of the post-
TDAPA add-on payment adjustment amount for all four quarters of CY 
2025. Additionally, we are presenting an estimated post-TDAPA add-on 
payment adjustment amount of $0.0096 for Jesduvroq, which would be 
included in the calculation of the post-TDAPA add-on payment adjustment 
amount for the fourth quarter of CY 2025. As discussed later in this 
section of the final rule, this presented post-TDAPA add-on payment 
adjustment amount for Jesduvroq will be updated in a CR once we have a 
full year's worth of utilization data available for the analysis.
a. Proposal To Publish Post-TDAPA Add-On Payment Adjustment Amounts 
After the Final Rule in Certain Circumstances
    As discussed in the CY 2024 ESRD PPS final rule (88 FR 76393) and 
codified at 42 CFR 413.234(g), we have finalized a post-TDAPA add-on 
payment adjustment, which is based on the most recent year of 
utilization data and is calculated annually in each rulemaking cycle. 
Under Sec.  413.234(g)(1), CMS bases the post-TDAPA add-on payment 
adjustment calculation on the most recent 12-month period of 
utilization for the new renal dialysis drug or biological product and 
the most recent available full calendar quarter of ASP data. However, 
when a drug or biological product begins its TDAPA period in the fourth 
quarter of a CY, and, therefore, would be included in the post-TDAPA 
add-on payment adjustment calculation beginning in the fourth quarter 2 
CYs later, there would likely not be a full year's worth of utilization 
data available at the time of proposed or final rulemaking for that CY 
due to the time-lag associated with collecting and processing 
utilization data for the final rule. For example, at the time of 
rulemaking for last year's ESRD PPS final rule, we had data available 
through June 2023 when calculating the post-TDAPA add-on payment 
adjustment amount for Korsuva[supreg] (88 FR 73697). However, for a 
drug or biological product that began its TDAPA period in October of 
the prior year, data from October through June would only represent 9 
months of data. We believe it is important to have a full year's 
utilization data when determining the post-TDAPA add-on payment 
adjustment amount so that the post-TDAPA add-on payment adjustment 
appropriately captures the utilization of the drug or biological 
product as required by Sec.  413.234(g)(1).
    We proposed that when there is insufficient data at the time of 
rulemaking, we will publish the post-TDAPA add-on payment adjustment 
amount via CR once we have a full 12 months of data. Specifically, we 
will publish the post-TDAPA add-on payment adjustment amount in a CR 
under the following circumstances: (1) a drug or biological product is 
ending its TDAPA period during the CY, and therefore under Sec.  
413.234(c)(1) will begin being included in the post-TDAPA add-on 
payment adjustment amount calculation during that CY; and (2) that drug 
or biological product does not have at least 12 full months of 
utilization data at the time the final rule is developed. Under this 
proposal, we would still include an estimated post-TDAPA add-on payment 
adjustment amount in the proposed rule and update that estimated amount 
in the final rule, but we would note that the estimated amount 
presented in the final rule is subject to change. We note that the 
final post-TDAPA add-on payment adjustment amount published after the 
final rule could be higher or lower than the estimated amount presented 
in the final rule. We do not anticipate having less than a full year's 
utilization data at the time of rulemaking for drugs and biological 
products that begin receiving TDAPA payments in quarters other than the 
fourth quarter of the year; however, should such an instance arise, we 
would similarly publish the post-TDAPA add-on payment adjustment amount 
in a CR once 12 months of utilization data are available. We would 
indicate the quarterly release CR in which we intend to publish the 
final post-TDAPA add-on payment adjustment amount.
    For CY 2025, there is one TDAPA drug, Jesduvroq, which is ending 
its TDAPA period in CY 2025 and for which, at the time of proposed 
rulemaking, we did not anticipate having a full 12 months' worth of 
utilization data at the time of final rulemaking. As such, we stated 
that under this proposal we would indicate in the final rule that we 
intend to publish the post-TDAPA add-on payment adjustment amount for 
CY 2025 for Jesduvroq once we have a full year of utilization data. We 
generally intend to publish this updated post-TDAPA add-on payment 
adjustment amount two calendar quarters prior to the end of the TDAPA 
period, as this would allow for sufficient time to gather and analyze a 
year's worth of utilization data. We stated that for this drug, and for 
any drug or biological product that begins its TDAPA period in the 
fourth quarter of a CY, we would generally publish the post-TDAPA add-
on payment adjustment amount at the beginning of the second quarter of 
the last CY of that drug or biological product's TDAPA period (that is, 
two

[[Page 89136]]

calendar quarters before the drug is included in the post-TDAPA add-on 
payment adjustment amount). However, should circumstances arise that 
prevent us from calculating a post-TDAPA add-on payment adjustment 
amount at that time, we would publish the final post-TDAPA add-on 
payment adjustment amount at a later time.
    We noted that this approach to publishing the post-TDAPA add-on 
payment adjustment amount calculation would not impact any drug or 
biological product that has at least one full year's worth of 
utilization data at the time when the analysis for the final rule is 
developed, nor would it impact any drug or biological product that is 
already included in the post-TDAPA add-on payment adjustment 
calculation for a given CY. We do not intend to routinely update post-
TDAPA add-on payment adjustment amounts quarterly, as we believe this 
will make it more difficult for ESRD facilities to estimate payments. 
However, for drugs or biological products that lack a full year's worth 
of utilization data at the time when the analysis for the final rule is 
developed, we believe it is appropriate to take this additional step to 
ensure that their post-TDAPA add-on payment adjustment is based on 12 
months of utilization data as required by Sec.  413.234(g)(1).
    We invited public comment on our proposal to update post-TDAPA add-
on payment adjustment amounts after the final rule is published in 
situations where 12 months of utilization data is not available at the 
time of the analysis calculated for the ESRD PPS final rule. We did not 
receive any comments on this proposal.
    Final Rule Action: We are finalizing our proposal to publish the 
post-TDAPA add-on payment adjustment amount after the final rule in 
certain circumstances, as we believe it is most consistent with Sec.  
413.234(g)(1), which requires that the post-TDAPA add-on payment 
adjustment amount be calculated using 12 months of utilization data.
7. Inclusion of Oral-Only Drugs Into the ESRD PPS Bundled Payment
a. Background
    Section 1881(b)(14)(A)(i) of the Act requires the Secretary to 
implement a payment system under which a single payment is made to a 
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 
\36\ that are furnished to individuals for the treatment of ESRD and 
for which payment was made separately under this title, and any oral 
equivalent form of such drug or biological.
---------------------------------------------------------------------------

    \36\ As discussed in the CY 2019 ESRD PPS final rule (83 FR 
56922), we began using the term ``biological products'' instead of 
``biologicals'' under the ESRD PPS to be consistent with FDA 
nomenclature. We use the term ``biological products'' in this final 
rule except where referencing specific language in the Act or 
regulations.
---------------------------------------------------------------------------

    When we implemented the ESRD PPS in 2011 (75 FR 49030), we 
interpreted this provision as including not only injectable drugs and 
biological products used for the treatment of ESRD (other than ESAs and 
any oral form of ESAs, which are included under clause (ii) of section 
1881(b)(14)(B) of the Act), but also all oral drugs and biological 
products used for the treatment of ESRD and furnished under title XVIII 
of the Act. We also concluded that, to the extent oral-only drugs or 
biological products used for the treatment of ESRD do not fall within 
clause (iii) of section 1881(b)(14)(B) of the Act, such drugs or 
biological products would fall under clause (iv) of that section, 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) of the Act.
    We finalized and issued payment policies for oral-only renal 
dialysis service drugs or biological products in the CY 2011 ESRD PPS 
final rule (75 FR 49038 through 49053). In that rule, we defined renal 
dialysis services at Sec.  413.171 as including drugs and biological 
products with only an oral form. We also finalized a policy to delay 
payment for oral-only drugs under the ESRD PPS until January 1, 2014. 
Accordingly, we codified the delay in payment for oral-only renal 
dialysis service drugs and biological products at Sec.  413.174(f)(6), 
and provided that payment to an ESRD facility for renal dialysis 
service drugs and biological products with only an oral form would be 
incorporated into the ESRD PPS payment rates effective January 1, 2014, 
once we had collected and analyzed adequate pricing and utilization 
data. Since oral-only drugs are generally not a covered service under 
Medicare Part B, this delay of payment under the ESRD PPS also allowed 
coverage to continue under Medicare Part D for those beneficiaries with 
such coverage.
    In the CY 2011 ESRD PPS proposed rule (74 FR 49929), we noted that 
the only oral-only drugs that we identified were phosphate binders and 
calcimimetics, specifically, cinacalcet hydrochloride, lanthanum 
carbonate, calcium acetate, sevelamer hydrochloride, and sevelamer 
carbonate. All of these drugs fall into the ESRD PPS functional 
category for bone and mineral metabolism.
    Since then, the Congress has acted three times to further delay the 
inclusion of oral-only renal dialysis service drugs and biological 
products in the ESRD PPS. Specifically, as discussed in section II.A.1 
of this final rule, ATRA in 2013, as amended by PAMA in 2014, and 
amended by ABLE in 2014, ultimately delayed the inclusion of oral-only 
drugs into the ESRD PPS until January 1, 2025.
    Section 217(c)(1) of PAMA also required us to adopt a process for 
determining when oral-only drugs are no longer oral-only and to 
incorporate them into the ESRD PPS bundled payment. Section 217(a)(2) 
of PAMA further amended section 632(b)(1) of ATRA by requiring that, in 
establishing payment for oral-only drugs under the ESRD PPS, the 
Secretary must use data from the most recent year available. In the CY 
2016 ESRD PPS proposed rule (80 FR 37839), we noted that when the 
existing oral-only drugs (which were, at that time, only phosphate 
binders and calcimimetics) were determined no longer to be oral-only 
drugs, we would pay for them using the TDAPA. We stated that this would 
allow us to collect data reflecting current utilization of both the 
oral and injectable or intravenous forms of the drugs, as well as 
payment patterns and beneficiary co-pays, before we add these drugs to 
the ESRD PPS bundled payment.
    In 2017, when an injectable calcimimetic became available, CMS 
issued a Change Request \37\ to add all calcimimetics, including oral 
and injectable forms, to the ESRD PPS bundled payment beginning in CY 
2018. CMS paid the TDAPA for calcimimetics for a period of 3 years (CY 
2018 through CY 2020). When the TDAPA period ended, we went through 
rulemaking (85 FR 71410) to increase the ESRD PPS base rate beginning 
in CY 2021 to incorporate the cost of calcimimetics.
---------------------------------------------------------------------------

    \37\ https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/mm10065.pdf and 
https://www.cms.gov/regulations-and-guidance/guidance/transmittals/2018downloads/r1999otn.pdf.
---------------------------------------------------------------------------

    Most recently, in the CY 2023 ESRD PPS final rule (87 FR 67185 
through 67186), we finalized a revision to the regulatory definition of 
an oral-only drug, effective January 1, 2025, to clarify our 
longstanding policy by specifying that an oral-only drug has no 
injectable functional equivalent. The effective date of this revised 
definition will coincide

[[Page 89137]]

with the January 1, 2025, incorporation of oral-only drugs into the 
ESRD PPS under Sec.  413.174(f)(6). The revised definition of oral-only 
drugs reflects that drugs with similar end-action effects are treated 
as equivalent under the ESRD PPS, consistent with our approach to 
designating drugs into ESRD PPS functional categories.
b. Current Policy for Oral-Only Drugs in CY 2025
    Existing regulations at Sec.  413.174(f)(6) state that effective 
January 1, 2025, oral-only drugs will be paid for under the ESRD PPS. 
Although oral-only drugs are excluded from the ESRD PPS bundled payment 
until January 1, 2025, they are currently recognized as renal dialysis 
services as defined in regulation at Sec.  413.171. Accordingly, CMS is 
planning to incorporate oral-only drugs into the ESRD PPS bundled 
payment beginning January 1, 2025, using the TDAPA, as described in the 
CY 2016 ESRD PPS final rule (80 FR 69027) and subsequent rules.
    As we stated in the CY 2023 ESRD PPS final rule (87 FR 67180), if 
an injectable equivalent or other form of administration of phosphate 
binders were to be approved by FDA prior to January 1, 2025, the 
phosphate binders would no longer be considered oral-only drugs and 
would no longer be paid for outside the ESRD PPS. We stated that we 
would pay for the oral and any non-oral version of the drug using the 
TDAPA under the ESRD PPS for at least 2 years, during which time we 
would collect and analyze utilization data. We stated that if no other 
injectable equivalent (or other form of administration) of phosphate 
binders is approved by the FDA prior to January 1, 2025, we would pay 
for these drugs using the TDAPA under the ESRD PPS for at least 2 years 
beginning January 1, 2025. CMS will use the same process that it used 
for calcimimetics to incorporate phosphate binders into the ESRD PPS 
beginning January 1, 2025. CMS discussed its process for incorporating 
calcimimetics in CMS Transmittal 1999, dated January 10, 2018, and in 
MLN Matters Number: MM10065.<SUP>38 39</SUP> We stated that pricing for 
phosphate binders under the TDAPA would be based on pricing 
methodologies available under section 1847A of the Act. A new renal 
dialysis drug or biological product is paid for using the TDAPA, which 
is based on 100 percent of ASP. If ASP is not available then the 
transitional drug add-on payment adjustment is based on 100 percent of 
wholesale acquisition cost (WAC) and, when WAC is not available, the 
payment is based on the drug manufacturer's invoice. In such cases, CMS 
will undertake rulemaking to modify the ESRD PPS base rate, if 
appropriate, to account for the cost and utilization of phosphate 
binders in the ESRD PPS bundled payment.
---------------------------------------------------------------------------

    \38\ https://www.cms.gov/Regulations-and-Guidance/Guidance/
Transmittals/2018Downloads/R1999OTN.pdf.
    \39\ https://www.cms.gov/Outreach-and-Education/Medicare-
Learning-Network-MLN/MLNMattersArticles/Downloads/MM10065.pdf.
---------------------------------------------------------------------------

    We note that on October 17, 2023, a new oral phosphate lowering 
agent received FDA marketing approval. According to the FDA-approved 
labeling for this drug, XPHOZAH[supreg] (tenapanor) is indicated to 
reduce serum phosphorus in adults with chronic kidney disease who are 
on dialysis as add-on therapy in patients who have an inadequate 
response to phosphate binders or who are intolerant of any dose of 
phosphate binder therapy. CMS has identified XPHOZAH[supreg] to be a 
renal dialysis service because it is used to treat or manage a 
condition associated with ESRD, per its approved indication. 
XPHOZAH[supreg] tablets are taken orally, usually twice a day with 
meals. CMS has also determined that XPHOZAH[supreg] meets the current 
regulatory definition of an oral-only drug as defined at Sec.  
413.234(a), and therefore, in accordance with Sec.  413.174(f)(6), is 
not paid for under the ESRD PPS until January 1, 2025. Consistent with 
policies adopted in the CY 2016 and CY 2023 ESRD PPS final rules (see 
80 FR 69025 and 87 FR 67183), XPHOZAH[supreg] will be included in the 
ESRD PPS effective January 1, 2025, using the drug designation process 
under Sec.  413.234.
    As set forth in Sec.  413.174(f)(6), effective January 1, 2025, 
payment to an ESRD facility for renal dialysis service drugs and 
biological products with only an oral form furnished to ESRD patients 
will be incorporated within the prospective payment system rates 
established by CMS in Sec.  413.230, and separate payment will no 
longer be provided. As noted earlier in this section, we have recently 
published operational guidance, including information about the TDAPA 
amount, HCPCS codes, and ASP reporting requirements and timelines for 
phosphate binders at https://www.cms.gov/files/document/including-oral-only-drugs-esrd-pps-bundled-payment.pdf. We note that we will use the 
same process that we used for calcimimetics to incorporate phosphate 
binders into the ESRD PPS beginning January 1, 2025, and that we will 
not be following this process for any other oral drugs or biological 
products. Manufacturers would need to apply for a HCPCS code and the 
TDAPA for any other oral drugs or biological products to be eligible 
for the TDAPA.
    Finally, we note that the TDAPA amount is not applied to claims for 
renal dialysis services provided to beneficiaries with acute kidney 
injury.\40\ When ESRD facilities were paid the TDAPA for calcimimetics 
and the latter were incorporated into the ESRD PPS bundled payment for 
patients with ESRD, the TDAPA was not paid for claims for renal 
dialysis services provided to beneficiaries with acute kidney injury. 
Similarly, ESRD facilities will not be paid the TDAPA for phosphate 
binders for renal dialysis services provided to beneficiaries with 
acute kidney injury. This is discussed below in section III.E of this 
final rule.
---------------------------------------------------------------------------

    \40\ https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/mm102811.pdf and https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2017Downloads/R1941OTN.pdf.
---------------------------------------------------------------------------

    We note that for any other oral-only drugs, such as 
XPHOZAH[supreg], we will apply our drug designation process as we do 
for all new renal dialysis drugs and biological products, consistent 
with Sec.  413.234 and the policy finalized in CY 2016 ESRD PPS final 
rule (80 FR 69027) and reiterated in the CY 2023 ESRD PPS final rule 
(87 FR 67180).
c. Operational Considerations Related to the Incorporation of Oral-Only 
Drugs
    In the CY 2011 ESRD PPS final rule (75 FR 49043), we explained that 
there were certain advantages to delaying the implementation of payment 
for oral-only drugs and biological products under the ESRD PPS. These 
advantages included allowing ESRD facilities additional time to make 
operational changes and logistical arrangements to furnish oral-only 
renal dialysis service drugs and biological products to their patients.
    In November 2023, in accordance with section 632(d) of ATRA, the 
Government Accountability Office (GAO) published a Report to 
Congressional Committees titled, ``End-Stage Renal Disease: CMS Plans 
for including Phosphate Binders in the Bundled Payment.'' (GAO-24-
106288).\41\ The report summarized the current status of payment for 
the phosphate binders as well as identifying areas of operational 
concerns. These include challenges related to hiring the staff needed 
for ESRD facilities to provide phosphate binders to patients, 
complexities relating to system updates needed to accommodate the 
volume and broad array of phosphate binders, and costs related to 
dispensing, storage, and

[[Page 89138]]

transportation. The considerations identified in the GAO report 
generally align with the comments we have received on past ESRD PPS 
proposed rules. The GAO also interviewed dialysis organization 
representatives who stated that they are preparing to make the 
anticipated adjustments needed to dispense the phosphate binders.
---------------------------------------------------------------------------

    \41\ https://www.gao.gov/assets/d24106288.pdf.
---------------------------------------------------------------------------

    With respect to considerations related to staffing, we note that 
the ESRD PPS includes payment for staffing related to the provision of 
renal dialysis services. We believe there are several strategies that 
ESRD facilities could employ to efficiently use available staff time to 
provide phosphate binders. There are parallels between the 
administration of phosphate binders and the administration of oral 
calcimimetics, which are also typically taken every day. First, we 
expect that patients with ESRD generally receive treatment for at least 
3 hours per session, typically three times per week. We believe that 
during this treatment window there is generally staff availability to 
provide the patient with pre-packaged medication, which we note could 
include medication for multiple days. Second, ESRD facilities could 
maximize the efficiency of staff time by mailing the prescriptions, to 
the extent that doing so is consistent with state pharmacy laws. For 
example, the GAO report identified that one large dialysis organization 
only mails oral prescriptions to patients' homes, while others mail the 
medication to either the ESRD facility or the patient's home. Third, 
the GAO report identified that some ESRD facilities contract with 
outside pharmacies rather than operating their own pharmacy. By 
contracting with outside pharmacies, ESRD facilities could reduce or 
avoid the need to hire additional pharmacists and pharmacy staff to 
manage the volume of prescriptions.
    Another challenge identified by the dialysis organizations was the 
complexity of dispensing phosphate binders because of the broad array 
of phosphate binders and the high volume of pills.\42\ We acknowledge 
there are six common types of phosphate binders as compared to only one 
type of calcimimetics. The GAO report also noted that unlike 
calcimimetics, phosphate binders are typically taken with every meal 
and snack. We note that although Medicare will begin paying for 
phosphate binders under the ESRD PPS beginning January 1, 2025, we are 
not establishing any requirements regarding how or where patients take 
these medications. These decisions are made and will continue to be 
made by the patient, nephrologist, and care team.
---------------------------------------------------------------------------

    \42\ Ibid.
---------------------------------------------------------------------------

    We recognize that updates may be required to ESRD facilities' 
systems, including electronic medical records, billing systems, and 
inventory management systems to accommodate new procedures for 
dispensing phosphate binders. As we previously noted, we initially 
delayed the incorporation of oral-only drugs into the ESRD PPS in 2011, 
in part to allow ESRD facilities to make such operational changes and 
logistical arrangements. In addition, we have provided operational 
guidance on the CMS website at https://www.cms.gov/files/document/including-oral-only-drugs-esrd-pps-bundled-payment.pdf that addresses 
HCPCS coding, billing, and price information. We expect that ESRD 
facilities will be able to make these system changes in advance of 
January 1, 2025.
    As discussed in the CY 2025 ESRD PPS proposed rule, dialysis 
organizations have expressed concerns surrounding CMS using ASP to 
determine the TDAPA amount added to the ESRD PPS base rate for 
phosphate binders, which they believe does not adequately provide for 
dispensing cost.\43\ Under current TDAPA policy, CMS intended to pay 
the TDAPA based on 100 percent of ASP for phosphate binders for at 
least 2 years. However, as noted in the CY 2025 ESRD PPS proposed rule 
(89 FR 55797), CMS recognized that updates may be required to ESRD 
facilities' systems, including electronic medical records, billing 
systems, and inventory management systems to accommodate new procedures 
for dispensing phosphate binders. In addition, we recognized the high 
percentage of ESRD beneficiaries that have at least one phosphate 
binder prescription and the large volume of phosphate binder 
prescriptions and stated that we were considering whether it may be 
appropriate to make additional payment to account for incremental 
operational costs in excess of 100 percent of ASP, such as dispensing 
fees, when paying the TDAPA for phosphate binders. Unlike drugs and 
biological products for which payment is already included in the ESRD 
PPS base rate, including all other drugs and biological products in 
existing functional categories, dispensing fees and other costs are not 
currently included in the ESRD PPS base rate for phosphate binders. 
Therefore, in the CY 2025 ESRD PPS proposed rule, we also stated that 
we were considering whether a potential change in TDAPA amount policy 
for phosphate binders to account for such costs would be consistent 
with the TDAPA policy as finalized in the CY 2019 and CY 2020 ESRD PPS 
final rules (83 FR 56948 and 84 FR 60673 through 60676). In the 
proposed rule, we noted one potential example we could consider would 
be paying 106 percent of ASP for 2 years as we did for calcimimetics. 
As discussed in the CY 2011 ESRD PPS final rule, the amounts added to 
the ESRD PPS base rate for oral drugs at that time were based on data 
from Part D, which included dispensing fees (75 FR 49043). We solicited 
comments on the extent to which 100 percent of ASP is an appropriate 
TDAPA amount for phosphate binders and whether there are any costs 
associated with the inclusion of phosphate binders into the ESRD PPS 
bundled payment that may not be accounted for by 100 percent of ASP. In 
the proposed rule we noted that CMS may finalize a change in the TDAPA 
amount for phosphate binders after considering comments on this topic.
---------------------------------------------------------------------------

    \43\ Ibid.
---------------------------------------------------------------------------

    As noted earlier, we have issued guidance \44\ about the process we 
will use for paying the TDAPA for the phosphate binders and for their 
incorporation into the ESRD PPS bundled payment. This guidance 
addresses several key topics including billing information, information 
about the discarded drug policy, and information for manufacturers 
about reporting timelines for ASP data.
---------------------------------------------------------------------------

    \44\ https://www.cms.gov/medicare/payment/prospective-payment-systems/end-stage-renal-disease-esrd and https://www.cms.gov/files/document/including-oral-only-drugs-esrd-pps-bundled-payment.pdf.
---------------------------------------------------------------------------

    We invited public comment on the TDAPA payment methodology for the 
January 1, 2025, incorporation of oral-only drugs in the ESRD PPS. 
Approximately 162 commenters including LDOs; provider advocacy 
organizations; nonprofit dialysis associations; coalitions of dialysis 
organizations; a network of dialysis organizations; professional 
organizations; long-term care pharmacy association; ESRD facilities; 
ESRD beneficiaries, a trade association and pharmaceutical 
manufacturers, along with MedPAC, commented on the TDAPA payment 
methodology for the January 1, 2025, incorporation of oral-only drugs 
in the ESRD PPS. Of the 162 comments on oral-only drugs, we received 22 
responses directly pertinent to the TDAPA methodology for the January 
1, 2025, incorporation of oral-only drugs in the ESRD PPS. The 
remaining comments were out-of-scope, including 133 form letters, of 
which approximately 110 were from a unique

[[Page 89139]]

submitter. The following is a summary of the public comments received 
on these proposals and our responses.
    Comment: Multiple commenters expressed appreciation that CMS 
recognized the operational concerns and associated costs that were 
raised by ESRD facilities in the 2023 GAO report.\45\ However, they 
expressed concern that CMS does not fully understand the costs and 
burdens associated specifically with staff time and dispensing of these 
drugs. Numerous commenters expressed concerns regarding the incremental 
operational costs and burden of incorporating phosphate binders into 
the ESRD PPS bundled payment. The commenters' concerns included, but 
were not limited to, distribution fees, mailing fees, storage fees, and 
increases in labor costs.
---------------------------------------------------------------------------

    \45\ ``End-Stage renal Disease: CMS Plans for Including 
Phosphate Binders in the Bundled Payment.'' (GAO-24-106288, Nov. 
2023).
---------------------------------------------------------------------------

    Response: CMS thanks the commenters for their appreciation and for 
sharing concerns regarding the costs and burden of incorporating 
phosphate binders into the ESRD PPS bundled payment. CMS has addressed 
these specific concerns in the responses to comments that follow in 
this rule. CMS recognizes that the introduction of oral-only 
medications into the ESRD PPS bundle can present some new logistic 
challenges. CMS is recognizing these costs through the modification to 
the TDAPA amount for phosphate binders in this final rule. In 
accordance with section 1881(b)(14)(B) of the Act, Sec.  413.171 
defines renal dialysis services to include oral-only renal dialysis 
services drug and biologicals. Oral-only renal dialysis service drugs 
and biological products were included in the definition of renal 
dialysis services in the CY 2011 ESRD PPS final rule (75 FR 49044). At 
that time CMS finalized a policy to delay payment for these drugs under 
the ESRD PPS until January 1, 2014, to allow ESRD facilities to plan 
for the logistic challenges like those interested parties note in their 
comments. Legislation further delayed this date to January 1, 2025, and 
CMS ultimately updated the regulations at 42 CFR 413.174(f)(6) to 
finalize the date of the incorporation of oral-only drugs into the ESRD 
PPS bundled payment as January 1, 2025. CMS believes that the passage 
of over a decade since implementation of the ESRD PPS has provided 
sufficient time for interested parties to make the operational changes 
and logistical arrangements needed to furnish oral-only renal dialysis 
service drugs and biological products to their patients.
    Comment: Numerous commenters stated that CMS should finalize the 
payment of a dispensing fee to account for such incremental operational 
costs when phosphate binders are added to the ESRD PPS bundled payment. 
They stated that the dispensing of oral medications to be taken daily 
will result in incremental operational costs and that these costs and 
dispensing fees are not included in the ESRD PPS base rate. An LDO and 
a coalition of dialysis organizations noted that every dialysis 
provider likely will implement a process that is most cost effective 
and efficient based on their footprint, organizational structure, 
patient population and other specific circumstances. Commenters stated 
that while the processes and procedures may vary by ESRD facility, 
every ESRD facility will incur distribution, storage, and staff 
expenses that are not accounted for in the ASP data, and this is an 
important distinction from the current processes related to 
calcimimetics. These other costs are discussed in the comments and 
responses that follow.
    Response: In the CY 2025 ESRD PPS proposed rule, CMS recognized the 
high percentage of ESRD beneficiaries that have at least one phosphate 
binder prescription and the large volume of phosphate binder 
prescriptions and noted that we were considering whether it may be 
appropriate to make additional payment to account for incremental 
operational costs in excess of 100 percent of ASP, such as dispensing 
fees, when paying the TDAPA for phosphate binders. We stated that 
unlike drugs and biological products for which payment is already 
included in the ESRD PPS base rate, including all other drugs and 
biological products in existing ESRD PPS functional categories, 
dispensing fees and other costs are not currently included in the ESRD 
PPS base rate for phosphate binders (89 FR 55797). CMS believes that 
payment for the incremental operational costs, such as distribution 
fees, mailing fees, storage fees, and increases in labor costs incurred 
by the ESRD facilities for the provision of phosphate binders should 
align with resource use; that is, ESRD facilities' outlay to provide 
the phosphate binders to the Medicare beneficiaries. In lieu of a 
dispensing fee, as discussed later in this section, we are finalizing a 
flat rate increase to the proposed 100 percent of ASP TDAPA amount for 
phosphate binders.
    Comment: Coalitions of dialysis organizations commented that 
distribution costs, both dispensing fees and mailing fees, are not 
included in 100 percent of ASP. An LDO stated that CMS suggested that 
ESRD facilities can implement efficiencies by having phosphate binder 
prescriptions mailed to the patient's home to the extent possible under 
state pharmacy laws. They noted, however, that this still represents a 
new cost to ESRD facilities that is not accounted for in a drug's ASP. 
One commenter who is a pharmacy solutions company stated that the range 
of dispensing fees tends to be $5 to $30 for any given dispense, and 
incremental operational costs might include costs associated with call 
centers and pharmacists to receive prescriptions from ESRD facilities, 
as well as the internal processing costs associated with converting 
that into fillable medications. The commenter also stated that there is 
labor associated with the actual fulfillment of oral medications, which 
includes both quality control such as operational checks, and despite 
automation there is additional regulatory burden and oversight that is 
applied to mail order pharmacies. They stated that all these activities 
will result in incremental operational costs. The commenter stated that 
it is reasonable to expect that ESRD facilities, depending on their 
size and scale, might pay more than what would be incurred in mailing 
fees to dispense oral medications through a pharmacy. Commenters noted 
that these types of distribution costs exist regardless of whether the 
oral-only drugs are dispensed from a retail or mail or central 
pharmacy.
    Multiple commenters stated that the ESRD facilities will be paying 
pharmacy charges to obtain the drugs through them. Commenters expressed 
concern that ESRD facilities will incur additional costs that should 
not be theirs to shoulder. A non-profit dialysis association noted that 
increased payment for these incremental operational costs is important, 
particularly now when according to the commenter ESRD facilities are at 
a financial breaking point. The commenter noted that the logistics 
involved with getting the phosphate binders to a patient can be more 
expensive than the drugs themselves. They stated that these costs are 
even greater when beneficiaries are based in rural communities, putting 
their ESRD facilities at an even greater disadvantage.
    An organization of pediatric nephrologists supported the TDAPA 
amount based on 100 percent of ASP for oral phosphate binders. While 
the organization appreciated that adding

[[Page 89140]]

oral-only drugs to the bundled payment will improve patient access, 
they are concerned that these drugs are expensive, and pediatric 
centers will not be able to afford them. The organization stated that 
pediatric patients with kidney disease are mainly dialyzed in pediatric 
hospitals, which are not able to get bulk pricing deals for these 
drugs. By adding oral-only drugs to the ESRD PPS bundled payment 
without an appropriate increase in payment, the organization stated 
that there will be a huge cost to the pediatric hospitals that they 
cannot absorb. The commenter identified additional concerns about 
access, as these are not first-line drugs for pediatrics and there is 
often significant prior authorization involved in procuring these drugs 
for pediatric patients. They stated that the provision of phosphate 
binders for the pediatric ESRD population would include compounding 
charges and dispensary costs.
    Several commenters noted that there will be mailing fees either in 
terms of obtaining drugs from pharmacies or sending the drugs directly 
to the patient's home, which is where they are taken. The pharmacy 
solutions company stated that the home delivery of medications is 
preferred by beneficiaries. The commenter predicted that most dialysis 
providers will rely on mail order or shipping from a central pharmacy 
to their clinics for distribution; others may rely on local retail 
pharmacies. The commenter stated that for home delivery, each 
prescription must be shipped to a patient's home through a carrier like 
the United States Postal Service, FedEx, UPS, etc. Thus, each dispense 
incurs an additional expense of $3 to $25 depending on weight and 
shipping method. The commenter also noted that given the number of 
types of phosphate binders used per patient, and the sheer volume of 
pills needed, there will be increased shipping costs previously 
unaccounted for in the ESRD PPS base rate for oral phosphate binders. A 
coalition of dialysis providers stated that shipping costs alone are 
expected to be significant, as pills must be packaged to ensure the 
medication is not damaged during transit, and shipping costs are likely 
to escalate year over year, as will the contract costs with mail-order 
pharmacies.
    Drug manufacturers encouraged CMS to finalize a change in the TDAPA 
amount to 106 percent of ASP for phosphate binders. They stated that 
100 percent of ASP does not consider the substantial cost for 
dispensing oral-only drugs particularly for the high volume of pills 
associated with phosphate binders, which a large majority of Medicare 
ESRD beneficiaries utilize. An LDO and a coalition of dialysis 
organizations commented on the distribution of phosphate binders to a 
subpopulation of patients with housing instability, for whom mailing 
medications to a home is not an option. Based on an assessment of the 
LDO's patient population, as well as internal and external assets and 
capabilities in efficiently ordering and distributing a large volume of 
oral drugs, they assessed that mailing medications to patient homes, 
arguably the least burdensome process for facility staff, is viable for 
only a subset of their population. Because many patients have unstable 
housing situations, the LDO stated that they cannot rely on mail order 
for every patient.
    Multiple commenters noted that all these distribution options will 
incur new costs previously unaccounted for in the original underlying 
bundled payment and that are not covered by 100 percent of ASP, 
including additional staff time and facility infrastructure costs. 
Unlike the current process used for calcimimetics, staff will be 
required to accept and store individual prescriptions for each patient. 
An LDO stated phosphate binders currently flow through retail and mail 
order pharmacies, and that they will continue to flow through those 
channels when the payment changes from Part D to Part B. The LDO 
suggested that it would be appropriate for CMS to adjust the TDAPA 
payment amount to recognize Part B pharmacy supply fees paid for oral 
drugs paid as part of a physician's service, or in this case as part of 
the renal dialysis service.
    Response: CMS thanks the commenters for sharing the challenges 
accompanying the complexity of dispensing phosphate binders because of 
the broad array of phosphate binders and the high volume of pills. We 
acknowledge there are six common types of phosphate binders as compared 
to only one calcimimetic. CMS also acknowledges the range of dispensing 
fees for the high volume of phosphate binders required to manage ESRD 
patients, along with the impact of potentially higher pharmacy supply 
fees on the rural community. We understand the concerns expressed by 
the commenters about ASP, and that small ESRD facilities may be unable 
to negotiate the lower drug prices attributed to volume, and 
inaccessibility to supply chain discounts. These unique challenges of 
the high volume of phosphate binders that ESRD facilities must provide 
to beneficiaries would be magnified by a higher cost-to-payment ratio 
for the smaller ESRD facilities. We recognize that unstable housing 
situations with some ESRD beneficiaries would affect the distribution 
of phosphate binders through mail order, which may be a preferred way 
for ESRD facilities to manage this process. In consideration of the 
incremental operational costs that will be incurred by the ESRD 
facilities, as noted later in this section, CMS has decided to finalize 
an increase to the current 100 percent of ASP calculation of the TDAPA 
amount paid to ESRD facilities for the inclusion of phosphate binders.
    Comment: A coalition of dialysis organizations noted that ESRD 
facilities will need to update information technology systems to 
facilitate these changes. Changes are required to update electronic 
medical records, billing systems, and inventory management. The 
commenter also stated that e-prescribing is also a complex process that 
involves interactions with state regulatory authorities and that ESRD 
facilities will need to stand-up or expand their internal ability to 
engage with e-prescribing systems and contract with e-prescribing 
platforms to facilitate this policy change for phosphate binders. The 
coalition stated that all these changes represent both significant up-
front costs and investments as well as ongoing administrative 
requirements to ensure operational connectivity and seamless delivery 
to the beneficiary. The commenter stated that ASP does not cover any of 
information technology costs for ESRD facilities to distribute 
phosphate binders to beneficiaries.
    Response: CMS acknowledges that there will be changes needed in the 
IT systems for ESRD facilities to accommodate the updates and 
methodological changes accompanying the inclusion of the phosphate 
binders in the ESRD PPS. These changes and updates affect electronic 
medical records, billing systems, and inventory management systems. 
However, since publication of the CY 2016 ESRD PPS final rule, our 
existing regulations at Sec.  413.174(f)(6) have stated that effective 
January 1, 2025, oral-only drugs, which includes phosphate binders, 
will be paid for under the ESRD PPS. As previously discussed, we 
initially delayed the incorporation of oral-only drugs into the ESRD 
PPS in 2011, in part to allow ESRD facilities to make such operational 
changes and logistical arrangements. In addition, we have provided 
detailed operational guidance on the implementation of the TDAPA policy 
as it pertains to phosphate binders to ensure that facilities have 
clear instructions on compliance and payment processes to facilitate a 
smooth

[[Page 89141]]

transition,\46\ which addresses HCPCS coding, billing, and price 
information for phosphate binders. We expect that ESRD facilities will 
be able to make these system changes in advance of January 1, 2025. CMS 
will continue to issue operational guidance as necessary for the smooth 
implementation of the incorporation of phosphate binders into the ESRD 
PPS bundled payment. As discussed later in this section, CMS is 
finalizing an increase in the TDAPA amount for phosphate binders, which 
may help to offset the costs associated with the logistic steps that 
the commenter described.
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    \46\ https://www.cms.gov/files/document/including-oral-only-drugs-esrd-pps-bundled-payment.pdf.
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    Comment: Coalitions of dialysis organizations, a professional 
organization of nephrologists, a drug manufacturer and a health care 
system noted that supporting the provision of a significant volume of 
pills to patients along with the storage costs associated with 
maintaining the drugs at the ESRD facility if the decision is to 
distribute the drugs to patients during their dialysis treatment 
sessions is an additional cost to the ESRD facility. An LDO stated that 
the storage and distribution of oral calcimimetic medications are 
different from what they would be with phosphate binders. Commenters 
noted that because there is one oral calcimimetic medication, and half 
of their patient population on calcimimetic treatment (approximately 25 
percent) receives this drug three times per week chairside, the storage 
and distribution processes are much simpler. They stated that ESRD 
facilities can maintain a supply of calcimimetics with relatively low 
burden compared to phosphate binders. The commenters stated that with 
more than 80 percent of ESRD patients being prescribed phosphate 
binders, and with more than six different types of oral phosphate 
binders and various dosages of each, phosphate binders represent a 225 
percent relative increase over, and addition to, the percent of 
patients to whom the ESRD facilities are currently delivering 
calcimimetics. The coalition stated that the scale of operational 
requirements needed to deliver calcimimetics simply pales in comparison 
to what will be required to deliver phosphate binders to beneficiaries 
through the ESRD PPS.
    The commenters also noted that because of the size of the pills and 
the quantity required for each prescription, most ESRD facilities are 
not equipped to store and dispense this volume of oral medication. They 
stated that phosphate binders represent an exponential increase in the 
volume of pills dialysis providers will need to acquire, distribute, 
store, and manage for their patients each month and year. The relative 
difference between managing 360 pills per year per patient for 
cinacalcet as compared with 3,240 pills per year per patient for 
calcium carbonate is 800 percent.
    An LDO stated that the ESRD PPS bundled payment might have included 
storage administration fees for drugs that were previously separately 
billable (largely intravenous agents) when CMS established the bundled 
payment. However, they noted that the claims data CMS analyzed at that 
time omitted these oral medications. The LDO commented that it is 
incorrect to assume that the storage costs and dispensing fees for 
intravenous agents, which represent the vast majority of dialysis-
provided drugs accounted for when the bundled payment was created, are 
equivalent to the administration and mailing costs associated with 
oral-only medications. A coalition of dialysis organizations stated 
that while their member ESRD facilities have increased their 
familiarity with dispensing oral drugs since the inception of the ESRD 
PPS, the difference between distributing several hundred pills to 25 
percent of their patients each year and distributing thousands of large 
pills to 80 percent of the ESRD facilities' patients each year requires 
a significant expansion of their pharmaceutical distribution operations 
on a massive scale. The commenter stated that the ESRD facilities 
cannot simply repurpose existing systems to meet this goal--they must 
build, rebuild, and significantly expand the scale of their operations 
to accommodate a vastly larger number of patients taking exponentially 
more pills than they have ever provided before. The development, 
maintenance, and ongoing clinical management of these processes 
represent significant costs to ESRD facilities, which are not covered 
by setting the TDAPA for phosphate binders at 100 percent of ASP.
    The LDO commented that intravenous agents and oral-only drugs 
differ in several respects. Most notably, intravenous agents are 
usually administered to patients while on dialysis. Thus, there is 
centralized shipping and administration of those products. In contrast, 
the commenter stated, under state and other pharmacy laws, a 
significant number of the oral-only drugs will be shipped and dispensed 
directly to the patient's home. This delivery model incurs fixed costs, 
such as shipping and administration fees, which differ from those 
associated with the previously separately billable intravenous drugs.
    A coalition of dialysis organizations stated that ESRD facilities 
would also have to construct or install on-site storage with 
appropriate temperature controls and security measures compliant with 
state pharmacy laws and requirements. If the patient misses or changes 
their appointment, or if the delivery of their prescription is delayed 
by the shipping carrier, this process breaks down. The coalition stated 
that CMS's suggestion regarding labor allocation for in-center 
distribution of phosphate binders does not address the needs of 
patients using home dialysis, is not simple, and is not without costs. 
The commenter stated that having an ESRD facility staff member hand a 
patient their pre-packaged medication is the final step in a long, 
complex, and costly process. They stated that none of those costs will 
be supported if CMS sets the TDAPA amount for phosphate binders at 100 
percent of ASP.
    A non-profit treatment and research center stated that given the 
difficulties associated with dispensing these medications in the ESRD 
facility, these facilities may have to restrict the formulary of 
available medications, which may mean that some patients have 
difficulty accessing the optimal medication for them. A health care 
system stated that because of significant cost considerations, they are 
concerned that ESRD facilities may limit patient choice by offering 
fewer phosphate binders based on the cost to facilities.
    In their comment, MedPAC refers to their comment in the CY 2019 
proposed rule that stated that the ASP + 6 percent policy that is 
applied to many Part B drugs was developed to reimburse physicians for 
the cost of drugs that they purchase directly and commonly administer 
in their offices. MedPAC also stated that while the ASP payment policy 
never stated what cost the ``+6 percent'' was intended to cover, they 
noted that reimbursing dialysis facilities is considerably different 
from reimbursing physicians. First, the variation in physicians' 
purchasing power, whether they practice solo, as part of a group, or in 
a health system, is likely to result in considerably more variation in 
the acquisition price for a drug compared to the acquisition prices for 
dialysis facilities. If the intent of the ``+6 percent'' was to address 
acquisition price variation, MedPAC stated that they believe that 
rationale is diminished for dialysis facilities. MedPAC also stated 
that the TDAPA amount is in addition to the ESRD PPS base rate, which 
already includes payment for the cost of storage and administration of

[[Page 89142]]

ESRD-related drugs. Therefore, if the intent of the ``+6 percent'' was 
to address storage and administration costs, MedPAC believes these 
costs are already addressed through the ESRD PPS bundled payment and do 
not contribute to the rationale for paying 106 percent of ASP for the 
TDAPA.
    Response: We agree with MedPAC that the 106 percent of ASP percent 
policy was developed to pay physicians for the cost of drugs and that 
the TDAPA is an add-on payment adjustment to the ESRD PPS base rate, 
which already accounts for the cost of storage and administration of 
renal dialysis drugs. However, CMS recognizes the unique costs 
associated with the provision of phosphate binder drugs and believes it 
is appropriate to consider a potential change in the TDAPA payment 
policy for these drugs. CMS believes it is appropriate to make an 
incremental addition to the TDAPA amount to specifically account for 
incremental operational costs in excess of 100 percent of ASP for 
furnishing phosphate binders, such as distribution fees, mailing fees, 
excess storage fees, and increases in labor costs. Unlike other drugs 
and biological products for which payment is already included in the 
ESRD PPS base rate, including all other drugs and biological products 
in existing ESRD PPS functional categories, these incremental 
operational costs, such as security of medications in storage, are not 
currently included in the ESRD PPS base rate for phosphate binders. We 
noted this in the analysis conducted to establish the base rate in the 
CY 2011 ESRD PPS final rule, and we did not include phosphate binders 
in that analysis due to a lack of data (75 FR 49043). CMS is making a 
provision for a fixed additional amount for each monthly claim that 
includes phosphate binders, which will increase the TDAPA amount to 
account for these unaddressed incremental operational costs in CY 2025 
and CY 2026.
    Regarding the concern about the difficulties associated with 
dispensing phosphate binders in the ESRD facility, and the risk that 
these facilities may have to restrict the formulary of available 
medications, which may mean that some patients have difficulty 
accessing the optimal medication for them, we believe that physicians 
and their patients should make the decision together on the appropriate 
form of the drug for treatment. It is not our intent to interfere with 
that decision making process. As the number of drugs within each ESRD 
PPS functional category increases and market share competition from the 
manufacturers is a factor, we anticipate easier access, more choices in 
care, and lower prices. We acknowledge that payment policies may have 
unintended consequences as identified by the commenters. However, it is 
our expectation that ESRD facilities will follow the physician's plan 
of care for the patient. Under the ESRD facility CfCs (for example, 
Sec. Sec.  494.70(a)(12) and 494.90(a)(3)), if a physician determines 
that a particular phosphate binder is clinically best for a particular 
patient, the ESRD facility is obligated to make that drug available to 
the patient. In the CY 2011 ESRD PPS final rule, we specifically stated 
that we expect ESRD facilities to provide the appropriate medications, 
at the appropriate dosage, based upon individual patient needs. We 
expect the patient's nephrologist and the interdisciplinary team to 
identify medication needs in accordance with the individual patient's 
plan of care (75 FR 49038). CMS will be closely monitoring drug 
utilization at the beneficiary and facility level for these types of 
issues.
    Comment: Coalitions of dialysis organizations, a professional 
organization of nephrologists and drug manufacturers commented that 
complying with state pharmacy laws for the distribution of phosphate 
binders is an additional cost. For example, these commenters noted that 
some states, like Alabama and Arkansas, do not allow ESRD facilities to 
distribute oral drugs directly to the patients, so there are additional 
contracting costs incurred. An LDO commented that ESRD facilities are 
limited by state rules in their ability to maintain a stock of 
medications that are dispensed to patients for consumption at home. 
They stated that CMS's recommendation that ESRD facilities could 
provide the patient with prepackaged medication when they are at the 
facility is not aligned with the reality of how ESRD facilities 
operate. They also stated that since they are not licensed to package 
medications, they will need to pay pharmacies to provide the medication 
so it can be distributed by registered nurses in their ESRD facilities 
to their patients. This fee is not included in the ASP, and the 
commenter stated that they will incur additional costs.
    Another coalition of dialysis organizations commented that ESRD 
facilities are working diligently to stand up contracting and 
procurement agreements with manufacturers, distributors, mail-order 
pharmacies, and other entities to facilitate these changes to the 
payment system. The coalition notes that each provider must ensure 
compliance with federal rules as well as state pharmacy laws, which can 
vary significantly and prevent providers from having uniform policies 
and protocols across the country, creating inefficiencies that cannot 
be mitigated. Whether standing-up or significantly expanding these 
operations from their current, limited state to manage the phosphate 
binders, the coalition noted that ESRD facilities will need to invest 
in significant legal, administrative, and compliance staff resources to 
initiate and continuously maintain these operations going forward. The 
coalition also stated that some of their members noted that they will 
also need to help beneficiaries understand the limitations based on 
state pharmacy laws of what they can and cannot address with them about 
their prescription in the facility, as many state pharmacy laws require 
questions about prescriptions to be answered only by the pharmacist or 
prescribing clinician.
    An organization of pediatric nephrologists stated that pediatric 
hospitals providing pediatric dialysis often do not have a license to 
dispense for Medicare.
    A trade association stated that the dispensing flexibilities of 
pre-packaged mailed medications that extend to community-dwelling 
beneficiaries or contracting with external pharmacies to furnish the 
medications not dispensed during an in-center dialysis session, may not 
apply to those beneficiaries in long-term care facilities (LTCs), due 
to Federal or State nursing home regulations. In addition, this trade 
association stated that furnishing the oral-only phosphate binder 
medications to beneficiaries receiving home dialysis in a nursing 
facility will create excessive burdens on facility staff to establish 
``work-around'' processes to intake, store, and dispense these oral-
only dialysis medications in a manner different than their standard 
operating procedures for all other residents. The trade association 
wrote that such ``work-arounds'' increase the risk for missed 
medication administration and increase LTC provider operating costs, 
which may disincentivize providers from offering in-center dialysis 
room, akin to a ``den'' in a private home, or home dialysis services 
within the LTC facility, thereby limiting beneficiary care options.
    A coalition of dialysis organizations stated that CMS should ensure 
that other providers, such as SNFs, are notified of forthcoming changes 
to the ESRD PPS regarding the provision of phosphate binders and work 
with those providers to ensure a smooth transition. Coalitions of 
dialysis organizations and a nephrology nurses association requested 
additional guidance from CMS regarding the complexity of

[[Page 89143]]

phosphate binder management for ESRD patients in the SNF setting. A 
trade association also requested that CMS address how ESRD and LTC 
facilities should address the unique operational considerations related 
to the incorporation of oral-only drugs into the ESRD PPS when the 
beneficiary's current home is a LTC facility. The association requested 
CMS to explain how the oral-only phosphate binder medications for 
Medicare dialysis patients should be made available to the LTC provider 
in a manner that complies with the Federal and State LTC provider 
regulations, whether it be from the ESRD facility, mail delivery or 
through an LTC pharmacy. The same commenters wanted to know if 
assurances will be provided that the costs of these medications 
directly related to the ESRD benefit and services will not be passed on 
to the SNF. Finally, the commenter questioned what, if any, are the 
documentation needs and requirements to be exchanged between the SNF 
and the ESRD facility.
    Response: CMS expects that facilities should be prepared 
logistically for the inclusion of phosphate binders in the ESRD PPS 
bundled payment, given that the regulation establishing the current 
effective date was codified in 2016. This would include the logistics 
and contractual agreements for distributing the phosphate binders, 
whether in-center or for those patients receiving home dialysis, any 
need for increased storage due to the number of pills, and efficient 
use of ESRD facility labor. CMS is planning to hold at least two open 
door forums to inform interested parties about ESRD PPS policy and 
answer questions related to implementation of the incorporation of 
phosphate binders into the ESRD PPS bundled payment. In addition, CMS 
has a payment mailbox for incoming questions regarding the ESRD PPS 
payment policies. That mailbox address is: <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="4e0b1d1c0a1e0f17030b001a0e2d233d6026263d60292138">[email protected]</a>.
    Regarding the commenter's concerns about pediatric hospitals' 
licensure to dispense phosphate binders, we believe the commenter is 
referring to regulations that prevent certain hospital pharmacies from 
providing drugs to patients to take home. We note that we expect ESRD 
facilities would contract with a pharmacy as necessary, and this would 
be the case for hospital-based ESRD facilities as well. Some hospitals 
may not have outpatient pharmacies, as would most freestanding ESRD 
facilities, but would be able to contract with a pharmacy to make 
phosphate binders available to patients. We note that the additional 
$36.41 increase to the TDAPA amount for phosphate binders would be 
intended cover incremental operational costs associated with such a 
contract.
    CMS expects that LTC facilities will ensure that the current 
procedures they are using to supply oral drugs, such as calcimimetics, 
comply with the Federal and State LTC facility regulations. 
Accordingly, the same process should be followed for phosphate binders. 
In accordance with the statutory definition of renal dialysis services 
at section 1881(b)(14)(B)(iii) of the Act, Sec.  413.171 defines 
phosphate binders as a renal dialysis service. Renal dialysis services 
have always been included within the scope of the Part A extended care 
benefit under section 1861(h)(7) of the Act that provides for coverage 
of those services (not specified elsewhere in section 1861(h)) that are 
generally furnished by, or under arrangements made by, SNFs. However, 
dialysis services described under section 1861(s)(2)(F) of the Act may 
be unbundled when furnished by an outside dialysis supplier. Given 
this, the SNF rarely bills separately for renal dialysis services. 
Rather, such services are billed for separately under the Medicare Part 
B dialysis benefit by the outside supplier. The incorporation of oral 
only drugs did not change the existing ESRD facility CfCs or associated 
guidance for providing home dialysis services in a LTC facility. 
Currently, CMS does not plan to update the QSO 18-24 guidance. As 
explained in QSO 18-24, collaborative care planning and delineated 
division of responsibilities is critical to the successful 
implementation of a patient's dialysis plan of care.\47\ Listed below 
are the clinical areas that should be addressed in an agreement between 
an ESRD facility and LTC facility when home dialysis services are 
provided to residents of a LTC facility. This is not an exhaustive 
list, nor does it represent mandatory elements of a written agreement. 
This guidance is a resource for dialysis facilities to refer to prior 
to furnishing home dialysis care to nursing home residents. Guidance on 
clinical areas that should be addressed in an agreement include:
---------------------------------------------------------------------------

    \47\ https://www.cms.gov/files/document/qso-18-24-esrd-revised.pdf.
---------------------------------------------------------------------------

    <bullet> Methods for enabling timely communication and 
collaboration between the ESRD facility and nursing home care team;
    <bullet> Ensuring a safe and sanitary environment where the 
dialysis treatments occur;
    <bullet> Ensuring active participation of the nursing home care 
team in the development and implementation of an individualized care 
plan;
    <bullet> Delineation of patient monitoring responsibilities before, 
during, and after each treatment, ensuring any state scope-of-practice 
laws and limitations are adhered to when delineating responsibilities;
    <bullet> Processes that ensure a review of the qualifications, 
training, competency verification, and monitoring of all personnel, 
patients, and caregivers (family members or friends) who administer 
dialysis treatments in the nursing home;
    <bullet> Procedures for preparing nursing home staff to 
appropriately address and respond to dialysis-related complications and 
provide emergency interventions, as needed; and
    <bullet> Procedures to make sure that all equipment necessary for 
the resident's dialysis treatment is available and maintained in 
working condition.
    Comment: A trade association questioned if CMS intends to update 
the QSO-18-24-ESRD guidance prior to implementation to assure that both 
the ESRD facility and the LTC provider clearly understand what may need 
to be updated in their agreements, policies and procedures, and 
training needs resulting from the revised payment methodologies and the 
potential shift in how these oral-only phosphate binder medications are 
made available to the LTC provider.
    Response: The incorporation of oral-only drugs under the ESRD PPS 
will not change the existing ESRD facility CfCs or associated guidance 
for providing home dialysis services in a LTC facility. Currently, CMS 
does not plan to update the QSO 18-24 guidance. As explained in QSO 18-
24, collaborative care planning and delineated division of 
responsibilities is critical to the successful implementation of a 
patient's dialysis plan of care.
    Comment: A non-profit treatment and research center stated that 
there will be difficulty managing these medications for patients 
residing in nursing homes whether for short-term rehabilitation or as 
long-term residents. They stated that nursing homes have existing 
processes for obtaining medication for their patients which does not 
include obtaining it from ESRD facilities. The ESRD facilities will 
need to collaborate with any nursing facility in which their patients 
reside to arrange for the delivery of the medication. Further, the 
commenter stated that the nursing homes will ask for payment for the 
time their staff spend in providing the medication to the patient. They 
will need to have a pharmacist deliver the medication to the nurse 
caring for a

[[Page 89144]]

patient and then the nurse will have to provide the medication to the 
patient as prescribed.
    Response: As noted previously, renal dialysis services have always 
been included within the scope of the Part A extended care benefit 
under section 1861(h)(7) of the Act that provides for coverage of those 
services (not specified elsewhere in section 1861(h)) that are 
generally furnished by, or under arrangements made by, SNFs. However, 
dialysis services described under section 1861(s)(2)(F) of the Act may 
be unbundled when furnished by an outside dialysis supplier. Therefore, 
LTCs can provide renal dialysis services, including provision of 
phosphate binders, to their residents in an ``under arrangement'' 
agreement with an ESRD facility.\48\ Any payment arrangements, such as 
payment for the LTC staff time, with the ESRD facilities would involve 
contractual arrangements with the ESRD facility and the LTC facility. 
Alternatively, if the LTC is a Medicare-certified dialysis facility, it 
can provide renal dialysis services.
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    \48\ https://www.cms.gov/Medicare/Medicare-Contracting/ContractorLearningResources/Downloads/ja0435.pdf.
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    Comment: A coalition of dialysis organizations, a professional 
organization of nephrologists, a drug manufacturer, and a health care 
system all stated that adjusting drug supplies when a physician changes 
a patient's prescription to another product (which often occurs) is a 
cost not covered by 100 percent of ASP. In a comment from an LDO, they 
stated that their data suggests that relative to calcimimetics, 
phosphate binder prescriptions change frequently. They noted that 
approximately 23 percent of patients on a phosphate binder have a 
change in their prescription each month. The commenters stated that 
assuming mail delivery is used for appropriate patients, ESRD 
facilities will incur the cost of delivery, which in some cases may be 
more than once per month depending on the rate of prescription changes.
    Response: CMS recognizes that there may be changes in the patient's 
prescription for phosphate binders to address the patient's side-
effects from a current phosphate binder or to adjust following the 
results of laboratory testing. As a cost control measure, ESRD 
facilities could adjust the prescribed amounts to avoid additional 
mailing fees or could negotiate deeper discounted pricing from mail 
service pharmacies for long term, chronic therapies such as phosphate 
binder prescriptions. In the CY 2016 ESRD PPS final rule (80 FR 69033), 
we discussed our existing policy since the inception of the ESRD PPS 
that all renal dialysis service drugs and biological products 
prescribed for ESRD patients, including the oral forms of renal 
dialysis injectable drugs, must be reported by ESRD facilities, and the 
units reported on the monthly claim must reflect the amount expected to 
be taken during that month. We stated that ESRD facilities should use 
the best information they have in determining the amount expected to be 
taken in a given month, including fill information from the pharmacy 
and the patient's plan of care. CMS notes that Medicare does not pay 
for drugs that are not in single-use packaging that have been dispensed 
and discarded. As noted in an October 2022 review article about mineral 
bone disorders in kidney disease patients, decisions about the use and 
dose of specific phosphate binders should be based on progressive or 
persistent hyperphosphatemia.\49\ Additionally, changes in phosphate 
binder prescriptions most often occur in patients with ESRD who are new 
to dialysis \50\ and may have higher costs. CMS provides an onset 
adjustment of 32.7 percent, which is a Medicare payment adjustment for 
patients with ESRD who are eligible for Medicare during their first 120 
days of chronic renal dialysis. As noted in the CY 2011 ESRD PPS 
proposed rule (74 FR 49952) the higher costs of the new patients may be 
due to stabilization of the patient's condition, along with 
administrative and labor costs associated with the patients being new 
to dialysis.
---------------------------------------------------------------------------

    \49\ Int. J. Mol. Sci. 2022, 23(20), 12223; https://doi.org/10.3390/ijms232012223, Mineral Bone Disorders in Kidney Disease 
Patients: The Ever Current Topic.
    \50\ Expert Opinion on Drug Safety, 2022, 21(7); https://doi.org/10.1080/14740338.2022.2044472. An update on phosphate 
binders for the treatment of hyperphosphatemia in chronic kidney 
disease patients on dialysis: a review of safety profiles.
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    Comment: A coalition of dialysis organizations and a health care 
system disagreed with the language in the proposed rule that suggested 
there would be no additional labor cost incurred when phosphate binders 
are added to the ESRD PPS bundled payment. The commenters stated that 
they anticipate that adding new duties associated with the distribution 
of phosphate binders will take significant time away from existing 
patient care activities. As a result, many ESRD facilities may find 
themselves having to hire additional health care professionals and 
other staff to maintain the same level of care provided today. The 
coalition and health care facility also stated that ESRD facilities 
continue to face significant labor costs and, while the tight labor 
market has abated somewhat, hiring additional staff remains a 
significant expense. An LDO noted that CMS suggested that ESRD 
facilities can efficiently use staff time by providing patients with 
pre-packaged medication that would include medications for multiple 
days. However, the LDO, along with a coalition of ESRD facilities 
commented that this represents a new cost to ESRD facilities that is 
not accounted for in a drug's ASP. They commented that what CMS 
presents as a simple solution is the end-result of a complex system 
that will require a significant up-front and ongoing investments of 
resources and staff time. To execute CMS's suggestion, the commenters 
noted that ESRD facilities need to contract with a pharmacy to 
dispense, fill, and ``pre-package'' the medication and arrange for 
delivery to the facility in advance of each patient's scheduled 
appointment. Facility staff would need to receive, inventory, store, 
and manage medication for all their patients on-site and then ensure 
that all pharmacy processes are coordinated with scheduled patient 
appointments. The LDO stated that under Part B, phosphate binders will 
continue to be distributed through pharmacies whether those 
prescriptions are mailed to the patient or to the facility. Regardless 
of where the patient receives the prescription (facility or home), the 
burden of managing oral phosphate binders through the facility affects 
every member of the staff. The LDO stated that the ESRD facility staff 
will need to manage medication orders, call in new prescriptions, 
conduct medication management, maintain delivery logs when 
prescriptions are delivered to the facility, review and maintain refill 
requests, educate patients on usage, and manage disposal of unused oral 
medications. Because many patients will lose the low-income subsidy and 
other beneficiary protections in Part D, the LDO noted, some facility 
staff time will now be dedicated to assisting patients who have trouble 
affording their medications.
    A non-profit treatment and research center stated that not only are 
there costs incurred when their registered nurses dispense the 
medications to the patients, provide counseling about the medications 
and answer any questions patients may have, but the nurses will be 
taken away from their current patient care responsibilities to perform 
these functions, which the commenters noted will negatively impact the 
patients under their care. A health care system

[[Page 89145]]

also stated that increasing the number of pharmacies will increase the 
administrative cost of providing services and the complexity of 
tracking the drugs for the ESRD facility.
    The LDO stated that while approximately 25 percent of their patient 
population is on calcimimetic therapy, whereas approximately 70 to 80 
percent of their population is on phosphate binder therapy, CMS cannot 
assume that because ESRD facilities are managing calcimimetics, the 
infrastructure is in place to manage phosphate binders. They stated 
that there will be a significant amount of staff time devoted to 
managing phosphate binders through the ESRD facility, which will almost 
certainly be required to hire additional staff to reduce the burden on 
clinical staff. The LDO stated that these areas represent the ongoing 
costs to providers and do not include startup costs of building storage 
capacity and upgrading IT systems to accommodate changed workflow and 
new business functions.
    A coalition of dialysis organizations expressed the importance of 
medication management with ESRD patients, as they may have multiple co-
morbidities and polypharmacy, and there is a potential for medication-
related errors. This makes continuity of care and medication management 
systems important. They stated that CMS does not cover ESRD facilities' 
ongoing expenses to provide medication management for the phosphate 
binders.
    Response: CMS has carefully considered the operational 
considerations and costs raised in the comments. With respect to 
considerations for ESRD facility staffing, CMS notes that the ESRD PPS 
includes payment for staffing related to the provision of most renal 
dialysis services. However, we acknowledge that there are some areas 
such as IT synchronization and the advancements in the delivery systems 
that had not been considered, when establishing both the ESRD PPS base 
rate and the current policy for TDAPA payments at 100 percent of ASP. 
These costs were considered in formulating the increased TDAPA payment 
which is intended to account for incremental operational costs 
associated with furnishing phosphate binders. CMS does believe there 
are several strategies that ESRD facilities could employ to efficiently 
use available staff time to provide phosphate binders. There are 
parallels between the administration of phosphate binders and the 
administration of oral calcimimetics, which are also typically taken 
every day. First, we expect that patients with ESRD generally receive 
treatment for at least 3 hours per session, typically three times per 
week. We believe that during this treatment window there is generally 
staff availability to provide the patient with pre-packaged multiple-
day doses of their medication (should state law allow). Second, ESRD 
facilities could maximize the efficiency of staff time by mailing the 
prescriptions, to the extent that doing so is consistent with state 
pharmacy laws. For example, the GAO report identified that one large 
dialysis organization only mails oral prescriptions to patients' homes, 
while others mail the medication to either the ESRD facility or the 
patient's home. Third, the GAO report identified that some ESRD 
facilities outsource labor by contracting with outside pharmacies 
rather than operating their own pharmacy. By contracting with outside 
pharmacies, ESRD facilities could reduce or avoid the need to hire 
additional pharmacists and pharmacy staff to manage the volume of 
prescriptions. CMS acknowledges that these suggestions may not be fully 
applicable for LTC or SNF facilities. CMS will continue to engage and 
communicate with these facilities to ensure continuity of care and will 
continue to monitor patient outcomes under this policy change.
    Comment: A coalition of dialysis organizations stated that while 
ESRD facilities and clinical teams, such as dietitians, are involved in 
the current management of bone and mineral metabolism and 
hyperphosphatemia, the process is currently managed under the auspices 
of the prescribing physician working within the formulary confines of 
the beneficiary's Part D plan or other source of drug coverage, which 
is managed largely outside of the ESRD facility. Migration of phosphate 
binders from Part D to Part B imposes new clinical administrative 
responsibility on ESRD facilities to develop clinical protocols and 
formularies, educate their clinician partners and clinical staff, and 
manage ongoing clinical evaluation and monitoring to ensure they are 
meeting the needs of our patients on an ongoing basis to manage a class 
of drugs for which they were previously not responsible. The coalition 
stated that the development, maintenance, and ongoing clinical 
management of these processes represent significant costs to ESRD 
facilities to hire and continuously employ clinical leaders across ESRD 
facilities and educate and train clinical staff on evolving educational 
protocols and educate beneficiaries on complex clinical issues. They 
noted that although ESRD facilities certainly already employ many 
clinicians, the expansion of the bundled payment to include phosphate 
binders represents an expansion of the duties their clinical teams need 
to undertake, which will result in an expansion of their clinical 
teams. They stated that ASP would not cover any of these clinical 
operations expenses required for ESRD facilities to take on the 
responsibility of managing the phosphate binders for ESRD patients.
    Response: As discussed in the CY 2016 ESRD PPS final rule (80 FR 
69010), we issued sub-regulatory guidance that instructs ESRD 
facilities to include all composite rate drugs and biological products 
furnished to the beneficiary on the monthly claim form (Change Request 
8978, issued December 2, 2014). In CY 2015 ESRD PPS final rule (79 FR 
66149 through 66150), we discussed the drug categories that we consider 
to be used for the treatment of ESRD with the expectation that all of 
those drugs and biological products would be reported on the claim. 
Along with capturing cost to align payment with resource use, we 
expected that ESRD facilities would be aware of all renal dialysis 
service drugs and biological products being taken by their dialysis 
patients in the event of a medical adverse event during dialysis. In 
addition, the ESRD QIP includes measures for coordination of care in 
the Care Coordination domain, which accounts for 30 percent of an ESRD 
facility's Total Performance Score. The QIP also includes a reporting 
measure for dialysis events. We have heard from interested parties that 
they are aware of and manage, with the patient's physician, the drugs 
and biological products taken by their ESRD patients. Therefore, CMS 
does not believe that the management of phosphate binders done in 
conjunction with the ESRD patient's physician, represents a new 
clinical administrative responsibility.
    CMS will continue monitoring beneficiary utilization of phosphate 
binders, as well as beneficiary health outcomes that might be related 
to phosphate binder treatment, as it includes these drugs in the 
bundled payment. In addition, CMS is monitoring these metrics across 
beneficiary characteristics, including race or ethnicity and dual 
eligibility status, to ensure that vulnerable populations are not 
harmed by this change.
    Comment: A coalition of dialysis organizations commented on the 
ESRD facilities' responsibility to educate ESRD beneficiaries on an 
ongoing basis. They stated that the migration of Medicare payment for 
phosphate binders from Part D to Part B would be a significant change 
for beneficiaries.

[[Page 89146]]

For some, this change would start with ensuring they understand that 
their phosphate binders will now be managed by their ESRD facility 
rather than through their local pharmacy. However, the commenter noted 
that some beneficiaries may experience a change in their recommended 
prescription related to the change from their prior drug coverage and 
will need clinical, dietary, and social work education in support of 
that change.
    Response: Under the CfCs for ESRD facilities (73 FR 20480), the 
standard for patient education located at Sec.  494.90(d) mandates that 
the plan of care include education and training for patients and family 
members or caregivers or both, in aspects of the dialysis experience 
and dialysis management, which includes medications they are taking. 
The plan of care would include a change in a patient's recommended 
prescription and would include the need for clinical, dietary, and 
social work education in support of that change. ESRD beneficiary 
education is a longstanding CfC requirement.
    Comment: An LDO expressed appreciation of CMS's interest in 
exploring options for paying providers for costs in addition to the 
drug acquisition costs and acknowledgement that drug dispensing fees 
were included in the original bundling of oral drugs in 2011. An 
interested party requested that CMS consider the incremental 
operational costs involved when adding phosphate binders to the ESRD 
bundled payment, noting that the current proposal does not account for 
these costs, which could lead to increased financial strain on ESRD 
facilities. The commenter stated that a fair dispensing fee or a 
similar mechanism should be implemented to cover these additional 
expenses.
    An LDO and a health care system requested CMS to consider that 
payment at 100 percent of ASP is inconsistent with Part B drug payment 
generally, where providers are typically paid at 106 percent of ASP 
percent or receive additional dispensing fees for certain drugs. 
Numerous commenters agreed that CMS should finalize the TDAPA payment 
for phosphate binders at 106 percent of ASP, rather than 100 percent of 
ASP, to account for additional facility incremental operational costs. 
One LDO stated that they strongly believe the savings CMS will obtain 
from including these drugs in the ESRD PPS bundled payment will cover 
the additional costs associated with appropriately recognizing 
dispensing and other incremental operational costs. The non-profit 
dialysis organization also recommended that beginning January 1, 2025, 
CMS should begin collecting and analyzing data to inform a mid-year 
correction to the TDAPA amount if data suggest that 106 percent of ASP 
is insufficient.
    MedPAC commented that CMS should maintain its existing TDAPA policy 
to incorporate oral-only phosphate binders into the ESRD PPS. The 
commission wrote that in their comment in the CY 2019 ESRD PPS proposed 
rule, they stated that the 106 percent of ASP policy that is applied to 
many Part B drugs was developed to reimburse physicians for the cost of 
drugs that they purchase directly and commonly administer in their 
offices.\51\ MedPAC stated that while the ASP payment policy never 
stated what cost the ``+6 percent'' was intended to cover, they noted 
that payment to ESRD facilities is considerably different from payment 
to physicians. MedPAC stated that the variation in physicians' 
purchasing power, whether they practice solo, as part of a group, or in 
a health system, is likely to result in considerably more variation in 
the acquisition price for a drug compared to the acquisition prices for 
ESRD facilities. If the intent of the ``+6 percent'' was to address 
acquisition price variation, MedPAC believed that rationale was 
diminished for ESRD facilities. In their comment letter, MedPAC 
referenced their comment on the CY 2019 ESRD PPS proposed rule, that 
setting the TDAPA at 100 percent of ASP appears to be a well-founded 
policy. Further, they stated that as CMS explained when the agency 
reduced the TDAPA amount for calcimimetics in CY 2020 from 106 percent 
of ASP to 100 percent of ASP, setting the payment level with the 
average sales price of the drug limits the financial burden on 
beneficiaries and taxpayers.
---------------------------------------------------------------------------

    \51\ Medicare Payment Advisory Commission.2018. MedPAC comment 
on CMS's proposed rule on the end-stage renal disease payment system 
for CY 2019. https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-letters/08312018_esrd_cy2019_dme_medpac_comment_v2_sec.pdf.
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    Response: As discussed previously, CMS agrees with MedPAC that the 
106 percent of ASP policy was developed to reimburse physicians for the 
cost of drugs and that the TDAPA is an add-on payment adjustment to the 
ESRD PPS base rate, which already accounts for the cost of storage and 
administration of renal dialysis drugs and biological products. 
However, we also recognize that there are incremental operational costs 
with inclusion of phosphate binders into the ESRD PPS, that were not 
factored into the original payment policy. As described later in this 
section, CMS is making a provision for an increase in the calculation 
of the amount for the TDAPA for phosphate binders through a flat rate 
addition for two years to account for these unforeseen incremental 
operational costs.
    Comment: A hospital association requested that CMS pay ESRD 
facilities for the costs associated not only with drug acquisition, but 
also with storing, managing and distributing oral drugs that are not 
consumed with the treatment. An LDO noted that in the proposed rule, 
CMS suggests that payment for phosphate binders at 106 percent of ASP 
may be appropriate for the 2-year TDAPA period. The LDO and a drug 
manufacturer agreed that this approach would be consistent with CMS 
policy for calcimimetics and would also be consistent with Part B drug 
payment policies generally. However, a non-profit treatment and 
research center stated that for some phosphate binder medications like 
sevelamer and calcium acetate, the 6 percent above ASP likely will not 
cover the costs they will have to pay to the pharmacy, much less the 
costs incurred when their registered nurses dispense the medications to 
the patients, provide counseling about the medications and answer any 
questions patients may have.
    To maintain consistency with the treatment of calcimimetics during 
their first 2 years of TDAPA, to align with the way Medicare pays for 
drugs and biological products under the Hospital Outpatient PPS's pass-
through payment policy, and to minimize administrative burden on CMS 
and ESRD facilities, multiple commenters recommend that CMS adopt the 
methodology outlined in section 1847A of the Act, which sets payment at 
the 106 percent of ASP; if ASP is not available, the payment is based 
on the Wholesale Acquisition Cost (WAC). Alternatively, an LDO urged 
CMS to use the flat rate part B supply fee for oral drugs under the 
Physician Fee Schedule as a precedent to provide the same payment 
adjustment for oral Part B renal dialysis drugs.
    MedPAC opposed the TDAPA amount based on 106 percent of ASP for 
phosphate binders in their comment and noted that when CMS reduced the 
TDAPA amount for calcimimetics in CY 2020 from 106 percent of ASP to 
100 percent of ASP, MedPAC stated that CMS explained that setting the 
payment amount at 100 percent of ASP of the drug limits the financial 
burden on beneficiaries and taxpayers.
    Response: Consistent with our discussion in the CY 2020 ESRD PPS 
final rule (84 FR 60675), we continue to

[[Page 89147]]

believe that 100 percent of ASP is a reasonable basis for payment for 
the TDAPA for new renal dialysis drugs and biological products that 
fall within an existing functional category, because there are already 
dollars in the per treatment base rate for the new drug's respective 
functional category. We further believe 100 percent of ASP is a 
reasonable basis for the TDAPA amount for new renal dialysis drugs and 
biological products that do not fall within an existing functional 
category because the ESRD PPS base rate has dollars built in for 
administrative complexities and overhead costs for drugs and biological 
products. However, we note that the original analysis in the CY 2011 
ESRD PPS final rule excluded phosphate binders, which are a 
longstanding renal dialysis service, and their associated costs, so a 
higher payment amount to capture these additional costs would be 
warranted. In addition, we believe the 106 percent of ASP payment could 
induce ESRD facilities to choose the higher priced phosphate binders 
for the higher payment rate. As detailed below, CMS is increasing the 
TDAPA amount for phosphate binders for two years in an amount similar 
to 106 percent of ASP to pay for the additional incremental operational 
costs of phosphate binder inclusion in the ESRD PPS while striking a 
balance between accessibility and efficiency and economy for the 
Medicare program.
    Comment: Numerous commenters stated that CMS should adopt a 
dispensing fee using a rate of 106 percent of ASP for phosphate binders 
to align the ESRD PPS policies with those applied to other Medicare 
providers. They stated that both the Medicare Part D and Medicaid 
programs provide for dispensing fees. Under Part D, they noted that the 
dispensing fees are set through negotiations between the plan and 
pharmacy. Medicaid amounts are significantly higher and in the range of 
$9 to $12 per prescription, which the commenter noted would translate 
into a $0.69 to $0.92 per treatment amount in the context of the ESRD 
PPS, according to an analysis cited by the commenter. The commenters 
also noted that in accordance with section 1861(s) of the Act, Medicare 
Part B includes a $24 dispensing fee, which would be approximately 
$1.85 per treatment in the ESRD PPS context. Additionally, the 
commenters stated that according to the Medicare Claims Processing 
Manual, Chapter 17, Sec.  90.4, CMS also provides a dispensing fee to 
hospital outpatient departments (HOPD) and ambulatory surgical centers 
(ASC), but relies upon 106 percent of ASP rather than a flat rate. The 
commenters stated that CMS decided to maintain the 106 percent of ASP 
policy in the HOPD and ASC settings after conducting a multi-year 
analysis of hospital cost reports. This analysis sought to determine 
the average overhead costs associated with providing drugs to patients, 
and CMS decided to adopt 106 percent of ASP as the payment amount. The 
commenters indicated that even though in the context of some HOPD/ASC 
products the add-on may result is higher payment amounts, CMS adopted 
this approach because of its administrative simplicity. Similarly, in 
these settings, the commenters stated that CMS also has adopted 106 
percent of ASP as the basis for paying for separately payable non-pass-
through drugs. One criterion a drug must meet to receive this separate 
payment is that the cost exceeds $135 per day.
    The commenters stated that adopting a 106 percent of ASP policy as 
the basis of a dispensing fee rate would also align with the treatment 
of drugs in these other payment systems. They indicated that one 
analysis of phosphate binders demonstrates that the increase in per 
treatment payment for a 30-day supply of a phosphate binder could range 
from $1.46 to $8.03. The commenters stated that these amounts are not 
significantly different than those CMS finds acceptable in the HOPD/ASC 
setting or the other dispensing fee programs.\52\
---------------------------------------------------------------------------

    \52\ MedPAC. Report to the Congress: Outpatient Dialysis 
Services (Mar. 2024).
---------------------------------------------------------------------------

    The commenters requested that CMS adopt the 106 percent of ASP 
policy that it relies upon in other parts of the Medicare program, 
which the commenters described as straightforward and transparent.
    Response: As CMS stated in the CY 2020 ESRD PPS final rule (84 FR 
60676), we believe moving from pricing methodologies available under 
section 1847A of the Act, (106 percent of ASP) to 100 percent of ASP 
for all new renal dialysis drugs and biological products regardless of 
whether they fall within an ESRD PPS functional category strikes a 
balance between the increase to Medicare expenditures (subsequently 
increasing beneficiary co-insurance) and addressing stakeholder 
concerns discussed in section II.B.1.e of the CY 2019 ESRD PPS final 
rule (83 FR 56932). As an example of how the flat addition to the TDAPA 
amount would impact beneficiary copayment when compared to 106 percent 
of ASP, if a beneficiary's monthly utilization for a given phosphate 
binder totaled $1,000 (100 percent of ASP) + $36.41= $1,036.41, the 
beneficiary co-pay would be $207.28. However, if the same phosphate 
binder were to be paid a TDAPA amount derived from 106 percent of ASP 
($1,000 * 1.06 = $1,060), then the beneficiary's copay would be $212 
($1,060 * 0.20 = $212). During the CY 2024 ESRD PPS rulemaking cycle, 
CMS indicated that it preferred to adopt policies that are less complex 
and more transparent. As noted later in this section of the preamble, 
we are finalizing the incorporation of a flat-rate add-on amount to the 
TDAPA, as allowed by section 1881(b)(14)(D)(iv) of the Act, for 
phosphate binders, which we believe reflects a similarly transparent 
and straightforward approach. We believe this fixed addition to the 
TDAPA amount for phosphate binders is relatively simple while being 
more predictable and more transparent than the requested 106 percent of 
ASP methodology, because ESRD facilities would not have their 
additional payment based on the ASP of the drug prescribed. 
Additionally, this fixed increase methodology would achieve many of the 
benefits described by commenters without incentivizing use of higher-
cost phosphate binders.
    Comment: Commenters generally agreed that payment of 100 percent of 
ASP would be insufficient to cover the incremental operational costs of 
including phosphate binders in the ESRD PPS bundled payment. In their 
comments letters, both MedPAC (citing their 2023 Report to Congress) 
\53\ and LDOs have recognized the inherent incentives that a 
percentage-based payment policy creates in encouraging use of higher 
cost drugs when less expensive therapeutic alternatives are available.
---------------------------------------------------------------------------

    \53\ Medicare Payment Advisory Commission.2023. Report to the 
Congress: Medicare and the health care delivery system. Washington, 
DC:MedPAC.
---------------------------------------------------------------------------

    A coalition for dialysis organizations recognized that utilizing 
106 percent of ASP ties the value of the dispensing fee to ASP, which 
may present issues where ESRD facility incremental operational costs 
exceed 6 percent of ASP. They stated that they understand why some 
other payment systems have instead provided fixed dispensing fees that 
are intended to reimburse for incremental operational costs independent 
of ASP and arrive at the fixed dispensing fee through different 
mechanisms, including some that are set in statute.
    Although MedPAC did not support setting the TDAPA amount at 106 
percent of ASP to account for dispensing fees, which are intended to 
cover reasonable costs that are directly

[[Page 89148]]

related to providing the drug,\54\ MedPAC did state in the comment that 
there is no consensus on the original intent of the percentage add-on 
to ASP. MedPAC stated that if CMS elects to include a dispensing fee in 
the TDAPA for phosphate binders, the agency should examine the 
dispensing fees for phosphate binders paid under Part D to assess if 
such data are appropriate to use under the ESRD PPS, noting that, in 
2021, the median Part D dispensing fee was $0.50 per claim for the six 
common types of phosphate binders furnished to beneficiaries on 
dialysis. In their comment letter, the Commission indicated that it has 
also found that under Part D, dispensing fees for generic drugs are 
typically a fixed dollar amount (that is, not always related to the 
price of the product), and that similar to dispensing fees paid in the 
commercial sector, Part D plans typically pay dispensing fees of $1 per 
claim or less.\55\ As an alternative to 106 percent of ASP, the LDOs, 
coalitions of dialysis organizations and the professional association 
of nephrologists would also support, and there is precedent for, a flat 
rate addition to the ASP. One LDO recommended a flat fee instead of a 
percentage of the cost of the medication. The LDO stated that 
dispensing expenses do not fluctuate based on the cost of the 
medication. The commenter estimated that dispensing fees would be 
roughly $11 and shipping fees would be approximately $15 per 
prescription. Other commenters stated that for certain conditions, 
Medicare Part B covers outpatient prescription drugs and biological 
products when they are part of a physician's service or used with 
covered durable medical equipment. For those drugs, Medicare Part B 
pays pharmacies a supply fee for each prescription. The commenters 
referred to 42 CFR 414.1001 and stated that pharmacies are paid $24 for 
the first 30-day period, and $16 for each subsequent 30-day period. On 
a per treatment basis, this would equate to approximately $1.23 to 
$1.85 when a patient receives 13 treatments in a month. Commenters 
suggested that CMS should recognize that under Part B, ESRD facilities 
will be required to pay for these pharmacy services.
---------------------------------------------------------------------------

    \54\ Under 42 CFR 423.100, dispensing fees are costs incurred at 
the point of sale in excess of the ingredient cost of a covered Part 
D drug. Dispensing fees include pharmacy costs such as checking 
insurance status, performing quality assurance, physical delivery, 
special packaging, and salaries of pharmacists and other pharmacy 
workers as well as the costs associated with maintaining the 
pharmacy facility and acquiring and maintaining technology and 
equipment.
    \55\ The Commission's calculation is based on Part D 
prescription drug event data from CMS. According to our stakeholder 
interviews, this amount is in line with most commercial insurance. 
https://www.medpac.gov/wpcontent/uploads/2023/10/Generic-prices-Part-D-April-2024-SEC.pdf.
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    Response: CMS has reviewed all of the comments regarding 
implementation of the inclusion of phosphate binders in the ESRD PPS 
bundled payment. In the CY 2016 ESRD PPS final rule, we stated that for 
at least 2 years we will pay for the existing oral-only drugs--
phosphate binders and calcimimetics--using the TDAPA, which will be 
calculated based on the payment methodologies under section 1847A of 
the Act (80 FR 69027), which can include 106 percent of ASP. Following 
finalization of the CY 2016 ESRD PPS final rule, the regulation at 
Sec.  413.234(c)(2) stated the TDAPA is paid until sufficient claims 
data for rate setting analysis for the new injectable or intravenous 
product is available, but not for less than two years. In the CY 2019 
ESRD PPS final rule CMS stated that to balance the price controls 
inherent in any PPS we believe that we needed to take numerous issues 
into consideration to revise the basis for TDAPA payment. These issues 
included the use of the best available data, the avoidance of use of 
the highest price drugs for higher payment, and cost-sharing for 
beneficiaries. We noted that we are, and will continue to be, conscious 
of ESRD facility resource use and recognize the financial barriers that 
may be preventing uptake of innovative new drugs and biological 
products.
    Therefore, we proposed to revise Sec.  413.234(c) under the 
authority of section 1881(b)(14)(D)(iv) of the Act, to reflect that we 
would base the TDAPA payments on 100 percent of ASP instead of the 
pricing methodologies available under section 1847A of the Act (which 
includes 106 percent of ASP)(83 FR 56943-56944).
    As we discussed previously, we believe that a flat increase to the 
TDAPA amount for phosphate binders would be most appropriate. We 
believe an increase in the payment adjustment amount that approximates 
6 percent of ASP would provide the appropriate payment for incremental 
operational costs associated with ESRD facilities furnishing phosphate 
binders. We considered the differences in the availability of data for 
calculating the appropriate TDAPA amount for calcimimetics and 
phosphate binders. Prior to the TDAPA payment for calcimimetics in CY 
2018, only those ESRD beneficiaries with Part D had access to the oral 
calcimimetic, Sensipar, but there was no utilization data for the 
injectable calcimimetic, Parsabiv, which would serve as a substitute 
for the oral calcimimetic. However, CMS was able to obtain data on 
phosphate binder utilization among ESRD PPS beneficiaries who had Part 
D coverage for phosphate binders to estimate expenditures, and there is 
no injectable phosphate binder for which we do not have utilization 
data. Therefore, with the knowledge of utilization of phosphate binders 
in Part D, coupled with the percentage of ESRD PPS beneficiaries who do 
not have Part D coverage, we believe we have adequate data to be able 
to calculate an appropriate amount to pay the TDAPA for phosphate 
binders for at least two years. Taking into account the estimates that 
were put forth by the commenters for the incremental operational costs 
to the ESRD facilities for supplying the phosphate binders to the ESRD 
facilities, along with our use of the Part D data, we have determined 
that a fixed amount derived from 6 percent of ASP of a monthly weighted 
average of the six most common phosphate binders based on past Part D 
utilization data best aligns payment with resource use and mitigates 
the incentive to use of the most expensive phosphate binders to obtain 
higher TDAPA payment and ultimately a higher dollar addition to the 
ESRD PPS base rate at the end of the TDAPA period. This aligns with the 
commenters' suggestions of using a flat rate adjustment instead of 106 
percent of ASP. We are finalizing a flat rate increase to the TDAPA 
amount for phosphate binders, derived from 6 percent of the weighted 
average of Medicare expenditures for phosphate binders per month under 
Part D, for the first two years of TDAPA payment to ESRD facilities. 
The CY 2025 flat rate increase to the TDAPA amount will be $36.41. This 
payment adjustment is included for every monthly ESRD PPS claim that 
includes phosphate binders. We will consider changes to this amount 
through future rulemaking if appropriate; for example, this amount 
could be recalculated derived from the best available updated data for 
the second year of TDAPA payment for phosphate binders, potentially 
utilizing data from Part B.
    Additionally, we are finalizing regulatory language at 
413.234(c)(4), which states that we would pay an increased amount 
through the TDAPA for phosphate binders for two years. The increase to 
the TDAPA amount would be the equivalent of the monthly weighted 
average of 6 percent of ASP, calculated for each of the first two years 
of TDAPA payment for the phosphate binders.
    Comment: Coalitions of dialysis organizations, a professional 
organization of nephrologists and a non-profit treatment and research 
center

[[Page 89149]]

stated that, due to the 2 percent reduction in Medicare FFS payments 
under sequestration, 100 percent of ASP equates to roughly ASP minus 
1.6 percent, which the commenters stated does not cover the cost of 
acquiring phosphate binders. They commented that many medium and small 
ESRD facilities do not have the economies of scale and must purchase 
drugs at a significant percentage above the ASP. As a result, 100 
percent of ASP is actually less than the acquisition cost of these 
drugs and will have a negative financial impact on these ESRD 
facilities. A non-profit treatment and research center noted that since 
the ASP is reduced by 1.6 percent because of the sequestration cuts, 
the gap between resource use and payment is even greater. A 
professional organization of dialysis providers and an LDO stated that 
Medicare only pays 80 percent of costs. For patients who are dual 
eligible receiving Medicaid, this remaining 20 percent goes 
unreimbursed, which, following sequestration, equates to 78.4 percent. 
Similar results would occur for patients without a secondary insurance 
if they are unable to pay the remaining 20 percent cost-sharing amount. 
An LDO asserted that for patients without secondary insurance, only 60 
percent of the nonpayment is covered by bad debt.
    Response: We appreciate the commenters' concerns about payment 
adequacy; however, we noted that these concerns generally fall outside 
the scope of ESRD PPS policy. Sequestration is a mandatory spending 
reduction that affects Medicare Part B payments broadly, including 
payments under the ESRD PPS.\56\ Reductions in Medicare payments due to 
sequestration fall outside the scope of the ESRD PPS policy and are 
required under the Budget Control Act of 2011 (BCA; P.L. 112-25). In 
addition, the 20 percent beneficiary copayment amount is required by 
statute, and we did not propose any changes to this amount. Section 
1833 of the Act governs payments of benefits for Part B services and 
the cost sharing amounts for services that are considered medical and 
other health services. In general, many Part B services are subject to 
a payment structure that requires beneficiaries to be responsible for a 
20 percent coinsurance after the deductible (and Medicare pays 80 
percent). With respect to renal dialysis services furnished by ESRD 
facilities to individuals with ESRD, under section 1881(b)(2)(A) of the 
Act, Medicare pays 80 percent of the total amount per treatment and the 
individual pays 20 percent (74 FR 50005). Some dual eligible 
beneficiaries could have their coinsurance reimbursed via Medicaid in 
some circumstances.\57\
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    \56\ A general description of Medicare sequestration from the 
Congressional Research Service is available at https://sgp.fas.org/crs/misc/R45106.pdf.
    \57\ https://www.cms.gov/outreach-and-education/medicare-learning-network-mln/mlnproducts/downloads/medicare_beneficiaries_dual_eligibles_at_a_glance.pdf.
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    Similarly, we did not propose any changes to the ESRD PPS bad debt 
policy, which is also dictated by statute. For instance, we have long 
interpreted Title I, section 153(b)(4) of MIPPA as providing that bad 
debt payments are available only for covered services under the 
composite rate.\58\ In addition, section 1861(v)(1) of the Act, 
implemented at Sec. Sec.  413.89 & 413.215(b), imposes certain 
reductions in the amount of bad debts otherwise treated as allowable 
costs which are attributable to deductibles and coinsurance amounts. 
Currently, general requirements and policies for payment of bad debts 
attributable to unpaid Medicare deductibles and co-insurance are found 
in chapter 3 of the Provider Reimbursement Manual, Part 1 (PRM) (CMS 
Pub. 15-1) and cost reporting worksheets and instructions in the PRM 
Part 2 (CMS Pub. 15-2).
---------------------------------------------------------------------------

    \58\ See the November 17, 2004 Decision of the Administrator 
(https://www.cms.gov/Regulations-and-Guidance/Review-Boards/OfficeAttorneyAdvisor/Downloads-3/2004-D43.pdf) and Medicare Benefit 
Policy Manual, Chapter 11, Sec.  80 (https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/bp102c11.pdf).
---------------------------------------------------------------------------

    We acknowledge that some ESRD facilities may pay more or less than 
ASP for renal dialysis drugs and biological products that they 
purchase, since ASP represents an average, but we note that payment of 
the TDAPA based on ASP is consistent with the principles of prospective 
payment underlying the ESRD PPS more broadly. As stated earlier in this 
final rule, we are finalizing an increase to the TDAPA amount for 
phosphate binders to account for certain administrative costs not 
included in the ESRD PPS base rate, but this increase is not intended 
to account for sequestration costs, beneficiary copayment amounts, or 
bad debts.
    Comment: Coalitions of dialysis organizations requested that CMS 
address what they consider to be a gap in the current Medicare guidance 
to support including phosphate binders into the ESRD PPS bundled 
payment. Specifically, regarding the reporting of oral drugs, the 
coalition notes that the current Medicare Benefit Policy Manual states 
that for oral or other forms of renal dialysis drugs that are filled at 
the pharmacy for home use, ESRD facilities should report one line item 
per prescription, but only for the quantity of the drug expected to be 
taken during the claim billing period.\59\ A non-profit treatment and 
research center stated that patients will be given all of their 
medications at one time, presumably a few days before the start of a 
new month. They noted that if a patient misplaces the medication, they 
will need to obtain a new supply from the ESRD facility. Since the ESRD 
facility is not paid for the lost medication, the lost medication will 
cost the ESRD facility significant money. The commenter also stated 
that the doses prescribed for these medications depend on blood tests 
which are performed monthly, typically during the mid-week dialysis 
treatment of the first week of the month. The results become available 
a few days later and are then reviewed by nephrologists who may 
prescribe dose changes in phosphate lowering medication or may 
prescribe a different phosphate lowering medication. In that case, the 
ESRD facility would have to provide the patient an additional supply of 
medication and would have to pay additional fees to the pharmacy. In 
the event the medication is changed, the facility would again not be 
paid for the unused medication. A professional organization of 
nephrologists stated that ESRD facilities absorb the costs of unused 
medications when patients are hospitalized, transfer to other 
facilities, die, or receive a kidney transplant. A coalition of 
dialysis providers provided additional illustrative examples of when 
the current payment policy does not work financially for ESRD 
facilities, including patient hospitalization or when the patient is on 
vacation over 30 days, patient death and changes in ESRD facility. To 
align the reporting and payment with similar provisions for hospitals 
and skilled nursing facilities (SNFs), coalitions of dialysis 
organizations referred to the Medicare Claims Processing Manual, 
Chapter 17, Sec.  90.4 and requested that CMS require reporting on 
claims of one of the following:
---------------------------------------------------------------------------

    \59\ Medicare Benefit Policy Manual Chapter 11--End Stage Renal 
Disease Sec.  20.3.C.
---------------------------------------------------------------------------

    <bullet> Both the quantity of the drug expected to be taken during 
the claim billing period and any unused quantity of drug that was 
prescribed under a prescription that was later revised.
    <bullet> The total amount of the drug provided during the claim 
billing period.
    The coalition of dialysis providers claimed that these changes 
would alleviate the financial losses to ESRD

[[Page 89150]]

facilities. The commenter stated that these changes do not need to be 
included in the CY 2025 final rule but can be done through guidance 
prior to the end of CY 2024 to apply to the forthcoming inclusion of 
phosphate binders in the ESRD PPS bundled payment to limit unnecessary 
losses for an already strained payment system. The commenter also 
stated that making these changes to the billing rules is also necessary 
for CMS to have accurate utilization data of the phosphate binders 
during the TDAPA period for the purpose of future rate setting 
exercises. The commenter believes that without these changes, not only 
will ESRD facilities experience real-time losses due to circumstances 
outside their control, but those losses will be baked into depressed 
utilization data used to update the base rate after the end of the 
TDAPA period for the phosphate binders, locking those losses into the 
ESRD PPS in perpetuity. In addition, the commenter noted that other 
providers, including hospitals, pharmacies and skilled nursing 
facilities, are all permitted by Medicare to submit claims for the full 
prescription dispensed in good faith to the beneficiary. They requested 
that CMS align the ESRD PPS billing policies with that of other health 
care providers rather than imposing what they characterized as unique 
and unnecessary burdens on a fragile payment system serving the most 
vulnerable patients.
    Response: CMS thanks the commenters for their recommendations. Per 
the regulation at Sec.  413.198(b)(5), each ESRD facility must submit 
data and information of the types and in the formats established by CMS 
for the purpose of estimating patient-level and facility-level 
variation in resource use involved in furnishing renal dialysis 
services. At Sec.  413.198(b)(5)(ii), this includes information 
reported on ESRD PPS claims about the total number of billing units (or 
the expected number of billing units), for renal dialysis drugs and 
biological products provided to beneficiaries for use while receiving 
home dialysis services as defined in Sec.  413.217(b), which includes 
home dialysis services, support, and equipment as identified in Sec.  
410.52, to be included in the ESRD PPS effective January 1, 2011.
    As we noted previously in this section, in the CY 2016 ESRD PPS 
final rule (80 FR 69033), we discussed our existing policy since the 
inception of the ESRD PPS that all renal dialysis service drugs and 
biological products prescribed for ESRD patients, including the oral 
forms of renal dialysis injectable drugs, must be reported by ESRD 
facilities, and the units reported on the monthly claim must reflect 
the amount expected to be taken during that month. We did not propose a 
change to the reporting requirements regarding the drugs expected to be 
taken during the claim billing period and any unused quantity of that 
drug that was prescribed under a prescription that was later revised, 
along with the total amount prescribed during the billing period. 
However, we thank the commenter for their suggestions and will take the 
commenter's suggestions into consideration in future rulemaking. 
Discarded drugs or biological products that are not in single use 
containers or single dose packaging are not billable under the ESRD 
PPS.\60\ Similarly, we believe it would be most appropriate to make a 
future modification to the ESRD PPS base rate, if warranted, based on 
actual phosphate binder utilization and not discarded amounts. We 
expect that ESRD facilities will employ strategies to reduce discarded 
amounts of phosphate binders, which best serves the interest of 
efficient resource use and is consistent with the goals of the ESRD 
PPS.
---------------------------------------------------------------------------

    \60\ In the CY 24 ESRD PPS final rule, we finalized a new policy 
to require the use of the JW or JZ modifier on claims to track 
discarded amounts of single-dose container and single-use package 
renal dialysis drugs and biological products paid for under the ESRD 
PPS, effective January 1, 2025 (88 FR 76346, 76383-76386).
---------------------------------------------------------------------------

    Comment: A coalition of dialysis organizations recommended that CMS 
should amend the cost reports and update billing and payment policies 
in advance of the TDAPA period for phosphate binders. The current ESRD 
Facility Cost Report revision includes one line item for the TDAPA and 
one line item for the TPNIES. At the time this was implemented, there 
was only one drug receiving the TDAPA and one supply item receiving the 
TPNIES. At present and in the coming years, the commenter expects there 
will be multiple drugs and devices receiving the TDAPA and the TPNIES 
in the same year. The commenter stated that CMS and other policymakers 
would find it important and useful to be able to track costs associated 
with individual products receiving the TDAPA and TPNIES rather than 
have them reported in the aggregate. The commenter recommended that CMS 
add several line items for each of the TDAPA and TPNIES reporting 
sections and provide instructions that each product receiving the TDAPA 
or the TPNIES are to be reported separately on their distinct line-
items. The commenter stated that CMS should also ensure that ESRD 
facilities have clear instructions for reporting the TDAPA for 
phosphate binders during the TDAPA period and that facilities have 
clear instructions for reporting the phosphate binders after they are 
bundled into the base rate after the end of the TDAPA period. The 
commenter stated that it is imperative that CMS amend the cost report 
and instructions in advance of the launch of the TDAPA period and end 
of the TDAPA period to ensure the integrity of dialysis facility cost 
reporting.
    Further, the coalition requested CMS to make changes to billing 
procedures to make it easier for ESRD facilities to identify the 
correct TDAPA and TPNIES payments to report on the cost report. At 
present, they state that when CMS pays a claim that includes the TDAPA 
or TPINIES, ESRD facilities simply receive one payment for the adjusted 
base rate plus the TDAPA or TPNIES amount. The TDAPA or TPNIES is not 
indicated on a separate line item by CMS. The coalition stated that 
while the ESRD PPS is a bundled payment system with a standardized base 
rate, most claims are adjusted based on a dozen patient and facility 
characteristics. As a result, the commenter stated that to accurately 
report TDAPA and TPNIES payments on the Cost Report, ESRD facilities 
need to crosswalk each reimbursement to relevant patient claims or 
medical records to identify those for whom TDAPA or TPNIES payment was 
requested, then determine if and at what amount the TDAPA or TPNIES was 
paid, noting that the TDAPA and TPNIES payment amount fluctuates over 
the course of the year, and then report those figures on the cost 
report on an ESRD facility basis. For some ESRD facilities this is a 
manual, and not an automated exercise. The commenter requested that CMS 
amend billing and payment procedures to flag TDAPA and TPNIES payments 
separately on an itemized report so that ESRD facilities can more 
effectively and efficiently identify and flag these items for accurate 
reporting onto the Cost Report.
    Response: CMS thanks the commenters for their suggestions regarding 
the cost reports. We are currently evaluating changes to the ESRD PPS 
cost reports and will take these suggestions into consideration for 
future cost report modifications.
    Comment: A drug manufacturer questioned why the phosphate-lowering 
agent XPHOZAH[supreg] is receiving disparate treatment from phosphate 
binders with respect to the TDAPA. The drug manufacturer stated that 
they view CMS as treating XPHOZAH[supreg] similar to a phosphate binder 
for the purposes of inclusion in the ESRD PPS bundled payment, but 
different from a phosphate

[[Page 89151]]

binder for the purposes of a potential increase to the ESRD PPS base 
rate after the end of the TDAPA period.
    Response: Existing Medicare regulations state that effective 
January 1, 2025, oral-only drugs will be paid for under the ESRD 
Prospective Payment System (PPS). Although oral-only drugs are not 
included in the ESRD PPS bundled payment until January 1, 2025, they 
are currently recognized as renal dialysis services as defined in 
regulation. Accordingly, CMS is planning to incorporate oral-only drugs 
into the ESRD PPS bundled payment beginning January 1, 2025, using the 
TDAPA, as described in the calendar year (CY) 2016 ESRD PPS final rule 
(80 FR 69027) and subsequent rules. In the CY 2022 ESRD PPS final rule 
(87 FR 67179) we stated that we finalized and issued the payment 
policies for oral-only renal dialysis service drugs or biological 
products in the CY 2011 ESRD PPS final rule (75 FR 49038 through 
49053). In that rule we defined renal dialysis services at Sec.  
413.171 as including other drugs and biologicals that are furnished to 
individuals for the treatment of ESRD and for which payment was made 
separately prior to January 1, 2011, under Title XVIII of the Act, 
including drugs and biologicals with only an oral form. Although we 
included oral-only renal dialysis service drugs and biologicals 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 ESRD PPS until January 1, 2014. In the CY 2011 
ESRD PPS proposed rule (74 FR 49929), we noted that the only oral-only 
drugs that we identified were phosphate binders and calcimimetics, 
specifically, cinacalcet hydrochloride, lanthanum carbonate, calcium 
acetate, sevelamer hydrochloride, and sevelamer carbonate. All of these 
drugs fall into the ESRD PPS functional category for bone and mineral 
metabolism. In the manufacturer's press release on October 17, 2023, 
they noted that XPHOZAH[supreg] is a phosphate-lowering therapy, and it 
is not a phosphate binder.\61\
---------------------------------------------------------------------------

    \61\ https://ir.ardelyx.com/news-releases/news-release-details/fda-approves-xphozahr-tenapanor-first-class-phosphate-absorption.
---------------------------------------------------------------------------

    As for the commenter's concern regarding CMS's treatment of 
XPHOZAH[supreg] with respect to a potential increase in the ESRD PPS 
base rate after the end of the TDAPA period, we note that we have been 
consistent in treating XPHOZAH[supreg] as an oral-only drug that is 
considered included in the ESRD PPS base rate because it falls within 
the bone and mineral metabolism ESRD PPS functional category. 
XPHOZAH[supreg] is a renal dialysis service under the definition at 
Sec.  413.171 and is to be included in the ESRD PPS bundled payment 
effective January 1, 2025, according to Sec.  413.174(f)(6). Any other 
oral renal dialysis drug or biological product without an injectable 
equivalent or other form of administration would also be included in 
the ESRD PPS bundled payment effective January 1, 2025. We note that 
XPHOZAH[supreg], should it apply for the TDAPA, would receive the same 
consideration and treatment as other renal dialysis drugs and 
biological products in existing ESRD PPS functional categories which 
are considered included in the ESRD PPS base rate. In the CY 2016 ESRD 
PPS final rule we explained that we would modify the ESRD PPS base rate 
after the end of the TDAPA period only for calcimimetics and phosphate 
binders, but that we would not follow this process for any other 
potential future oral-only drugs in the bone and mineral functional 
category or any other functional category, as calcimimetics and 
phosphate binders were the only two drugs for which 2007 utilization 
data was available at the time the ESRD PPS base rate was first 
developed for which payment was delayed (80 FR 69025). In particular, 
the intention behind CMS's policy is that funds would be added to the 
base rate to account for phosphate binders because the costs associated 
with phosphate binders would have been included in the initial 
calculation of the base rate in CY 2011 if not for CMS's (and 
subsequently congress') decision to temporarily delay their inclusion. 
However, the delay was always with the intention that the costs would 
eventually be included in the ESRD PPS base rate. This is not true of 
other drugs or biological products that were not in use in the 
timeframe analyzed for the initial development of the ESRD PPS base 
rate, but that are considered included in the base rate because they 
fall within an existing functional category.
    From a policy perspective, the ESRD PPS bundled rate is intended to 
encourage efficient resource use, and CMS therefore only would add 
funds, if appropriate, to the base rate for drugs that have a new 
function not accounted for when the initial base rate was developed or, 
in the case of calcimimetics and phosphate binders, that were intended 
to be included at the time the base rate was first developed but were 
temporarily excluded. As discussed previously, XPHOZAH[supreg] is not a 
phosphate binder (nor is it a calcimimetic), so under our established 
methodology it would be treated in the same way as all other new drugs 
(80 FR 69027). We note that any specific considerations regarding 
modification of the ESRD PPS base rate to account for phosphate 
binders, such as whether to incorporate data from drugs or biological 
products with a similar end-action effect that may be a substitute for 
phosphate binders, will be made through notice and comment rulemaking 
in the future. We will consider the commenter's suggestions related to 
how the ESRD PPS treats new renal dialysis drugs and biological 
products in existing functional categories which are considered 
included in the base rate for potential future rulemaking related to 
TDAPA and other payment policies under the ESRD PPS.
    Comment: Some commenters expressed support for a delay for the 
inclusion of either oral-only drugs and biological products or 
phosphate binders, in the ESRD PPS bundled payment. We received 110 
form letters from unique submitters that did not relate to policies 
proposed in the CY 2025 ESRD PPS proposed rule, but rather expressed 
support for -draft legislation that would delay the inclusion of 
certain oral-only drugs and biological products into the ESRD PPS 
bundled payment. One drug manufacturer requested CMS refrain from 
incorporating phosphate-lowering therapies into the ESRD PPS in January 
2025. The drug manufacturer suggested that CMS should respond to 
stakeholder concerns regarding access issues and public health data on 
harms to patients.
    Response: We did not propose any changes to Sec.  413.174(f)(6) to 
modify the date of the incorporation of the oral-only drugs into the 
ESRD PPS. We note that in the CY 2011 ESRD PPS final rule we stated 
that the delay in incorporating oral-only drugs into the ESRD PPS 
bundled payment would allow additional time to address several issues 
including the following: the determination of oral-only drug pricing 
and utilization; adequate beneficiary education; assessment of 
potential problems which may arise in connection with the provision of 
oral drugs prior to the system's expansion to include oral-only drugs; 
analysis regarding the ability of ESRD facilities to provide oral-only 
ESRD drugs; and, evaluation of indicators applicable to the monitoring 
of certain patient conditions treated with oral-only drugs, such as 
bone loss and mineral metabolism associated with the provision of 
calcimimetics and

[[Page 89152]]

phosphate binders, which could assist in determining the impact of the 
fully bundled ESRD PPS, and any unintentional consequences that might 
ensue, on quality of care (75 FR 49043 through 49044). CMS has actively 
been engaged in addressing the aforementioned issues since that rule 
was finalized 13 years ago in preparation for inclusion of the oral-
only drugs into the ESRD PPS. Our data analysis has shown that because 
not all ESRD PPS beneficiaries have had Part D coverage some have 
lacked equal access to either calcimimetics or phosphate binders. 
Inclusion in the ESRD PPS bundled payment provides patients access to 
all the drugs and biological products in all the ESRD PPS functional 
categories, including those included in the bone and mineral metabolism 
functional category, averting potential harm to those Medicare 
beneficiaries currently lacking access to some of those drugs and 
biological products.
    Comment: A coalition for dialysis organizations recommended that 
CMS should align MA and ESRD PPS policies in advance of the TDAPA 
period for phosphate binders and future inclusion of phosphate binders 
in the ESRD PPS base rate to ensure MA beneficiaries will receive 
necessary medication.
    Response: With respect to MA, per section 1852(a)(1) of the Act and 
its implementation regulations (42 CFR 422.100 and 422.101(a)), 
Medicare Advantage organizations (MAOs) must cover items and services, 
including drugs, for which benefits are available under Parts A and B 
in the Traditional Medicare program, subject to limited exclusions. We 
note that phosphate binders are not subject to the limited exclusions 
at section 1852(a)(1) of the Act and, therefore, must be covered by 
MAOs. Specifically, in accordance with section 1852(a)(1) if the Act 
and 42 CFR 422.100 and 422.101(a), and as noted in \62\ section 10.4 of 
chapter 4 of the Medicare Managed Care Manual,\63\ MAOs must provide 
coverage of, by furnishing, arranging for, or making payment for, 
generally all services that are covered by Part A and Part B of 
Medicare and that are available to beneficiaries residing in the plan's 
service area. Services may be provided outside of the service area of 
the plan if the services are accessible and available to enrollees. In 
addition, with respect to coverage of Traditional Medicare benefits 
such as Part B drugs, MAOs must comply with applicable Medicare 
statutes, regulations, national coverage determinations (NCDs) and 
local coverage determinations (LCDs) of Medicare contractors with 
jurisdiction for claims in the geographic area in which services are 
covered under the MA plan (42 CFR 422.101(b)). In general, an MA plan 
that offers Part D benefits (MA-PD) must determine whether payment for 
the drug is allocated under Parts B or D, consistent with Traditional 
Medicare and Part D program drug coverage policies (see Appendix C, 
Attachment II, Question 5 of Chapter 6 \64\ Medicare Prescription Drug 
Benefit Manual for additional detail). Concerning how Part D sponsors 
will determine whether a drug is covered under Part B, it is important 
to keep in mind that in most cases Part B drug coverage should not 
impact payment decisions by Part D sponsors since Part B coverage is 
generally in a provider setting or physician's office rather than for 
drugs dispensed at a pharmacy. A Part D sponsor cannot deny payment for 
a particular drug on the basis that it is covered under Part B in some 
instances and Part D in others unless there is Part B coverage as the 
drug is prescribed and dispensed or administered in that particular 
instance. The fact that a claim is received for a drug that is 
sometimes covered by Part B is not a basis for denial since the Part D 
sponsor would have to determine whether the drug is being prescribed 
and dispensed or administered on the basis under which Part B coverage 
is available. This will generally involve interaction between the Part 
D sponsor and the Medicare Part B contractor with jurisdiction in that 
geographic area for that drug. Regarding new drugs, as decisions are 
made nationally or by individual A/B MAC contractors, this information 
will be available on the CMS and contractor websites. MA-PD coordinated 
care plans must coordinate all benefits administered by the plan with 
respect to drugs for which payment as so prescribed and dispensed or 
administered to an individual may be available under Part A or Part B, 
or under Part D (42 CFR 422.112(b)(7)). As a result of the rules and 
regulations described here, MAOs must cover oral-only ESRD drugs under 
their plans, as these are drugs under Part B and are not subject to the 
limited exclusions under section 1852(a)(1) of the Act.
---------------------------------------------------------------------------

    \63\ https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/chapter4-final-may2012_0.pdf
    \64\ https://www.cms.gov/medicare/prescription-drug-coverage/prescriptiondrugcovcontra/downloads/part-d-benefits-manual-chapter-6.pdf.
---------------------------------------------------------------------------

    Final Rule Action: After consideration of all the comments 
received, we agree with commenters that there are additional costs 
associated with ESRD facilities furnishing phosphate binders that are 
not currently included in the ESRD PPS base rate and that were not 
addressed when the ESRD PPS base rate was developed in CY 2011. This 
differentiates phosphate binders from other drugs and biological 
products in existing ESRD PPS functional categories, which justifies a 
change to the TDAPA policy, as phosphate binders were excluded from the 
analysis performed for the CY 2011 ESRD PPS final rule due to a lack of 
data available at the time of rulemaking. Consistent with past 
policies, we consider drugs and biological products in existing ESRD 
PPS functional categories to be included in the ESRD PPS base rate. The 
ESRD PPS base rate includes money for the costs, such as dispensing 
fees, associated with furnishing other drugs (in existing functional 
categories) paid for using the TDAPA. We are finalizing to pay the 
TDAPA for phosphate binders at 100 percent of ASP, increased by a fixed 
amount calculated at an amount that we believe most appropriately 
approximates 6 percent of ASP. For CY 2025, as utilization data and ASP 
reporting are currently unavailable, we are finalizing to use the 
weighted average of Medicare expenditures for phosphate binders per 
month under Part D for all phosphate binders used in a month, based on 
estimates for CY 2025 phosphate binder utilization using utilization 
patterns in CY 2023 among Part D eligible beneficiaries. For CY 2025, 
this amount is $36.41, which will be added to any monthly claim for 
which there is a TDAPA payment for phosphate binders. For CY 2025 and 
2026, the TDAPA amount for a phosphate binder is based on 100 percent 
of ASP plus an additional amount based on 6 percent of per-patient 
phosphate binder spending derived from utilization and cost data.
    We are finalizing two changes to Sec.  413.234(c) to codify this 
change in TDAPA policy for phosphate binders. First, we are amending 
paragraph (c) to note that we would not pay the TDAPA at 100 percent of 
ASP in this circumstance by adding in language which reads ``except as 
provided in paragraph (c)(4) of this section.'' Second, we are adding 
paragraph (c)(4) which reads: ``For calendar years 2025 and 2026, the 
transitional drug add-on payment adjustment amount for a phosphate 
binder is based on 100 percent of ASP plus an additional amount based 
on 6 percent of per-patient phosphate binder spending derived from 
utilization and cost data.'' As discussed previously, for calendar year 
2025, the additional amount is estimated based on the weighted

[[Page 89153]]

average of Medicare expenditures for phosphate binders per month under 
Part D for all phosphate binders used in a month, derived from 
estimates for CY 2025 phosphate binder utilization using utilization 
patterns in CY 2023 among Part D eligible beneficiaries. . We intend to 
reevaluate this amount in rulemaking next year; for example, for 
calendar year 2026, we may consider updating the additional amount 
quarterly derived from the actual phosphate binder utilization and ASP 
reported under Medicare Part B in the most recently available quarter, 
if appropriate.
d. Expected Impact of Incorporation of Oral-Only Drugs
    We anticipate that the incorporation of oral-only drugs into the 
ESRD PPS will increase access to these drugs for beneficiaries. We 
estimate that there will be an increase in Medicare spending as a 
result of this increase in access. Specifically, CMS has been 
monitoring and analyzing data regarding beneficiary access to Medicare 
Part D drugs; increases in expenditures for renal dialysis drugs paid 
under Medicare Part D; health equity implications of varying access to 
Medicare Part D drugs among patients with ESRD; and ESRD facility 
behavior regarding drug utilization. We have seen that incorporating 
Medicare Part D drugs into the ESRD PPS has had a significant positive 
effect of expanding access to such drugs for beneficiaries who do not 
have Medicare Part D coverage, with significant positive health equity 
impacts. For example, based on the results of our ESRD PPS monitoring 
analyses, in December 2017, prior to incorporation of calcimimetics 
into the ESRD PPS bundled payment, utilization was at 28.97 percent for 
African American/Black beneficiaries but went up to 35.31 percent in 
January 2018 and eventually to 39.04 percent in at the end of the TDAPA 
period for calcimimetics in December 2021. This 10.07 percentage point 
increase in utilization reflects the significant access improvement for 
African American/Black beneficiaries of incorporating formerly oral-
only drugs into the ESRD PPS.
    Lastly, as part of the preparation for the inclusion of phosphate 
binders into the ESRD PPS, CMS has monitored Part D utilization of, and 
spending for, phosphate binders. We have developed budgetary estimates 
of the changes in Medicare Part B and Part D spending, which are 
discussed in section VII.C.1 of this final rule.
8. Changes to the Low-Volume Payment Adjustment (LVPA)
a. Background on the LVPA
    Section 1881(b)(14)(D)(iii) of the Act provides that the ESRD PPS 
shall include 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. Therefore, the ESRD PPS provides a facility-level payment 
adjustment to ESRD facilities that meet the definition of a low-volume 
facility.
    Under Sec.  413.232(b), a low-volume facility is an ESRD facility 
that, based on the submitted documentation: (1) furnished less than 
4,000 treatments in each of the 3 cost reporting years (based on as-
filed or final settled 12-consecutive month costs reports, whichever is 
most recent, except as specified in paragraphs (g)(4) and (5)) 
preceding the payment year; and (2) has not opened, closed, or received 
a new provider number due to a change in ownership (except where the 
change in ownership results in a change in facility type or as 
specified in paragraph (g)(6)) 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.
    In addition, under Sec.  413.232(c), for purposes of determining 
eligibility for the LVPA, the number of treatments considered furnished 
by the ESRD facility equals the aggregate number of treatments 
furnished by the ESRD facility and the number of treatments furnished 
by other ESRD facilities that are both under common ownership with, and 
5 road miles or less from, the ESRD facility in question. To receive 
the LVPA, an ESRD facility must submit a written attestation statement 
to its Medicare Administrative Contractor (MAC) confirming that it 
meets the requirements as specified in Sec.  413.232 and qualifies as a 
low-volume ESRD facility. For purposes of determining eligibility for 
the LVPA, ``treatments'' mean total hemodialysis equivalent treatments 
(Medicare and non-Medicare). For peritoneal dialysis patients, one week 
of peritoneal dialysis is considered equivalent to three hemodialysis 
treatments (80 FR 68994). Section 413.232(e) generally imposes a yearly 
November 1 deadline for attestation submissions unless extraordinary 
circumstances justify an exception and specifies exceptions for certain 
years where the deadline is in December or January. The November 1 
attestation timeframe provides 60 days for a MAC to verify that an ESRD 
facility meets the LVPA eligibility criteria (76 FR 70236). The ESRD 
facility would then receive the LVPA for all the Medicare-eligible 
treatments in the payment year. Once an ESRD facility is determined to 
be eligible for the LVPA, a 23.9 percent increase is applied to the 
ESRD PPS base rate for all treatments furnished by the ESRD facility 
(80 FR 69001).
    In the CY 2011 ESRD PPS final rule (75 FR 49118 through 49125), we 
finalized the methodology used to target the appropriate population of 
ESRD facilities that were low-volume facilities based on a treatment 
threshold. After consideration of public comments, we originally 
established an 18.9 percent adjustment for ESRD facilities that furnish 
less than 4,000 treatments annually and indicated that this increase to 
the base rate would encourage small ESRD facilities to continue 
providing access to care.
    In the CY 2016 ESRD PPS proposed rule (80 FR 37819), we analyzed 
ESRD facilities that met the definition of a low-volume facility under 
Sec.  413.232(b) as part of the updated regression analysis and found 
that these ESRD facilities still had higher costs compared to other 
ESRD facilities. A regression analysis of low-volume facility claims 
from CYs 2012 and 2013 and cost report data indicated a multiplier of 
1.239; therefore, we proposed an updated LVPA adjustment factor of 23.9 
percent in the CY 2016 ESRD PPS proposed rule (80 FR 37819) and 
finalized this policy in the CY 2016 ESRD PPS final rule (80 FR 69001). 
This update was implemented budget neutrally alongside numerous other 
changes to the case-mix and facility-level adjusters. In CY 2022, 352 
ESRD facilities received the LVPA. Using the most recent available data 
for CY 2023, the number of ESRD facilities receiving the LVPA was 330.
    In the CY 2021 ESRD PPS final rule (85 FR 71443), we finalized a 
policy to allow ESRD facilities flexibility for LVPA eligibility due to 
the COVID-19 Public Health Emergency (PHE). Under Sec.  413.232(g)(4), 
for purposes of determining ESRD facilities' eligibility for payment 
years 2021, 2022, and 2023, we only considered total dialysis 
treatments for any 6 months of their cost-reporting period ending in 
2020. In the CY 2024 ESRD PPS final rule (88 FR 76344), we finalized 
changes to the LVPA regulation at Sec.  413.232 that allow ESRD 
facilities affected by disasters and other emergencies to qualify for

[[Page 89154]]

exceptions to certain eligibility requirements for the LVPA. Facilities 
may close and reopen if they experience an emergency, or they may 
temporarily exceed the 4,000-treatment threshold if they take on 
additional patients displaced by an emergency and still qualify for the 
LVPA.
(1) Current Issues and Concerns
    As discussed in the CY 2025 ESRD PPS proposed rule, interested 
parties, including MedPAC and the GAO,\65\ have recommended that we 
make refinements to the LVPA to better target ESRD facilities that are 
critical to beneficiary access to dialysis care in remote or isolated 
areas.\66\ These groups and other interested parties have also 
expressed concern that the strict treatment count used to determine 
eligibility introduces a ``cliff-effect'' that may incentivize ESRD 
facilities to restrict their patient caseload to remain below the 4,000 
treatments per year for the LVPA threshold.\67\
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    \65\ https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/jun20_ch7_reporttocongress_sec.pdf.
    \66\ https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-summary-report-april-2021.pdf.
    \67\ https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-summary-report-april-2021.pdf.
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    We considered several changes to the LVPA eligibility criteria to 
address the concerns that interested parties, including the GAO and 
MedPAC, raised about targeting LVPA payments to ESRD facilities that 
are necessary to protect access to care and are not located near other 
ESRD facilities. Specifically, these interested parties requested that 
we take into consideration the geographic isolation of an ESRD facility 
within the LVPA methodology. Section 1881(b)(14)(D)(iii) of the Act 
requires that the LVPA must reflect 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. Our analysis found that isolated low-
volume facilities do not face higher costs than other low-volume 
facilities. Therefore, we stated in the CY 2025 ESRD PPS proposed rule 
that we do not believe that this requested change reconciles with the 
central statutory requirements and limitations for the LVPA, and we 
stated that we are considering alternative approaches, including 
potentially addressing this issue through a new payment adjustment 
separate from the LVPA based on section 1881(b)(14)(D)(iv) of the Act. 
We noted in the proposed rule that we are analyzing claims and cost 
data regarding dialysis treatment levels and cost to inform options for 
potentially tailoring our methodology to meet the requirements of the 
statute, while simultaneously collecting additional data on geographic 
isolation of ESRD facilities. The ESRD PPS has separate facility-level 
payment adjustments for low-volume facilities, as set forth in 42 CFR 
413.232, and facilities in rural areas, as set forth in Sec.  413.233. 
To avoid overlap with these existing facility-level adjustments, we 
stated that we are analyzing the impact of potentially creating a new 
payment adjustment and considering innovative methodological options, 
such as the local dialysis need methodology on which we requested 
information in the CY 2024 ESRD PPS proposed rule (88 FR 42441 through 
42445).
    In addition, interested parties expressed that the eligibility 
criteria for the LVPA are very explicit and leave little room for 
flexibility in certain circumstances (85 FR 71442). Some also viewed 
the attestation process as burdensome to ESRD facilities and believed 
it may discourage participation by small ESRD facilities with limited 
resources that would otherwise qualify for the LVPA.\68\ Given these 
concerns, we considered alternative approaches to the LVPA that would 
reduce burden, remove negative incentives that may result in gaming, 
and better target ESRD facilities that are critical for beneficiary 
access.
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    \68\ https://www.cms.gov/files/document/end-stage-renal-disease-prospective-payment-system-technical-expert-panel-summary-report-april-2021.pdf.
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    CMS's contractor has held three Technical Expert Panels (TEPs) to 
discuss potential refinements to the ESRD PPS.\69\ During the 2018, 
2019, and 2020 TEPs, panelists, including representatives from ESRD 
facilities, independent researchers, patient advocates, and 
representatives from professional associations and industry groups (86 
FR 36397), discussed limitations of the current LVPA methodology and 
potential alternatives. In the CY 2022 ESRD PPS proposed rule, we 
included a RFI to inform LVPA payment reform (86 FR 36398 through 
36399). All fourteen responses to the CY 2022 ESRD PPS RFI for LVPA 
wrote in support of either eliminating or revising the current LVPA or 
rural facility adjustment.\70\ One small dialysis organization within a 
large non-profit health system responded that it is reliant upon the 
LVPA and the rural facility adjustment and supports both adjustments, 
albeit with modifications. MedPAC renewed its support for a new Low-
Volume and Isolated (LVI) adjustment with a recommendation for a three-
tiered approach for treatment thresholds, which would incorporate 
geographic isolation into its methodology and may disincentivize 
gaming. MedPAC called upon CMS to provide clear and timely criteria for 
ESRD facility eligibility and ensure the LVPA methodology is 
transparent. In concurrence with MedPAC, a coalition of dialysis 
organizations, three large dialysis organizations (LDOs), a non-profit 
kidney organization, and a provider advocacy coalition commented that 
the rural facility adjustment should be eliminated and a LVI 
methodology should be adopted, as they considered a methodology based 
upon census tracts to be both complicated and lacking transparency. 
Numerous commenters wrote in support of a tiered adjustment to mitigate 
the cliff effect and gaming. Commenters raised concerns regarding the 
reliance of the census tract methodology used by the rural facility 
adjustment upon `driving time' as a data measure, noting this presents 
legitimate equity issues. ESRD facilities that have relied upon both 
the LVPA and rural payment adjustments to remain operational expressed 
opposition to elimination of either adjustment.\71\
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    \69\ https://www.cms.gov/medicare/medicare-fee-for-service-payment/esrdpayment/educational_resources.
    \70\ https://www.cms.gov/files/document/cy-2022-esrd-pps-rfi-summary-comments.pdf.
    \71\ The materials from the TEPs and summary reports can be 
found at https://www.cms.gov/medicare/medicare-fee-for-service-payment/esrdpayment/educational_resources.
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    In the CY 2022 ESRD PPS proposed rule LVPA RFI, we sought input on 
alternative approaches to the LVPA methodology (86 FR 36398 through 
36399).\72\ Specifically, we requested input on--(1) whether a 
distinction other than census tract information should be considered; 
and (2) what criteria should be used to determine the threshold(s) of 
adjusted latent demand (in treatment counts) which determine LVPA 
eligibility. Additionally, we explored the LVI adjustment that MedPAC 
recommended in its June 2020 Report to Congress. Under the LVI 
methodology, a determination that a facility is low volume and isolated 
would be based on that facility's distance from the nearest facility 
and its total treatment volume. Regarding the LVI methodology, we 
requested input on the concerns for facilities that would lose the LVPA 
under the LVI methodology and the potential for gaming within the LVI 
methodology. In

[[Page 89155]]

addition, we requested input regarding the extent that the LVI 
methodology captures more isolated (and most often rural) facilities, 
and whether a separate rural facility adjustment should be maintained. 
As previously discussed, our most recent analysis of cost report data 
does not support the claim that isolated low-volume ESRD facilities 
face higher costs than non-isolated ESRD facilities; therefore, the LVI 
methodology would not adhere to the statutory requirement for the LVPA 
set forth at section 1881(b)(14)(D)(iii) of the Act.
(2) CY 2024 RFI on Potential Changes to the LVPA
    In the CY 2024 ESRD PPS proposed rule (88 FR 42430 through 42544), 
we issued a RFI regarding several possible modifications to the current 
LVPA methodology.\73\ We provided commenters the option of maintaining 
a single LVPA threshold, establishing LVPA tiers, or utilizing a 
continuous function. We received 23 comments in response to the RFI, 
all of which had differing opinions. A coalition of dialysis 
organizations recommended a two-tiered approach, while MedPAC 
reiterated their support for a LVI adjustment. A common theme among a 
handful of comments was concern about administrative burden and 
transparency regarding the methodology that is chosen. Most commenters 
believed that the issue of payment cliffs is substantial, but many did 
not believe any of the options presented in the RFI could successfully 
eliminate gaming completely. CMS will continue to consider these 
comments to potentially inform future rulemaking.
(3) CY 2024 RFI on the Rural Facility Adjustment
    We have considered several changes to the LVPA eligibility criteria 
to address the concerns that the GAO and MedPAC raised about targeting 
LVPA payments to ESRD facilities that are necessary to protect access 
to care and are not located near other ESRD facilities. As previously 
discussed, we do not believe the suggestion to consider facilities' 
geographic isolation reconciles with the central statutory requirements 
and limitations for the LVPA, and we are considering alternative 
approaches, including potentially addressing this issue through a new 
payment adjustment separate from the LVPA based on section 
1881(b)(14)(D)(iv) of the Act.
    The LVPA and rural adjusters currently result in increased payments 
to some geographically isolated ESRD facilities, but these adjusters do 
not specifically target geographically isolated ESRD facilities. 
Interested parties, including MedPAC and the GAO, have recommended that 
CMS make refinements to the LVPA and rural adjusters to better target 
ESRD facilities that are critical to beneficiary access to dialysis 
care in remote or isolated areas. The GAO and MedPAC, among others, 
have also raised concerns about targeting LVPA payments to ESRD 
facilities that are not located near other ESRD facilities to protect 
access to care.
    In the CY 2024 ESRD PPS proposed rule's LVPA RFI (88 FR 42441 
through 42445), we solicited comments on a potential new payment 
adjustment that accounts for isolation, rurality, and other 
geographical factors, including local dialysis need (LDN). The LDN 
methodology, as described in the CY 2024 ESRD PPS proposed rule (88 FR 
42430 through 42544), would consider LDN instead of basing payment 
strictly upon a rural designation, as provided for by Sec. Sec.  
413.233 and 413.231(b)(2). In the CY 2024 ESRD PPS proposed rule's LVPA 
RFI, we suggested the utilization of census tracts to identify 
geographic areas with low demand, then calculating latent demand by 
multiplying the number of beneficiaries near (``near'' was defined by 
driving time to ESRD facilities) an ESRD facility by the average number 
of treatments for ESRD beneficiaries. The threshold to qualify for the 
LVPA could then be applied by determining the amount of adjusted latent 
demand. The ESRD facilities that fall below the threshold would be 
eligible. The statutory requirements for the LVPA under section 
1881(b)(14)(D)(iii) of the Act generally would not allow for CMS to 
account for geographic isolation outside of the extent to which low-
volume facilities face higher costs in furnishing renal dialysis 
services than other facilities, and preliminary analysis found that, in 
general, low-volume facilities that are rural, isolated, or located in 
low-demand areas did not have higher costs than low-volume ESRD 
facilities overall. Because of this, the LDN methodology would be 
implemented under the authority in section 1881(b)(14)(D)(iv) of the 
Act, which states that the ESRD PPS may include such other payment 
adjustments as the Secretary determines appropriate.
    We received 23 comments in response to the LVPA RFI, all of which 
had differing opinions.\74\ Some commenters supported eliminating the 
rural adjuster and reallocating its funds to either the LVPA or to a 
new adjustment that considers LDN. Others stated the rural facility 
adjustment should be removed, and those dollars be incorporated into 
one of the tiered LVPA methodologies. Many commenters noted that a 
LVPA, a rural facility adjustment, and a possible LDN-based adjustment 
would be redundant. A coalition of dialysis organizations stated that 
CMS's reliance on zip codes to identify rural facilities is no longer 
an adequate proxy for facilities in need, and cited data that many 
rural facilities enjoy a large patient count and positive profit 
margins. Other commenters supported the rural facility adjustment, 
explaining that it was especially appropriate in conjunction with a 
modified LVPA methodology, since under the options presented by CMS in 
the RFI, many facilities would experience significant decreases in 
payment. They claimed that the additional funds provided by the rural 
facility adjustment would protect against the closure of rural 
facilities. Several commenters expressed concern about administrative 
burden and transparency in a general sense, no matter the methodology 
chosen.
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    \74\ https://www.cms.gov/files/document/cy-2024-esrd-pps-lvpa-rfi-summary-comments.pdf.
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    Generally, commenters were opposed to a payment adjustment based on 
the LDN methodology, reiterating many of the concerns raised during the 
2020 TEP. A coalition of dialysis organizations voiced the concern that 
the LDN methodology would take away providers' ability to make 
financial decisions about their operations, since they would not be 
able to predict their eligibility for the LDN payment adjustment nor 
the amount they would receive. They maintained that the LDN may not 
target the appropriate facilities and could provide opportunities for 
gaming. The coalition also claimed that the central issue faced by 
these facilities is low patient count, which they stated that the LDN 
methodology would not recognize, and thus the adjustment could be 
provided to facilities that are isolated, but have high patient counts, 
and are not in need of an additional payment adjustment. A coalition of 
dialysis organizations and a non-profit dialysis association both 
stated that the current LVPA provision to aggregate the treatments of 
facilities under common ownership that are not at least 5 miles apart 
is an important feature that discourages gaming, one that is not 
included in the LDN methodology. Furthermore, the coalition noted that 
the LDN methodology would lack stability, given that patient location 
varies over time. MedPAC suggested that if the LDN were adopted, CMS 
should ensure that the methodology is transparent; for example, making 
the

[[Page 89156]]

specifications and results for the regression equation available on 
CMS's website and in the Federal Register. In addition, MedPAC stated 
that CMS should note how often the model would be updated, discuss how 
census tract populations changing over time would affect the stability 
of the adjustment, and how the approach would address MedPAC's 
anticipated increase in home dialysis use.
    In addition to the questions outlined in the CY 2024 ESRD PPS 
proposed rule LVPA RFI, as discussed in the CY 2025 ESRD PPS proposed 
rule, CMS has also considered incorporating isolation criteria into the 
rural facility adjustment, where payment of the adjustment could be 
limited to ESRD facilities that are isolated from other ESRD 
facilities, or a higher adjustment could be applied for isolated rural 
facilities than for non-isolated rural facilities. Alternatively, the 
current rural facility adjustment could be replaced by an adjustment 
based solely on isolation. We noted that recent analysis has confirmed 
that, in general, low-volume facilities that are rural, isolated, or 
located in low-demand areas did not have higher costs than low-volume 
ESRD facilities overall. This analysis aligns with suggestions from 
various commenters, including MedPAC, to refine or remove the rural 
facility adjustment to better target ESRD facilities that are critical 
to beneficiary access and are likely not being adequately targeted 
under the current methodology. However, we noted that many ESRD 
facilities which receive the rural facility adjustment are critical to 
patient access and that these ESRD facilities may be relying on the 
additional payment from the rural facility adjustment for the coming 
years. As discussed in section II.B.2.f.(2) of this final rule, we 
proposed to implement a phase-out policy for ESRD facilities that lose 
the rural facility adjustment as a result of being redesignated from a 
rural area to an urban area in the most recent CBSA delineations. We 
are not finalizing any other changes to the rural facility adjustment 
in this final rule.
b. Tiered LVPA Methodology
    The goals of the ESRD PPS (including the LVPA) are to align 
resource use with payment, advance health equity, and protect access to 
renal dialysis services for vulnerable beneficiaries in underserved 
communities, including rural and isolated communities, by increasing 
payments to certain ESRD facilities in these areas to align with their 
higher costs. As noted in the CY 2016 ESRD PPS final rule (80 FR 68967 
through 69077), we aim to target the benefit of the LVPA to facilities 
that serve the access needs of patients in remote locations. In the CY 
2022 ESRD PPS final rule (86 FR 61874 through 62026), we detailed our 
commitment to achieving equity in health care outcomes for our 
beneficiaries using the definition of equity set forth in Executive 
Order 13985,\75\ which places emphasis on individuals who belong to 
underserved communities. In the CY 2023 ESRD PPS proposed rule RFI (87 
FR 38464 through 38586), we reiterated our commitment to achieving 
equity in health care and noted that we aim to align ESRD facility 
resource use with payment. Recent feedback from interested parties 
indicates that the current LVPA payment structure may lead some ESRD 
facilities to treat fewer patients to avoid a payment cliff. Proposing 
a revised methodology that would reduce the incentive for gaming, as 
the GAO described, would help advance health equity by removing the 
incentive for some ESRD facilities to limit access to renal dialysis 
services. We would expand access through payments that incrementally 
align resource use with payment to ESRD facilities that furnish 
different volumes of treatment.
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    \75\ 86 FR 7009 (January 25, 2021). https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government.
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    In the CY 2025 ESRD PPS proposed rule, we proposed to refine the 
LVPA methodology to include two tiers based on treatment volume with 
different payment adjustments for each tier. This methodology would be 
similar to the methodology described in the CY 2024 ESRD PPS proposed 
rule RFI (88 FR 42430 through 42544), but with methodological changes 
to improve consistency in an ESRD facility's tier assignment from year 
to year.
    We analyzed cost report data from ESRD facilities to develop the 
tiered thresholds and adjustment amounts for the proposed LVPA. This 
analysis used a logarithmic regression model that controls for various 
geographical and facility level characteristics, including facility 
type and region, to estimate cost differences based on treatment 
volume. We also simulated attestation patterns by excluding a 
stratified random sample of ESRD facilities who are eligible for LVPA 
payment but do not submit LVPA attestations. This step allowed us to 
account for the fact that a portion of ESRD facilities that were within 
the treatment volume threshold routinely did not attest to meeting the 
LVPA requirements for other reasons. We analyzed numerous different 
potential tiered payment structures based on this analysis, where the 
estimated cost for the tier uses the upper bound of the treatment count 
for that tier. Based on the results of this analysis, we proposed a 
two-tiered approach; we believe the two-tiered approach is appropriate 
because it strikes a balance between simplicity for ESRD facilities, 
sufficiently large tiers to allow for treatment volume variation from 
one year to the next, and payment adequacy for current low-volume 
facilities, particularly those with the lowest volume.
    Table 9 presents our proposed two-tiered LVPA methodology, which is 
based on data from ESRD facility cost reports such that the reporting 
periods include some part of the period between January 1, 2020, to 
December 31, 2022 (that is, beginning or ending during these 3 CYs). We 
noted that we have required budget neutrality for any change to the 
LVPA methodology, so any proposed changes to the LVPA cannot increase 
or decrease total estimated ESRD PPS payments; therefore, the two sets 
of potential adjustment factors in Table 9 would be implemented budget-
neutrally. The second column presents the unscaled adjusters, which if 
implemented, would cause the ESRD PPS base rate to be reduced by a 
factor of 0.999262, or approximately $0.20, to achieve budget 
neutrality. The third column presents the adjusters scaled down by a 
factor of 0.815 to maintain the LVPA payment amount under the existing 
methodology of $26.7 million based on the expected CY 2025 LVPA 
payments. Using the scaled adjusters would maintain budget neutrality 
without lowering the ESRD PPS base rate.

[[Page 89157]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.008

    The adjustment factors in the second column are derived from the 
regression explained previously. These results indicate that facilities 
which furnish less than 3,000 treatments have costs that are 34.9 
percent higher than non-low-volume facilities, and facilities that 
furnish between 3,000 and 3,999 treatments have costs that are 22.2 
percent higher. The adjustment factors in the third column, which are 
scaled down, reflect the same relationship between the two tiers of 
low-volume facilities and non-low-volume facilities.
    We explained that we believe a two-tier scaled approach is 
appropriate because it would increase payments to facilities with the 
lowest volume while keeping payment changes contained within the LVPA. 
In CY 2016 ESRD PPS final rule (80 FR 68972 through 69004) when we last 
updated the LVPA adjustment factor, we also updated most of the 
facility-level and case-mix adjusters. At that time, it was appropriate 
to apply a budget-neutrality factor that represented all of the changes 
to the facility-level and case-mix adjusters. However, we only proposed 
changes to the LVPA in the CY 2025 ESRD PPS proposed rule (89 FR 55760 
through 55843) and believed it would be most appropriate to contain the 
changes within the current LVPA by applying a scaling factor to the 
LVPA adjusters.
    We also analyzed a three-tiered option that would include a tier 
for ESRD facilities furnishing between 4,000 and 5,000 treatments, 
which is presented in Table 10. As noted previously, we considered both 
scaled and unscaled adjustment factors, with both maintaining budget 
neutrality. Our analysis showed that the scaled, three-tiered option 
would reduce payments for facilities furnishing less than 3,000 
treatments as compared to both the current LVPA methodology and the 
proposed two-tiered scaled methodology. Because payments for facilities 
furnishing between 4,000 and 5,000 treatments would increase, payments 
for the lowest-volume facilities would need to decrease to maintain 
budget neutrality, which we did not believe would align with the goals 
of the LVPA outlined previously. We explained that if we were to 
propose a three-tiered option, we believe budget neutralizing the base 
rate rather than scaling the adjustment factors would better align with 
these goals. Our analysis shows that an unscaled three-tiered 
adjustment would result in a $0.99 reduction to the base rate. We 
sought comment on our proposed scaled, two-tier proposal and on the 
alternative three-tier LVPA structure. We noted that, should this 
alternative be finalized, we would make changes to Sec.  413.232(b)(1) 
to reflect the increased LVPA threshold of 5,000. As discussed further 
in the next subsection, we also proposed to determine an ESRD 
facility's LVPA tier based on the median treatment count volume of the 
last three cost-reporting years, rather than using a single year 
treatment count. Therefore, expanding LVPA eligibility to ESRD 
facilities that furnished fewer than 5,000 treatments in each of the 
past three cost-reporting years would also increase the number of ESRD 
facilities that would qualify for tier 1 and tier 2, since ESRD 
facilities which furnished between 4,000 and 4,999 treatments in one of 
the past 3 years and fewer than 4,000 (or 3,000 for tier 1) in the 
other 2 years could qualify in these tiers.
[GRAPHIC] [TIFF OMITTED] TR12NO24.009


[[Page 89158]]


c. Final Changes to the LVPA for CY 2025
    We proposed a two-tiered LVPA using the scaled adjusters presented 
in the second column of Table 9. ESRD facilities that fall into the 
first tier (those that furnish fewer than 3,000 treatments) would 
receive a payment adjustment of 28.4 percent. Those that fall in the 
second tier (those that furnish 3,000 or more treatments but fewer than 
4,000 treatments) would receive a payment adjustment of 18.1 percent. 
Outside of the change to the LVPA amount, this change would not impact 
how the LVPA is applied to ESRD PPS payments.
    We stated that one potential complication with a tiered approach to 
the LVPA is that there would still be payment cliffs present between 
the tiers. This may discourage ESRD facilities from increasing their 
treatment volume in a given year, especially if it is uncertain whether 
the ESRD facility's treatment volume in future years will stay at the 
increased level. To address this, we proposed to determine an ESRD 
facility's LVPA tier based on the median treatment count volume of the 
last three cost-reporting years, rather than using a single year 
treatment count. This methodology would smooth payments over years, 
increasing stability and predictability in payments to low-volume 
facilities. We also proposed that, should a facility receive an 
exception under Sec.  413.232(g)(5) in one or more of the past three 
cost-reporting years, the median treatment count of the unaffected 
cost-reporting years would be used to make the facility's tier 
determination. We note that the median of two numbers is the average of 
those numbers, and the median of one number is that number. In the case 
that a facility does not have cost-reporting data from the last 3 years 
that are unaffected by a disaster or other emergency, we would assign 
the facility to a tier based on their last full year of unaffected 
treatment volume, assuming all LVPA eligibility criteria are met.
    We stated that we believe that the proposed median treatment 
approach would promote stability, especially for facilities whose 
treatment counts are on the margins of a tier. We also believe that the 
proposed smoothing methodology for determining the treatment volume 
tier for which an ESRD facility qualifies is better than the 
alternative of using the highest tier (in terms of treatment volume) 
for which an ESRD facility has qualified in each of the past years. For 
example, if we used the highest tier of the last 3 years and a facility 
furnishes 3,500 treatments in one of the past 3 years, it would be 
categorized as tier 2 even if it furnished fewer than 3,000 treatments 
in the other 2 years. We believe that the proposed smoothing would 
mitigate the introduction of a cliff-effect within the tiers.
    By contrast, under the proposed smoothing methodology, if the cost-
reporting data indicated that the facility furnished 2,500, 2,999, and 
3,500 treatments in the 3 years preceding the payment year, the median 
tier would be identified (tier 1 in this case), and the facility would 
(in the proposed two-tier system with scaling) receive a 28.4 percent 
payment adjustment for all of the treatments furnished during the 
payment year. We expect that any higher or lower payments from year to 
year under this policy would balance out over time without putting 
additional burden on the MACs. The structure of the proposed scaled, 
two-tier LVPA methodology is presented in Table 9, and the structure of 
the alternative three-tier unscaled LVPA methodology is presented in 
Table 10. For the purposes of comparison, we have included the scaled 
and unscaled version of both of the potential LVPA structures.
    We noted that we did not propose any changes to the methodology for 
determining eligibility for the LVPA under Sec.  413.232(b)(1), as the 
purpose of this change is to better allocate payments within the LVPA, 
not to expand the LVPA to facilities that have furnished more than 
4,000 treatments in one of the past three cost-reporting years. We 
would continue to determine eligibility for the LVPA based on a 
facility's treatment count in each of the three cost-reporting years 
preceding the payment year as set forth in Sec.  413.232(b)(1) and 
would not consider the median treatment count over that period for 
purposes of determining eligibility. Likewise, we did not propose any 
changes to Sec.  413.232(g)(5), which allows for an exception to the 
requirement at Sec.  413.232(b)(1) in the case of a disaster or other 
emergency. In the CY 2011 ESRD PPS final rule (75 FR 49030 through 
49214), we stated that we believe a 3-year waiting period serves as a 
safeguard against facilities that have the opportunity to take a 
financial loss in establishing facilities that are purposefully small. 
In response to the CY 2024 ESRD PPS proposed rule RFI (88 FR 42430 
through 42544), several interested parties commented that they believe 
CMS should maintain the 3-year attestation to determine eligibility for 
the LVPA, as it is an important safeguard against gaming. In addition, 
if we were to use the median tier methodology to determine LVPA 
eligibility, we estimate that the adjustment factors would decrease, 
because the scaling factor used to maintain budget neutrality within 
the LVPA would be smaller to account for a larger amount of ESRD 
facilities qualifying for the LVPA.
    We stated that, if finalized, the proposed median treatment count 
methodology for determining an eligible ESRD facility's LVPA tier would 
improve the stability and predictability of the LVPA by basing tier 
determination on the median treatment count of the last 3 years as 
opposed to the treatment count for each of the last 3 years, where 
facilities could be disqualified from a higher adjustment based on 
marginal changes. The proposed tiered smoothing methodology would also 
better align payment with resource use by minimizing the impact of the 
payment cliff between the LVPA tiers in a transparent and reproducible 
fashion. We solicited comments on each aspect of our proposal: (1) the 
tiered structure of the LVPA; (2) using the median treatment count 
volume to determine the LVPA payment tier for ESRD facilities that are 
eligible for the adjustment; and (3) the scaling of the adjusters to 
maintain LVPA payments at the same level. As previously discussed, we 
also considered an alternative three-tiered structure, which would have 
the effect of reducing the base rate by $0.99. We solicited comments on 
whether this alternative methodology could be more appropriate than the 
proposed methodology.
    We invited public comment on our proposal to change the LVPA 
methodology to include two tiers, use the median treatment count volume 
to determine the LVPA payment tier for eligible facilities, and to 
scale the adjusters to maintain budget neutrality without lowering the 
ESRD PPS base rate. Approximately 12 commenters including a non-profit 
dialysis organization, a non-profit kidney organization, multiple large 
dialysis organizations, a provider advocacy organization, a non-profit 
organization of ESRD networks, a non-profit kidney care alliance, a 
coalition of dialysis organizations, a small dialysis organization 
within a large non-profit health system, and MedPAC commented on the 
proposed changes to the LVPA methodology. The following is a summary of 
the public comments received on these proposals and our responses.
    Comment: Several commenters supported CMS's proposed changes to the 
LVPA methodology, agreeing that introducing two tiers would help reduce

[[Page 89159]]

the burden of payment cliffs. Some of these commenters encouraged CMS 
to continue refining the LVPA as more data becomes available, and to 
continue evaluating the impact of creating additional tiers. Nearly all 
commenters expressed support for our proposal to use the median 
treatment count volume to determine the LVPA payment tier for eligible 
facilities.
    Response: We thank commenters for their support and dedication to 
advancing health equity and protecting access to renal dialysis 
services for vulnerable beneficiaries. CMS will continue to monitor the 
ESRD PPS LVPA methodology to ensure that payments are appropriately 
aligned with resource use and adequately target low-volume facilities 
and make refinements, if appropriate, through rulemaking.
    Comment: Some commenters cited analysis suggesting that CMS may 
have underestimated the number of facilities projected to furnish more 
than 3,000 treatments during CY 2025 in the CY 2025 impact file \76\ 
and expressed concern that the adjuster amounts CMS calculated for both 
tier structures described in the CY 2025 ESRD PPS proposed rule may be 
inaccurate. Many of these commenters were also concerned that the two- 
and three-tiered structures presented in the proposed rule had the same 
adjusters despite a greater number of ESRD facilities qualifying for 
the LVPA under the three-tiered structure.
---------------------------------------------------------------------------

    \76\ The CY 2025 impact file can be found in Addendum B of the 
proposed rule.
---------------------------------------------------------------------------

    Response: The dialysis treatment counts reported in the impact 
tables in Addendum B represent Fee-For-Service (FFS) treatments 
furnished by each facility during 2023. LVPA tier assignment is based 
on facility size, which encompasses all treatments (Medicare FFS, MA, 
or non-Medicare) furnished during CYs 2020, 2021, and 2022, including 
treatments by ESRD facilities under common ownership and located within 
a 5-driving mile radius. The CY 2023 facility size information was 
considered separately from the FFS treatment during our analysis.
    The two- and three-tier LVPA structures in the CY 2025 ESRD PPS 
proposed rule appear identical as both represent estimates of expected 
cost differentials derived from a common model that measures 
association between facility size and cost. The adjusters from the 
common model are stable because they are based on the overall 
relationship between cost and volume, not on the number of tiers into 
which facilities are divided. These estimates appear in the second 
columns of Tables 9 and 10 in this final rule. However, once facilities 
are assigned to a category and payment budget neutrality is applied, 
the adjusters for the two- and three-tier proposals diverge, as shown 
by the third columns in each respective table where the adjustment 
factors are scaled to maintain total LVPA payments at the same level.
    Comment: Several interested parties expressed concern that the 
facilities in the second tier under the proposed two-tier LVPA 
methodology (furnishing between 3,000 and 3,999 treatments per year) 
would receive a lower adjustment compared to the current LVPA policy.
    Response: We maintain our belief that a two-tier scaled approach is 
appropriate, as it replaces a one-size-fits all approach with one where 
payments more closely align with cost while keeping payment changes 
contained within the population of LVPA facilities. Maintaining budget 
neutrality in this manner when transitioning to a tiered structure 
necessitates payment adjustments that differ from the current adjuster 
at each tier. Therefore, it is unavoidable that the tier 2 LVPA 
facilities receive a lower LVPA adjustment factor under the tiered 
system while holding total LVPA payments at the same level.
    We also maintain our belief that it is appropriate to implement a 
scaled approach as opposed to a budget neutrality factor applied to all 
ESRD PPS payments. We reiterate that when we last updated the LVPA 
adjustment factor in the CY 2016 ESRD PPS final rule (80 FR 68972 
through 69004), we also updated most of the facility-level and case-mix 
adjusters and applied a budget neutrality factor that represented all 
of those changes. Since we only proposed changes to the LVPA in the CY 
2025 ESRD PPS proposed rule (89 FR 55760 through 55843), we noted that 
it would be most appropriate to contain the changes within the current 
LVPA by applying a scaling factor to the LVPA adjusters.
    Comment: MedPAC supported the proposal for a two-tier LVPA for 
existing ESRD facilities as well as maintaining budget neutrality with 
respect to the current LVPA policy but expressed multiple concerns 
about extending the LVPA to new ESRD facilities. MedPAC suggested that 
the two-tier proposal is an improvement over the current policy, but 
that they ultimately support a statutory change that would replace both 
the LVPA and the rural facility adjustment with a single payment 
adjustment that considers distance to the next nearest facility and 
treatment volume. MedPAC stated that such an adjustment would eliminate 
extra payments to low-volume facilities in close proximity to another 
facility and high-volume rural facilities.
    Response: CMS appreciates the support expressed by MedPAC for the 
proposed changes to the LVPA methodology and its input on future 
refinements that could preserve access to renal dialysis services. CMS 
also shares MedPAC's concerns about extending the LVPA to new ESRD 
facilities, as this could result in decreased payment to the lowest-
volume ESRD facilities. As we discussed in the CY 2025 ESRD PPS 
proposed rule (89 FR 55760 through 55843), CMS aims to align resource 
use with payment, advance health equity and protect access to renal 
dialysis services for vulnerable beneficiaries in underserved 
communities, including rural and isolated communities, by increasing 
payments to certain ESRD facilities in these areas to align with their 
higher costs. We acknowledge MedPAC's continued support for an LVPA 
that incorporates geographic isolation but reiterate that such an 
adjustment would not be consistent with the statutory requirements for 
the LVPA unless geographic isolation is found to influence the extent 
to which low-volume ESRD facilities face higher costs, and we agree 
that such an adjustment would require a statutory change.
    Comment: Multiple commenters once again called for the elimination 
of the rural facility adjustment and for its funds to be allocated to 
support a more robust LVPA, either within the current bounds of 
eligibility or to include ESRD facilities that furnish up to 6,000 
treatments per year. Many of these commenters reiterated their support 
for MedPAC's LVI methodology and noted several concerns regarding the 
three-tier model presented by CMS in the CY 2025 ESRD PPS proposed 
rule. Some commenters stated that the three-tier model presented by CMS 
would cause substantial overlap between facilities receiving the LVPA 
and the rural facility adjustment, and that a large number of rural 
facilities are high-volume to an extent that may not warrant additional 
payment.
    Response: In the CY 2025 ESRD PPS proposed rule (89 FR 55760 
through 55843), CMS noted that recent analysis has confirmed, in 
general, that low-volume facilities that are rural, isolated, or 
located in low-demand areas did not have higher costs than low-volume 
ESRD facilities overall. This analysis broadly aligns with suggestions 
from various commenters, including MedPAC, to refine or remove the 
rural

[[Page 89160]]

facility adjustment to better target ESRD facilities that are critical 
to beneficiary access and are likely not being adequately targeted 
under the current methodology. However, CMS found that, on treatment 
weighted basis, over 65 percent of rural providers have no other 
providers in a 5-driving mile distance, and that this fraction 
increases to 83 percent for providers eligible for both the rural 
facility adjustment and the LVPA. These findings indicate that the 
overlapping payments for both the LVPA and rural facility adjustments 
are primarily going to small and isolated providers and align with our 
belief that many ESRD facilities which receive the rural facility 
adjustment are critical to patient access and may be relying on the 
additional payment from the rural facility adjustment for the coming 
years. We are not finalizing any changes to the rural facility 
adjustment at this time, but we are open to considering potential 
refinements to the definition of a rural ESRD facility in the future by 
considering alternate rural designations. Any future changes would 
consider the impact on rural ESRD facilities. Additionally, we note 
that the rural facility adjustment for the ESRD PPS is relatively small 
compared to other payment systems, at 0.8 percent, and that the 
suggested elimination of this adjustment would only account for about 
one third of the budget neutrality adjustment required for our 
alternative 3-tiered adjustment, which would expand the LVPA to ESRD 
facilities that furnish up to 5,000 treatments per year. Therefore, the 
funds currently associated with the rural facility adjustment would not 
be able to ``pay for'' expanding the LVPA to the commenter's suggested 
6,000 treatment volume threshold without a significant budget 
neutrality reduction to the ESRD PPS base rate.
    CMS also reiterates that because payments for facilities furnishing 
between 4,000 and 5,000 treatments would increase under the three-tier 
methodology presented in the proposed rule, payments for the lowest-
volume facilities would need to decrease to maintain budget neutrality, 
and we do not believe this would align with the goals of the LVPA. We 
thank the commenters who presented analysis demonstrating why the 
three-tier methodology we presented may yield decreased payment to the 
lowest-volume facilities and how alternative methodologies, including 
MedPAC's LVI methodology, could potentially yield more equitable 
payment distribution to LVPA-eligible facilities. CMS intends to 
consider the provided analyses to inform future notice and comment 
rulemaking pertaining to the LVPA methodology.
    Comment: A small dialysis organization within a large non-profit 
health system commented asking for additional clarification regarding 
the median tier calculation in the instance where a facility receives 
an exception for taking on additional patients due to a disaster or 
emergency.
    Response: In the CY 2025 ESRD PPS proposed rule (89 FR 55760 
through 55843), we proposed that, should a facility receive an 
exception under Sec.  413.232(g)(5) in one or more of the past three 
cost-reporting years, the median treatment count of the unaffected 
cost-reporting years would be used to make the facility's tier 
determination. We noted that the median of two numbers is the average 
of those numbers, and the median of one number is that number. In the 
case that a facility does not have cost-reporting data from the last 3 
years that are unaffected by a disaster or other emergency, we would 
assign the facility to a tier based on their last full year of 
unaffected treatment volume, assuming all LVPA eligibility criteria are 
met. For example, if cost-reporting data indicated that an ESRD 
facility furnished 2,500, 2,999, and 4,500 treatments in the 3 years 
preceding the payment year, but received an exception under Sec.  
413.232(g)(5) during the year it furnished 4,500 treatments, the median 
treatment count from the two prior years (2,500 and 2,999) would be 
used determine the facility's LVPA tier, which would place the facility 
in tier 1 under the proposed two-tier methodology. The facility would 
then receive a 28.4 percent payment adjustment for all of the 
treatments furnished during the payment year.
    Comment: Some interested parties commented that it is necessary to 
conduct analysis of the Pacific territories separately from the general 
Pacific census region to consider the unique costs that are exclusive 
to small island economies. The commenters cited air freight shipping 
costs, operational costs for utilities, limited availability of local 
healthcare professionals, and a lack of economies of scale as factors 
that may be raising the per-treatment costs across the Pacific 
territories. The interested parties acknowledged that CMS is barred 
from accounting for geographic isolation outside of the extent to which 
low-volume facilities face higher costs in furnishing renal dialysis 
services than other facilities, but claimed that CMS may have concluded 
that low-volume facilities that are rural, isolated, or located in low-
demand areas generally did not have higher costs than low-volume ESRD 
facilities overall without adequately considering the unique situation 
of the Pacific territories. The commenters urged CMS to refine the LVPA 
to better target isolated ESRD facilities such as those in the Pacific 
islands and requested the Secretary to consider exercising the 
authority provided under section 1881(b)(14)(D)(iv) to establish other 
payment adjustments for the Pacific territories in the case that CMS is 
unable to better target these facilities due to statutory constraints.
    Response: In the CY 2024 ESRD PPS proposed rule's LVPA RFI (88 FR 
42441 through 42445), we solicited comments on a potential new payment 
adjustment that accounts for isolation, rurality, and other 
geographical factors, including local dialysis need (LDN). CMS stated 
that the statutory requirements for the LVPA under section 
1881(b)(14)(D)(iii) of the Act generally would not allow for CMS to 
account for geographic isolation outside of the extent to which low-
volume facilities face higher costs in furnishing renal dialysis 
services than other facilities, and preliminary analysis found that, in 
general, low-volume facilities that are rural, isolated, or located in 
low-demand areas did not have higher costs than low-volume ESRD 
facilities overall. Because of this, we clarified that the LDN 
methodology could only be implemented under the authority in section 
1881(b)(14)(D)(iv) of the Act, which states that the ESRD PPS may 
include such other payment adjustments as the Secretary determines 
appropriate. Commenters were generally opposed to the LDN methodology 
for a variety of factors, and many supported MedPAC's LVI methodology 
in place of the existing LVPA and rural facility adjustments. The 
statute generally would not permit MedPAC's approach recommending 
payment directed at isolated facilities under the LVPA, and our 
preliminary analysis shows that the funds from the rural adjuster alone 
cannot support a third LVPA tier while maintaining budget neutrality 
and without decreasing payment to the lowest volume facilities. CMS is 
committed to achieving equity in healthcare outcomes for our 
beneficiaries, and we reiterate that the statutory requirement for the 
LVPA requires it reflect the extent to which low-volume ESRD facilities 
face higher costs. We intend to continue to evaluate whether geographic 
isolation is associated with higher costs for low-volume ESRD 
facilities and, should we find such evidence, we would be able to

[[Page 89161]]

consider alternative methodologies to the LVPA similar to MedPAC's LVI 
in potential future rulemaking. Should our future analysis show that 
isolated, low-volume ESRD facilities incur greater costs than other 
low-volume ESRD facilities, we would consider, if appropriate, making 
further refinements to the LVPA methodology through rulemaking. We 
recognize that the U.S. Pacific Territories are uniquely isolated 
compared to mainland ESRD facilities, so a different set of isolation 
criteria may apply distinctly to these ESRD facilities and, should they 
have higher costs than other LVPA facilities, support incorporating 
such isolation criteria into the LVPA under the current statute. 
However, we do not believe it would be appropriate to define isolation 
criteria based on predetermined ESRD facilities that we believe should 
be considered isolated. Additionally, as there are relatively few ESRD 
facilities in the U.S. Pacific Territories, any isolation criteria 
which would only identify these ESRD facilities would likely be very 
restrictive and not appropriate to be applied to the ESRD PPS overall. 
Therefore, we do not believe it would be most appropriate to address 
the higher costs that the commenter described through the LVPA. We 
intend to further consider the unique challenges and costs which are 
faced by ESRD facilities in the U.S Pacific Territories, and other 
similarly isolated places, and address these challenges and costs, if 
warranted, through an appropriate payment mechanism, such as an 
adjustment under section 1881(b)(14)(D)(iv), in potential future 
rulemaking.
    CMS appreciates the unique challenges that ESRD facilities in the 
U.S. Pacific Territories face and the higher costs that might accompany 
them. However, we note that the LVPA is generally not constructed to 
account for factors outside of the costs that ESRD facilities incur as 
a result of furnishing a small number of treatments. CMS has also noted 
that there are ESRD facilities that may be eligible for the LVPA but 
have not submitted attestations to their MACs. CMS encourages these 
facilities to attest for purposes of the LVPA as we continue to 
consider appropriate ways to support Pacific Territory facilities that 
are critical to beneficiary access to renal dialysis services.
    Final Rule Action: After considering the comments, we are 
finalizing as proposed the scaled two-tier LVPA methodology, where ESRD 
facilities that fall into the first tier will receive a payment 
adjustment of 28.9 percent and those that fall in the second tier will 
receive a payment adjustment of 18.3 percent. The structure of this 
methodology can be found in Table 11. We are also finalizing as 
proposed the tiered smoothing methodology, where an ESRD facility's 
LVPA tier will be determined based on the median treatment count volume 
of the last three cost-reporting years, rather than using a single year 
treatment count.
[GRAPHIC] [TIFF OMITTED] TR12NO24.010

    We note that the final LVPA adjusters under the two-tier 
methodology are marginally different from those presented in the CY 
2025 ESRD PPS proposed rule. The final LVPA adjusters presented in 
Table 11 reflect the use of more recent claims data in our analysis for 
this final rule, which results in changes to the scaling factor used to 
maintain total estimated LVPA payments at the same amount.
    CMS reiterates that we did not propose and are not finalizing any 
changes to the methodology for determining eligibility for the LVPA 
under Sec.  413.232(b)(1), as the purpose of the finalized changes is 
to better allocate payments within the LVPA, not to expand the LVPA to 
facilities that have furnished more than 4,000 treatments in one of the 
past three cost-reporting years. We will continue to determine 
eligibility for the LVPA based on a facility's treatment count in each 
of the three cost-reporting years preceding the payment year as set 
forth in Sec.  413.232(b)(1) and would not consider the median 
treatment count over that period for purposes of determining 
eligibility. Likewise, we did not propose and are not finalizing any 
changes to Sec.  413.232(g)(5), which allows for an exception to the 
requirement at Sec.  413.232(b)(1) in the case of a disaster or other 
emergency.
d. Summary of RFI on Improving the LVPA for New ESRD Facilities
    In the CY 2025 ESRD PPS proposed rule (89 FR 55760 through 55843), 
we sought comment on several approaches to modifying the LVPA 
methodology to ensure that payments are accurately aligned with 
resource use, adequately target low-volume facilities, and strive for 
healthcare equity for ESRD beneficiaries. We issued an RFI to seek 
feedback from the public on potential changes to the LVPA eligibility 
criteria, including the potential modification of the 3-year cost-
reporting data requirement, and what commenters believe would be the 
best way for a new low-volume ESRD facility to demonstrate or attest 
that it expects to be low-volume. We also sought information regarding 
the potential implementation of a reconciliation process for ESRD 
facilities that fail to furnish a low enough treatment volume to 
qualify for the LVPA or their predicted tier. We also questioned 
commenters about the cost differences for providers of low-volume home 
dialysis and providers of low-volume in-center dialysis, and whether 
the

[[Page 89162]]

LVPA be an appropriate pathway to support the provision of home 
dialysis through increased payment. In particular, we sought input and 
responses to the following considerations, requests, and questions:
    <bullet> Whether the LVPA or another adjustment, such as the LDN 
methodology discussed earlier, would be the most appropriate payment 
pathway to support access to renal dialysis services in areas that do 
not currently have sufficient capacity to furnish these services to all 
Medicare beneficiaries.
    <bullet> What would be the most appropriate way or ways for a new 
ESRD facility to demonstrate or attest that it expects to be low-
volume?
    <bullet> The potential for future reconciliation process as an 
appropriate accommodation for new ESRD facilities.
    <bullet> Whether a reconciliation process would be an effective 
tool for making appropriate payments to existing ESRD facilities that 
have three or more years of cost reporting data.
    <bullet> Would a reconciliation process be operationally 
straightforward and understandable for an ESRD facility that has opened 
in the past 3 years?
    <bullet> Would a reconciliation process make it more difficult for 
ESRD facilities to plan and budget for future payment years? Is this 
outweighed by the potential benefit of earlier access to the LVPA for 
these new facilities?
    <bullet> Would it be useful or feasible to implement a 
reconciliation process for ESRD facilities that have not opened in the 
past 3 years but, for whatever reason, may have furnished a low enough 
treatment volume to qualify for the LVPA?
    <bullet> Could the LVPA be changed in any way to better support 
ESRD facilities opening in underserved areas? Are there any costs 
specific to low-volume facilities for which the current LVPA does not 
account?
    <bullet> How are the costs for providers of low-volume home 
dialysis different from the costs for providers of low-volume in-center 
dialysis? Could the LVPA be an appropriate pathway to support the 
provision of home dialysis through increased payment?
    We did not receive any new feedback in response to our RFI 
regarding LVPA eligibility or the attestation process for new ESRD 
facilities. A handful of commenters reiterated their stance from the CY 
2024 ESRD PPS RFI on the LVPA. Some commenters thanked CMS for our 
consideration of public comments as we continue to refine the LVPA 
methodology. We received one comment from an LDO in response to our RFI 
regarding the cost differences for low-volume home dialysis versus in-
center dialysis providers. The comment explained that staffing dynamics 
make the 4,000-treatment LVPA threshold inapplicable for home dialysis 
programs but cautioned that a home dialysis-specific LVPA threshold may 
not address the challenges faced by low-volume home programs as the 
treatment aggregation mechanism within the LVPA disqualifies many of 
these programs due to their proximity to commonly owned in-center 
programs.
    We thank the commenters for their detailed and thoughtful comments, 
including those who responded to the RFI. While we are not responding 
to these comments in this CY 2025 ESRD PPS final rule, we intend to 
take them into consideration for future rulemaking and future policy 
development.

C. Transitional Add-On Payment Adjustment for New and Innovative 
Equipment and Supplies (TPNIES) Applications and Technical Changes for 
CY 2025

1. Background
    In the CY 2020 ESRD PPS final rule (84 FR 60681 through 60698), we 
established the transitional add-on payment adjustment for new and 
innovative equipment and supplies (TPNIES) under the ESRD PPS, under 
the authority of section 1881(b)(14)(D)(iv) of the Act, to support ESRD 
facility use and beneficiary access to these new technologies. For 
additional background on the TPNIES we refer readers to the CY 2024 
ESRD PPS final rule (88 FR 76410 through 76412).
    As indicated in Sec.  413.236(c) CMS includes the summary of each 
TPNIES application and our analysis of the eligibility criteria for 
each application in the annual ESRD PPS proposed rule and announces the 
results in the annual ESRD PPS final rule. Because we did not receive 
any applications for the TPNIES for CY 2025, no TPNIES application 
summaries, CMS analyses, or results have been included in this final 
rule.
2. Technical Changes to Sec.  413.236(b)(4) and Sec.  413.236(c)
    As part of the TPNIES eligibility requirements in Sec.  
413.236(b)(4), a covered equipment or supply must have a complete HCPCS 
Level II code application submitted, in accordance with the HCPCS Level 
II coding procedures on the CMS website, by the HCPCS Level II code 
application deadline for biannual Coding Cycle 2 for durable medical 
equipment, orthotics, prosthetics and supplies (DMEPOS) items and 
services as specified in the HCPCS Level II coding guidance on the CMS 
website prior to the particular CY. We have identified a minor error in 
Sec.  413.236(b)(4). Specifically, we inadvertently transposed the 
words orthotics and prosthetics within the DMEPOS acronym. The acronym 
was intended to read durable medical equipment, prosthetics, orthotics, 
and supplies (DMEPOS) instead of durable medical equipment, orthotics, 
prosthetics and supplies (DMEPOS).
    As described in the HCPCS Level II Coding Procedures, HCPCS Level 
II is a standardized coding system that is used primarily to identify 
drugs, biologicals and non-drug and non-biological items, supplies, and 
services not included in the CPT[supreg] code set jurisdiction, such as 
ambulance services and durable medical equipment, prosthetics, 
orthotics, and supplies (DMEPOS) when used outside a physician's 
office.
    While the HCPCS level II Coding Procedures include DMEPOS as an 
example of items for which HCPCS Level II codes are established, we 
believe that the phrase non-drug and non-biological items more broadly 
reflects all items, supplies, and services for which HCPCS Level II 
codes are established and aligns with the HCPCS Level II coding 
procedures on the CMS website. Therefore, we proposed a technical 
change at Sec.  413.236(b)(4) to remove the reference to the phrase 
durable medical equipment, orthotics, prosthetics and supplies (DMEPOS) 
and replace it with the phrase non-drug and non-biological items. We 
are also adding the word supplies. These technical changes would better 
reflect the broader category of non-drug and non-biological item coding 
in the HCPCS Level II Coding Procedures available on the CMS 
website.\77\
---------------------------------------------------------------------------

    \77\ Healthcare Common Procedure Coding System (HCPCS) Level II 
Coding Procedures. Available at: https://www.cms.gov/medicare/coding/medhcpcsgeninfo/downloads/2018-11-30-hcpcs-level2-coding-procedure.pdf. Accessed on January 16, 2024.
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    We did not receive any comments on our proposed technical changes 
to Sec.  413.236(b)(4). We are finalizing the technical changes as 
proposed at Sec.  413.236(b)(4) and also finalizing the corresponding 
edit at Sec.  413.236(c) for the same reasons that we identified for 
the proposed edit.

D. Continuation of Approved Transitional Add-On Payment Adjustments for 
New and Innovative Equipment and Supplies for CY 2025

    In this section of the final rule, we identify any items previously 
approved for the TPNIES and for which payment

[[Page 89163]]

is continuing for CY 2025. As described in the CY 2024 ESRD PPS final 
rule, no new items were approved for the TPNIES for CY 2024 (88 FR 
76431). As such there are no items previously approved for the TPNIES 
for which payment is continuing in CY 2025.

E. Continuation of Approved Transitional Drug Add-On Payment 
Adjustments for CY 2025

    Under Sec.  413.234(c)(1), a new renal dialysis drug or biological 
product that is considered included in the ESRD PPS base rate is paid 
the TDAPA for 2 years. In July 2023, CMS approved Jesduvroq 
(daprodustat) for the TDAPA under the ESRD PPS, effective October 1, 
2023. Implementation instructions are specified in CMS Transmittal 
12157, dated July 27, 2023, and available at: https://www.cms.gov/files/document/r12157cp.pdf.
    In April 2024, CMS approved DefenCath[supreg] (taurolidine and 
heparin sodium) for the TDAPA under the ESRD PPS, effective July 1, 
2024. Implementation instructions are specified in CMS Transmittal 
12628, dated May 9, 2024, and available at: https://www.cms.gov/files/document/r12628CP.pdf.
    Table 12 identifies the two new renal dialysis drugs for which the 
TDAPA payment period as specified in Sec.  413.234(c)(1) will continue 
in CY 2025: Jesduvroq (daprodustat) that was approved for the TDAPA 
effective in CY 2023 and DefenCath[supreg] (taurolidine and heparin 
sodium) that was approved for the TDAPA effective in CY 2024. Table 12 
also identifies the products' HCPCS coding information as well as the 
payment adjustment effective dates and end dates.
[GRAPHIC] [TIFF OMITTED] TR12NO24.011

    Comment: One commenter recommended that CMS monitor anemia outcomes 
with hypoxia-inducible factor prolyl hydroxylase inhibitor (HIF-PHI) 
versus erythropoiesis stimulating agent (ESA) therapy.
    Response: We thank the commenter for the recommendation and note 
that Jesduvroq (daprodustat) is a HIF-PHI.\78\ CMS engages in ongoing 
monitoring and analysis of the ESRD PPS to identify trends in 
beneficiary health outcomes. An overview of the ESRD PPS claims-based 
monitoring program is provided on the CMS website.\79\ CMS will 
continue the claims-based monitoring in CY 2025, inclusive of all drugs 
approved for the TDAPA. CMS intends to monitor anemia and 
cardiovascular outcomes among beneficiaries using Jesduvroq 
(daprodustat) and ESAs.
---------------------------------------------------------------------------

    \78\ Jesduvroq Prescribing Information. Accessed October 10, 
2024. Available at: https://gskpro.com/content/dam/global/hcpportal/en_US/Prescribing_Information/Jesdvroq/pdf/JESDUVROQ-PI-MG.PDF.
    \79\ ESRD Prospective Payment System (ESRD PPS) Claims-Based 
Monitoring Program-Overview of 2010-2022 Claims-Based Monitoring 
Program. Accessed September 13, 2024. Available at: https://www.cms.gov/medicare/medicare-fee-for-service-payment/esrdpayment/esrd-claims-based-monitoring.
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III. Final CY 2025 Payment for Renal Dialysis Services Furnished to 
Individuals With AKI

A. Background

    The Trade Preferences Extension Act of 2015 (TPEA) (Pub. L. 114-27) 
was enacted on June 29, 2015, and amended the Act to provide coverage 
and payment for dialysis furnished by an ESRD facility to an individual 
with AKI. Specifically, section 808(a) of the TPEA amended section 
1861(s)(2)(F) of the Act to provide coverage for renal dialysis 
services furnished on or after January 1, 2017, by a renal dialysis 
facility or a provider of services paid under section 1881(b)(14) of 
the Act to an individual with AKI. Section 808(b) of the TPEA amended 
section 1834 of the Act by adding a subsection (r) to provide payment, 
beginning January 1, 2017, for renal dialysis services furnished by 
renal dialysis facilities or providers of services paid under section 
1881(b)(14) of the Act to individuals with AKI at the ESRD PPS base 
rate, as adjusted by any applicable geographic adjustment applied under 
section 1881(b)(14)(D)(iv)(II) of the Act and adjusted (on a budget 
neutral basis for payments under section 1834(r) of the Act) by any 
other adjustment factor under section 1881(b)(14)(D) of the Act that 
the Secretary elects.
    In the CY 2017 ESRD PPS final rule, we finalized several coverage 
and payment policies to implement subsection (r) of section 1834 of the 
Act and the amendments to section 1861(s)(2)(F) of the Act, including 
the payment rate for AKI dialysis (81 FR 77866 through 77872 and 
77965). We interpret section 1834(r)(1) of the Act as requiring the 
amount of payment for AKI dialysis services to be the base rate for 
renal dialysis services determined for a year under the ESRD PPS base 
rate as set forth in Sec.  413.220, updated by the ESRD bundled market 
basket percentage increase factor minus a productivity adjustment as 
set forth in Sec.  413.196(d)(1), adjusted for wages as set forth in 
Sec.  413.231, and adjusted by any other amounts deemed appropriate by 
the Secretary under Sec.  413.373. We codified this policy in Sec.  
413.372 (81 FR 77965).

B. Public Comments and Responses on the Proposal To Allow Medicare 
Payment for Home Dialysis for Beneficiaries With AKI

1. Background
    In the CY 2017 ESRD PPS final rule, we indicated that we did not 
expect beneficiaries with AKI to dialyze at

[[Page 89164]]

home; therefore, the home dialysis benefit was not extended to 
beneficiaries with AKI (81 FR 77870). There were commenters who 
advocated for beneficiaries to have the option to dialyze in a home 
setting, particularly those beneficiaries who started peritoneal 
dialysis (PD) in the hospital and desired to continue PD after 
discharge. However, other commenters indicated that beneficiaries with 
AKI needed close supervision during dialysis. Additionally, some 
commenters indicated that dialysis for AKI is a short-term treatment, 
and beneficiaries would not have time to learn to administer a home 
therapy. Therefore, we finalized the AKI payment policy in the CY 2017 
ESRD PPS final rule as proposed without extending the AKI benefit to 
home dialysis beneficiaries. We indicated that we would gather data on 
the AKI beneficiary population and the extent of home training 
necessary to safely self-administer dialysis in the home, and that we 
would consider the use of home dialysis for beneficiaries with AKI in 
the future as we find that it may be beneficial for subsets of 
beneficiaries.
    In past years we have received comments regarding the site of renal 
dialysis services for Medicare beneficiaries with AKI, with the most 
recent comments received in response to the CY 2024 ESRD PPS proposed 
rule to update to the AKI dialysis payment rate (88 FR 76433). We have 
monitored data for beneficiaries with AKI and researched data in 
journal articles discussing the potential to expand dialysis for 
beneficiaries with AKI to a home setting, as noted in the CY 2017 ESRD 
PPS final rule (81 FR 77871).
    In the CY 2017 ESRD PPS final rule, we clarified that the ESRD 
Facility CfCs apply to ESRD facilities, not to ESRD beneficiaries, and 
noted that the ESRD facility CfCs would be the appropriate regulatory 
location for standards addressing care provided to beneficiaries with 
AKI in ESRD facilities. We finalized a policy that our CfCs would not 
need to be revised to address the provision of dialysis treatment to 
beneficiaries with AKI (81 FR 77871 through 77872).
    In December 2020, CMS's data contractor held a TEP that considered 
data related to utilization review and cost of AKI treatments since 
2017. The TEP solicited input regarding how reported costs align with 
realized costs of treatment for beneficiaries with AKI. During the TEP, 
participants suggested that we extend Medicare payment for 
beneficiaries with AKI to allow them to dialyze in a home setting. 
Additionally, the TEP indicated that beneficiaries with AKI could 
benefit from different treatment regimens. The TEP noted that more 
frequent, gentler dialysis with a lower ultrafiltration rate would be a 
viable option for some beneficiaries. Members of the panel commented on 
the similar treatment frequencies observed for beneficiaries with AKI 
and ESRD, stating that the payment system is currently constructed to 
facilitate the standard treatment plan for beneficiaries with AKI. 
Panelists recommended that the ESRD PPS should be flexible in terms of 
number of treatments for beneficiaries with AKI, so that those who need 
more frequent treatments are not impeded from receiving them. Panelists 
related instances of hospitals starting a patient on PD, which can be 
done frequently in the home setting, only to convert the patient to a 
more standard treatment regimen such as three in-center hemodialysis 
treatments per week before discharging the patient to a dialysis 
facility. Panelists also advocated that we provide Medicare payment for 
beneficiaries with AKI to be treated at home.
    We solicited comments regarding potentially modifying the site of 
renal dialysis services for beneficiaries with AKI and payment for AKI 
in the home setting as a RFI in the CY 2022 ESRD PPS proposed rule (86 
FR 36322, 36408). We received 16 comments from LDOs, patient advocacy 
groups, professional organizations, small dialysis organization within 
a large non-profit health system, and non-profit organizations. Most of 
the comments favored providing a payment option for beneficiaries with 
AKI to dialyze in a home setting; however, some commenters expressed 
concerns about doing so. A small dialysis organization within a large 
non-profit health system indicated that beneficiaries with AKI may have 
chronic kidney disease at a lesser stage, such as, Stage 3 or Stage 4 
chronic kidney disease (CKD) rather than ESRD; however, the AKI makes 
dialysis necessary. This commenter noted that if the AKI were to cause 
the beneficiary's underlying Stage 3 or Stage 4 CKD to progress to ESRD 
in the future, training them to use a home modality during the AKI 
episode could prepare the patient for a home modality if they are 
diagnosed as having ESRD. One LDO indicated there is evidence that PD, 
which is typically used in the home setting, is associated with better 
preservation of residual kidney function compared to hemodialysis. A 
national organization of beneficiaries and kidney health care 
professionals advocated that PD may be learned quickly, reduces rapid 
hemodynamic changes that may potentiate kidney injury and impede 
recovery, and does not require a high-risk central venous catheter to 
provide treatment. We note that these comments are specific to PD as a 
treatment modality; however, when considering such a policy we would 
include payment for both PD and hemodialysis (HD) in the home setting 
for beneficiaries with AKI, consistent with our payment policy for home 
dialysis for patients with ESRD.
    Most recently, as noted in the CY 2024 ESRD PPS final rule (88 FR 
76433), we received 10 public comments on our proposal to update the 
payment rate for renal dialysis services furnished to individuals with 
AKI. Commenters included a coalition of dialysis organizations, a non-
profit dialysis organization, a trade association, a renal product 
development company, and multiple large dialysis organizations. Most of 
the commenters requested that we allow payment for beneficiaries with 
AKI to select home dialysis modalities by changing the current policy, 
even though it was not proposed in the CY 2024 ESRD PPS proposed rule.
    In the CY 2025 ESRD PPS proposed rule, we acknowledged there have 
been concerns in the past regarding the safety of beneficiaries with 
AKI dialyzing at home (89 FR 55806). However, we explained that we 
carefully reviewed the totality of the information and evidence 
presented to the agency and now recognize that current information 
regarding beneficiaries with AKI dialyzing in a home setting supports 
more frequent dialysis at a lower ultrafiltration rate. We stated that 
the ability to dialyze at a lower ultrafiltration rate supports a 
decrease in hemodynamic fluctuation and the complications associated 
with it, which in turn support recovery of kidney function.
2. Technical Analysis
    In the CY 2025 ESRD PPS proposed rule, we noted that although there 
is only limited research regarding the use of home dialysis for the 
treatment of AKI, several studies support the use of home dialysis to 
generally improve access to dialysis and provide care that better meets 
patient needs (89 FR 55806 through 55807). We noted that many of the 
studies related to home dialysis in the AKI patient population use PD 
as the treatment modality, which we explained is consistent with 
comments received during the December 2020 TEP and comments received 
during rulemaking as noted previously. Additionally, we stated that 
data from the United States Renal Data System (USRDS) Annual Data 
Report (ADR),

[[Page 89165]]

indicated the percentage of incident dialysis patients performing home 
HD was only 0.4 percent in 2021, and a significant majority of dialysis 
patients performing home dialysis chose PD.\80\ We stated that we 
believe the choice of a home modality would be comparable in the 
beneficiary population for those with AKI as those initiating chronic 
maintenance dialysis for ESRD. However, we affirmed that payment would 
be provided for either modality of home dialysis. For example, PD was 
used frequently for patients during the COVID-19 PHE due to challenging 
situations such as supply shortages, staffing shortages, and limited 
surgical availability for the placement of a venous access. In the 
proposed rule, we noted that a multicenter, retrospective, 
observational study of 94 patients who received acute PD in New York 
City in the spring of 2020 indicated that rapid deployment of acute PD 
was feasible. We stated that the rates of death and renal recovery were 
like those of patients with AKI requiring kidney replacement therapy 
(KRT) in other cohorts. Of those who were discharged on dialysis, four 
were discharged on PD, and one was discharged on HD.\81\
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    \80\ Annual Data Report [verbar] USRDS (nih.gov), https://usrds-adr.niddk.nih.gov/2023/end-stage-renal-disease/2-home-dialysis.
    \81\ https://www.sciencedirect.com/science/article/pii/S0085253821004567.
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    We further noted that the International Society for Peritoneal 
Dialysis (ISPD) reiterated in the 2020 guidelines, updated from the 
2014 guidelines for PD in AKI, that PD should be considered a suitable 
modality for treatment of AKI in all settings. This was a strong 
recommendation from the ISPD based on evidence rated at the second 
highest level used by ISPD.\82\ Researchers found little to no 
difference between PD and hemodialysis in all-cause mortality, recovery 
of kidney function, or infection as a complication.\83\ We noted that 
this finding was augmented by an article that reviewed the resurgence 
of PD for the treatment of AKI since the COVID-19 PHE. The article 
listed cost effectiveness, low infrastructure requirements, ease of 
staff training, and more rapid recovery of renal function as benefits 
to the use of PD to treat AKI. We identified a survey of nephrologists 
from three international conferences which reported that 50.8 percent 
and 36.4 percent of respondents stated that PD was suitable for 
treating AKI in the wards and ICU, respectively. We found that PD is 
the predominant therapy used to treat pediatric patients with AKI, and 
until the mid to late 1990s was the predominant therapy to treat adults 
with AKI, but the use of this therapy has waned since the advent of 
pump driven continuous kidney replacement therapy.\84\
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    \82\ https://journals.sagepub.com/doi/10.1177/0896860820970834.
    \83\ https://pubmed.ncbi.nlm.nih.gov/29199769/.
    \84\ https://academic.oup.com/ckj/article/16/2/210/6696026.
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    We noted that most studies regarding recovery of kidney function in 
patients with AKI were based around hospitalized patients. We further 
noted that there were very limited studies suggesting that self-care 
dialysis can yield faster recovery of kidney function; however, the 
results were not conclusive.\85\ We identified that one study of 
hospitalized patients with AKI indicated that a median of 10 patients 
recovered kidney function more quickly utilizing PD.\86\ We noticed 
another study of hospitalized patients with AKI that indicated that 
while the recovery of kidney function was similar in PD and HD (28 and 
26 percent) there was a significantly shorter time to the recovery of 
kidney function for patients with AKI that utilized PD.\87\
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    \85\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4594060/.
    \86\ https://onlinelibrary.wiley.com/doi/pdfdirect/10.1111/1744-9987.12660.
    \87\ https://www.sciencedirect.com/science/article/pii/S0085253815528664.
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    We identified additional information from CMS AKI monitoring data, 
in which we found that current provision of AKI dialysis is very 
similar to the provision of ESRD dialysis. Data noted in the 2021 
Quarter 4 public use file (PUF) \88\ for AKI showed that hemoglobin for 
beneficiaries with ESRD averaged 10.6 gm/dL while the average 
hemoglobin for beneficiaries with AKI averaged 9 gm/dL. Although the 
data further suggested that beneficiaries with AKI were less likely to 
be prescribed an ESA than patients with ESRD, we identified research 
that indicated that patients using PD have a lower rate of anemia that 
those using HD. Additionally, patients receiving PD require lower doses 
of ESAs and iron than patients receiving HD.\89\ We observed that this 
might indicate that dialyzing in a home environment could be effective 
to manage anemia in beneficiaries with AKI more appropriately, as the 
USRDS ADR indicated incident patients with ESRD typically choose PD as 
a home modality over home HD.\90\ We stated that we believed that 
beneficiaries with AKI would make similar choices. Furthermore, the AKI 
PUF data showed that approximately 8 percent of beneficiaries with ESRD 
experienced incidences of fluid overload, while beneficiaries with AKI 
experienced episodes for which congestive heart failure was reported 
within 30, 60, and 90 days (which can be related to fluid overload) at 
rates of around 42 percent, 50 percent, and 53 percent, 
respectively.\91\ This data was concerning because fluid overload in 
beneficiaries with AKI can be detrimental to recovering kidney 
function. Additionally, this data supported conclusions drawn from an 
article involving the review of 1754 patients with AKI requiring 
dialysis. The article indicated that treatment protocols for patients 
with AKI were like those of incident ESRD patients despite the 
underlying differences in treatment goals. The article further 
indicated that most patients with AKI who recovered had discontinued 
dialysis without ever having been weaned from their initial dialysis 
prescription, suggesting there may be substantial opportunity to wean 
dialysis sooner.\92\ We continue to support the significant need to 
individualize the treatment of every kidney patient, but particularly 
beneficiaries with AKI, as this omission could result in a missed 
opportunity to recover kidney function.
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    \88\ https://www.cms.gov/medicare/payment/prospective-payment-systems/end-stage-renal-disease-esrd/esrd-prospective-payment-system-esrd-pps-overview-claims-based-monitoring-program.
    \89\ https://academic.oup.com/ckj/article/16/12/2493/7210548.
    \90\ Annual Data Report [verbar] USRDS (nih.gov), https://usrds-adr.niddk.nih.gov/2023/end-stage-renal-disease/2-home-dialysis.
    \91\ https://www.cms.gov/medicare/payment/prospective-payment-systems/end-stage-renal-disease-esrd/esrd-prospective-payment-system-esrd-pps-overview-claims-based-monitoring-program.
    \92\ https://journals.lww.com/jasn/abstract/2023/12000/initial_management_and_potential_opportunities_to.9.aspx.
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    We stated that we believed the proposal to provide payment for 
beneficiaries with AKI to dialyze in a home setting aligns closely with 
the CMS Strategic Pillars \93\ of expanding access, engaging the ESRD 
community by being responsive to TEPs and RFIs, and driving innovation 
to promote patient centered care. We did not have utilization data for 
beneficiaries with AKI using a home modality available, but we used the 
USRDS ADR, which indicated that disparities currently exist for self-
care dialysis in the home setting for the ESRD beneficiary population, 
with fewer African American/Black and Hispanic beneficiaries choosing a 
home dialysis modality. Additionally, fewer Medicare and Medicaid dual 
eligible

[[Page 89166]]

beneficiaries choose a home dialysis modality.\94\ We noted that the 
ability for beneficiaries with AKI to choose self-care dialysis in a 
home setting would offer a pathway to reduce these current disparities 
(insofar as the AKI population mirrors the ESRD beneficiary population) 
by promoting access to treatment, as well as removing a disparity in 
care between AKI beneficiaries and ESRD beneficiaries. We continue to 
believe it is crucial that the policy revisions to payment for AKI 
renal dialysis consider health equity and the effects on underserved 
populations. We identified that the rate of AKI was about 81 percent 
higher among African American/Black beneficiaries than among White 
beneficiaries.\95\ We noted that we had reviewed comments and concerns 
from interested parties and agreed that home dialysis could benefit 
beneficiaries with AKI. We noted that issues with fluid management 
could be managed with more frequent, gentler modalities, such as PD. We 
stated that we trusted that providing an avenue to expand treatment 
modalities would encourage individualized and patient-centered 
treatment plans for beneficiaries with AKI, for example, addressing 
anemia and ESA management. We will continue to monitor outcomes for 
beneficiaries with AKI with the expectation that AKI PUF are being 
reviewed in quality improvement efforts by ESRD facilities that provide 
services to beneficiaries with AKI.
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    \93\ https://www.cms.gov/about-cms/what-we-do/cms-strategic-plan.
    \94\ https://usrds-adr.niddk.nih.gov/2023/end-stage-renal-disease/2-home-dialysis.
    \95\ Annual Data Report [verbar] USRDS (nih.gov), https://usrds-adr.niddk.nih.gov/2023/chronic-kidney-disease/4-acute-kidney-injury.
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3. Home Dialysis Benefit for Beneficiaries With AKI
    As we explained in the CY 2025 ESRD PPS proposed rule (89 FR 
55806), we did not extend the home dialysis benefit to beneficiaries 
with AKI when we initially implemented the benefit (81 FR 77870). 
However, as discussed in the proposed rule (89 FR 55806 and 55807), we 
reviewed AKI monitoring data that showed the outcomes for anemia, ESA 
use, and fluid management are not necessarily reflective of the 
specific, individualized care, and close supervision by qualified staff 
currently required during the in-center dialysis process. We further 
noted that research demonstrated the use of PD correlated with positive 
outcomes for fluid management and a lower rate of anemia with less 
utilization of ESAs and iron. In the proposed rule we indicated that 
research related to home dialysis in the AKI patient population has 
primarily discussed results using PD as the modality; however, we would 
provide payment for either PD or HD as a home modality. We noted our 
goal was for beneficiaries with AKI to receive the necessary care to 
improve their condition, recover kidney function, and be weaned from 
dialysis treatment. We also noted that the literature exhibits a high 
correlation between the use of PD treatment for beneficiaries with AKI 
and positive outcomes for fluid management, infection rates, mortality, 
and recovery of kidney function.\96\ Additionally, we reviewed research 
that demonstrated that the use of PD to manage the care of 
beneficiaries with AKI as a result of COVID-19 was successful and that 
beneficiaries who had successfully begun a treatment regime that could 
transition from the hospital to a home modality should not have to 
change treatment to an in-center treatment modality.
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    \96\ https://pubmed.ncbi.nlm.nih.gov/29199769/.
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    We proposed, based on the current research we cited (89 FR 55806 
through 55807), to extend the home dialysis benefit as defined at 42 
CFR 410.52 to beneficiaries with AKI for either PD or HD. As discussed 
in section III.C.1 of this final rule, we proposed that the payment 
amount for home dialysis for AKI beneficiaries would be the same as the 
payment amount for in-center dialysis for AKI beneficiaries, consistent 
with payment parity within the ESRD PPS. This payment amount would be 
the ESRD PPS base rate, adjusted for geographic area, as described in 
section III.C.2 of this final rule. Additionally, as discussed in 
section III.C.3 of this final rule, we proposed to extend the training 
add-on payment adjustment for home and self-dialysis training in the 
same amount as for patients with ESRD, on a budget neutral basis. We 
proposed to revise Sec.  413.373, which currently states ``The payment 
rate for AKI dialysis may be adjusted by the Secretary (on a budget 
neutral basis for payments under section 1834(r)) by any other 
adjustment factor under subparagraph (D) of section 1881(b)(14) of the 
Act,'' by adding paragraph (a) before ``The payment rate'' that reads 
``CMS applies the wage-adjusted add-on per treatment adjustment for 
home and self-dialysis training as set forth at Sec.  413.235(c) to 
payments for AKI dialysis claims that include such training.'' We 
proposed to move the current language to paragraph (b) with a technical 
revision to add ``of the Act'' after ``section 1834(r)''. Furthermore, 
as discussed in section III.D of this final rule, we proposed changes 
to the ESRD facility CfCs that would accommodate the provision of home 
dialysis for beneficiaries with AKI and help ensure safe and high-
quality care for Medicare beneficiaries in this setting.
    We proposed to amend Sec.  410.52 to provide Medicare payment for 
the treatment of patients with AKI in the home setting. We proposed to 
revise Sec.  410.52 to read ``Medicare Part B pays for the following 
services, supplies, and equipment furnished to a patient with ESRD or 
an individual with Acute Kidney Injury (AKI) as defined in Sec.  
413.371 of this chapter in his or her home:'' by striking the words 
``an ESRD patient'' after ``to'' and adding the words ``a patient with 
ESRD or an individual with Acute Kidney Injury (AKI) as defined in 
Sec.  413.371 of this chapter'' after ``to''. We also proposed to 
revise Sec.  413.374(a) to read: ``The AKI dialysis payment rate 
applies to renal dialysis services (as defined in subparagraph (B) of 
section 1881(b)(14) of the Act) furnished under Part B by a renal 
dialysis facility or provider of services paid under section 
1881(b)(14) of the Act, including home services, supplies, and 
equipment, and self-dialysis.''
    We invited public comment on our proposal for extending the home 
dialysis benefit to beneficiaries with AKI. Approximately 27 commenters 
including LDOs; regional health systems; a home dialysis services 
provider; a coalition of dialysis organizations; a provider advocacy 
organization; a non-profit dialysis association; an advocacy group for 
people living with a serious illness; a non-profit organization of ESRD 
networks; a non-profit organization for environmental health and 
justice; a professional organization of pediatric nephrologists; a 
professional organization of nephrologists; a home dialysis stakeholder 
alliance; a national organization of patients and kidney health care 
professionals; a hospital association; a non-profit kidney care 
alliance; a non-profit kidney organization; device manufacturers; a 
patient-led dialysis organization; and ESRD patients commented on the 
proposed regulation. The following is a summary of the public comments 
received on these proposals and our responses.
    Comment: Many commenters were overwhelmingly in favor of the 
proposal to extend the home dialysis benefit to beneficiaries with AKI. 
The commenters agreed that while evidence is limited, experience from 
the COVID-19 PHE supports modifying payment policy to ensure home 
modalities would be available for appropriate patients with AKI. A 
patient with ESRD spoke to the

[[Page 89167]]

importance the proposal would have in empowering beneficiaries, in 
reducing their travel burden, and in enhancing their general quality-
of-life. A LDO expressed they were ``excited,'' and a home dialysis 
services provider expressed their ``enthusiastic support'' for the 
proposed policy change. Some commenters indicated that the proposal is 
an important step forward in mitigating health disparities. 
Additionally, some commenters expressed that providing patients with 
AKI access to home modalities, particularly PD, could support recovery 
of kidney function because of positive clinical outcomes. A few 
commenters spoke about the quality-of-life benefits and the positive 
move toward patient-centered care the proposal could generate. One 
commenter agreed that there are safety concerns surrounding home 
dialysis for beneficiaries with AKI, but that these can be mitigated 
with appropriate training. Finally, some commenters indicated that 
training beneficiaries with AKI for a home dialysis modality could be 
beneficial if the beneficiary did not recover kidney function and 
progressed to having ESRD.
    Response: CMS appreciates the support from commenters for the 
proposal to extend the home dialysis benefit with appropriate training 
to beneficiaries with AKI. We agree with commenters that extending the 
home dialysis benefit with appropriate training to beneficiaries with 
AKI could advance positive outcomes for beneficiaries who choose a home 
dialysis modality.
    Comment: A hospital association expressed confusion about the 
frequency of care received by chronic maintenance home dialysis 
patients and by extension the frequency of care a patient with AKI 
could receive in the home setting. Additionally, the same commenter 
indicated concern that the proposed rule does not include treatment of 
transplant patients with late graft recovery in the AKI definition.
    Response: A beneficiary with AKI and their health care provider 
would still determine the best frequency of care. CMS would provide 
payment for home dialysis treatments furnished to AKI beneficiaries at 
the ESRD PPS base rate determined for the year under section 
1881(b)(14) of the Act, as statutorily required at section 1834(r)(1) 
of the Act. In the CY 2011 ESRD PPS final rule CMS explained that home 
dialysis treatments are paid the same rate as in-center treatments (75 
FR 49058). Additionally, CY 2011 ESRD final rule provided an 
explanation that a week of home dialysis is converted into three 
equivalent in-center HD treatments. In the CY 2017 ESRD PPS final rule 
we stated that there is no weekly limit on the number of dialysis 
treatments that will be paid for beneficiaries with AKI (81 FR 77867). 
AKI is defined statutorily at section 1834(r)(2) of the Act. CMS cannot 
change the definition of AKI to include beneficiaries who have had a 
kidney transplant that experience late graft recovery. Beneficiaries 
that have had a transplant are still covered under the ESRD benefit for 
three years post-transplant. Therefore, the beneficiary that had a 
transplant could dialyze in an outpatient ESRD facility under the ESRD 
benefit.
    Comment: One commenter questioned how to use CPT codes such as 
90945 (Dialysis procedure other than hemodialysis) and 90947 (Dialysis 
procedure other than hemodialysis requiring repeated evaluations by a 
physician or other qualified health care professional, with or without 
substantial revisions of dialysis prescription) when billing for home 
dialysis rather than in-center.
    Response: We refer the commenter to the Medicare Claims Processing 
Manual Chapter 8 Sec.  170, which indicates that codes 90935, 90937, 
90945, or 90947 are only used if the place of service on the claim is 
an inpatient hospital. This is because all physicians' outpatient 
renal-related services are included in payment made under the monthly 
capitation payment.\97\
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    \97\ https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/clm104c08.pdf.
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    Final Rule Action: After consideration of the comments received, we 
are finalizing our proposal to extend the home dialysis benefit to 
beneficiaries with AKI, as proposed. Accordingly, we are finalizing our 
proposal to revise Sec.  410.52 to read: ``Medicare Part B pays for the 
following services, supplies, and equipment furnished to a patient with 
ESRD or an individual with Acute Kidney Injury (AKI) as defined in 
Sec.  413.371 of this chapter in his or her home.'' We are also 
finalizing our proposal to revise Sec.  413.374(a) to read: ``The AKI 
dialysis payment rate applies to renal dialysis services (as defined in 
subparagraph (B) of section 1881(b)(14) of the Act) furnished under 
Part B by a renal dialysis facility or provider of services paid under 
section 1881(b)(14) of the Act, including home services, supplies, and 
equipment, and self-dialysis.''

C. Annual Payment Rate Update for CY 2025

1. CY 2025 AKI Dialysis Payment Rate
    The payment rate for AKI dialysis is the ESRD PPS base rate 
determined for a year under section 1881(b)(14) of the Act, which is 
the finalized ESRD PPS base rate, including the applicable annual 
market basket update, geographic wage adjustments, and any other 
discretionary adjustments, for such year. We note that ESRD facilities 
could bill Medicare for non-renal dialysis items and services and 
receive separate payment in addition to the payment rate for AKI 
dialysis. As discussed in section II.B.4 of this final rule, the final 
ESRD PPS base rate is $273.82, which reflects the application of the CY 
2025 wage index budget-neutrality adjustment factor of 0.988600 and the 
CY 2025 ESRDB market basket percentage increase of 2.7 percent reduced 
by the productivity adjustment of 0.5 percentage point, that is, 2.2 
percent. Accordingly, we are finalizing a CY 2025 per treatment payment 
rate of $273.82 (($271.02 x 0. 988600) x 1.022 = $273.82) for renal 
dialysis services furnished by ESRD facilities to individuals with AKI. 
Additionally, we have applied a $0.00 budget neutrality adjustment to 
the AKI per treatment base rate as discussed in section III.C.3 of this 
final rule to address the training add-on payment adjustment for home 
dialysis modalities in the AKI beneficiary population. We did not 
receive specific comments related to the CY 2025 AKI dialysis payment 
rate. We discuss general comments on the ESRD PPS base rate in section 
II.B.4 of this final rule, and we discuss comments related to the 
budget neutrality reduction to the AKI payment rate to account for the 
training add-on payment adjustment in section III.C.3 of this final 
rule.
2. Geographic Adjustment Factor
    Under section 1834(r)(1) of the Act and regulations at Sec.  
413.372, the amount of payment for AKI dialysis services is the base 
rate for renal dialysis services determined for a year under section 
1881(b)(14) of the Act (updated by the ESRDB market basket percentage 
increase and reduced by the productivity adjustment), as adjusted by 
any applicable geographic adjustment factor applied under section 
1881(b)(14)(D)(iv)(II) of the Act. Accordingly, we apply the same wage 
index under Sec.  413.231 that is used under the ESRD PPS. As discussed 
in section II.B.2.b of this final rule, we are finalizing a new ESRD 
PPS wage index methodology, which utilizes BLS OEWS

[[Page 89168]]

data and freestanding ESRD facility cost report data. We proposed to 
use this same methodology when adjusting AKI dialysis payments to ESRD 
facilities, consistent with our historical practice of using the ESRD 
PPS wage index for AKI dialysis payments. The AKI dialysis payment rate 
is adjusted by the wage index for a particular ESRD facility in the 
same way that the ESRD PPS base rate is adjusted by the wage index for 
that ESRD facility (81 FR 77868). Specifically, we apply the wage index 
to the labor-related share of the ESRD PPS base rate that we utilize 
for AKI dialysis to compute the wage adjusted per-treatment AKI 
dialysis payment rate. We also apply the wage index policies regarding 
the 0.600 wage index floor (87 FR 67161 through 67166) and the 5 
percent cap on wage index decreases (87 FR 67159 through 67161) to AKI 
dialysis payments to ESRD facilities. ESRD facilities would utilize the 
same staff to provide renal dialysis services to and educate 
beneficiaries with AKI as those beneficiaries with ESRD. Therefore, 
utilizing the same wage index methodology would be appropriate in 
accordance with Sec.  413.372, which addresses the payment rate for AKI 
dialysis and refers to Sec.  413.231 for the wage adjustment. As stated 
previously, we are finalizing a CY 2025 AKI dialysis payment rate of 
$273.82, adjusted by the ESRD facility's wage index. We did not receive 
specific comments related to the CY 2025 AKI geographic adjustment 
factor. We discuss general comments related to the new ESRD PPS wage 
index methodology in section II.B.2 of this final rule.
3. Other Adjustments to the AKI Payment Rate
    Section 1834(r)(1) of the Act also provides that the payment rate 
for AKI dialysis may be adjusted by the Secretary (on a budget neutral 
basis for payments under section 1834(r)) by any other adjustment 
factor under subparagraph (D) of section 1881(b)(14) of the Act. As 
discussed in the previous section of this final rule, we proposed to 
extend AKI dialysis payment to home dialysis.
    As we explained in the CY 2025 ESRD PPS proposed rule (89 FR 
55807), we considered our existing payment policies for home dialysis 
for beneficiaries with ESRD in implementing payment for home dialysis 
in the AKI patient population. In the CY 2011 ESRD PPS final rule, we 
explained that although we included payments for providing training to 
beneficiaries in computing the ESRD PPS base rate, we agreed with 
commenters that we should pay for home dialysis training as a training 
add-on payment adjustment under the ESRD PPS to account for the cost of 
providing training to beneficiaries on the use of home dialysis 
modalities. Thus, we finalized the home dialysis training add-on 
payment adjustment of $33.44 per treatment as an additional payment 
made under the ESRD PPS when one-on-one home dialysis training is 
furnished by a nurse for either hemodialysis or peritoneal dialysis 
training and retraining (75 FR 49063). We clarified our policy on 
payment for home dialysis training again in the CY 2013 ESRD PPS final 
rule, in which we stated that training costs are included in the ESRD 
PPS base rate; however, we also provide a training add-on payment 
adjustment for each home and self-dialysis training treatment furnished 
by a Medicare-certified home dialysis training facility (77 FR 67468). 
We explained in the CY 2017 ESRD PPS final rule that it is not the 
intent of the training add-on payment adjustment to reimburse a 
facility for all of the training costs furnished during training 
treatments. Rather, the single ESRD PPS base rate, all applicable case-
mix and facility-level adjustments, as well as the add-on payment 
should be considered the Medicare payment for each training treatment 
and not the training add-on payment alone (81 FR 77854).
    In the CY 2025 ESRD PPS proposed rule we considered making payment 
for home dialysis for beneficiaries with AKI under the ESRD PPS base 
rate without a training add-on payment adjustment for home modality 
training (89 FR 55807). As we noted in section III.A. of the final 
rule, the ESRD PPS base rate upon which the AKI dialysis payment rate 
is established contains monies for training related costs. However, we 
stated in the proposed rule (89 FR 55809) that we are concerned that 
not providing a home and self-dialysis training add-on payment 
adjustment for AKI dialysis may limit access to home dialysis care for 
the AKI beneficiary population. As previously noted, incorporation of 
an adjustment factor under subparagraph (D) of section 1881(b)(14) of 
the Act into AKI dialysis payments must be done on a budget neutral 
basis for payments under section 1834(r) of the Act. Therefore, we 
stated that establishing a training add-on payment adjustment for 
training for home and self-care dialysis could have an impact on the 
AKI base rate.
    As discussed in the proposed rule, we reviewed options for applying 
budget neutrality to a home and self-dialysis training add-on payment 
adjustment for beneficiaries with AKI. We considered applying a budget 
neutrality adjustment factor by reducing the AKI dialysis payment rate 
amount (which is based on the ESRD PPS base rate and is then adjusted 
for wages according to Sec.  413.372) for renal dialysis services 
provided to patients with AKI to account for the training add-on 
payment adjustment. We provided an example for a potential calculation 
based on ESRD PPS data in the proposed rule (89 FR 55809). 
Additionally, we noted our concern that a decrease in the AKI dialysis 
payment rate to account for the home dialysis training add-on payment 
adjustment might create a disincentive for ESRD facilities to treat 
beneficiaries with AKI. We welcomed comments regarding budget 
neutralizing the home dialysis training add-on payment adjustment and 
solicited comments on other venues where beneficiaries might receive 
training for a home dialysis modality (89 FR 55809).
    We proposed, in accordance with section 1834(r)(1) of the Act and 
Sec.  413.373, to extend the home and self-dialysis training add-on 
payment adjustment under Sec.  413.235(c) to payments for renal 
dialysis services provided to beneficiaries with AKI using a home 
modality. We proposed to make payment for a home and self-dialysis 
training add-on payment adjustment at the same amount currently 
applicable under the ESRD PPS of $95.60 with a limit of 15 training 
treatments for PD and a limit of 25 training treatments for HD per 
patient excluding retraining sessions (75 FR 49063). Additional 
information regarding the maximum number of training treatments for 
which CMS provides payment under the ESRD PPS is located in the 
Medicare Claims Processing Manual.\98\ We requested data, either actual 
or estimated, regarding the number of training sessions provided to 
beneficiaries with AKI and the number of beneficiaries with AKI using a 
home modality (89 FR 55809) to use this information to make a 
determination on a training add-on payment adjustment in the CY 2025 
ESRD PPS final rule or in future rulemaking for subsequent years.
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    \98\ https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/clm104c08.pdf.
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    We invited public comment on our proposal for a payment adjustment 
for training of beneficiaries with AKI that elect to dialyze in a home 
setting. Approximately 27 commenters including LDOs; a coalition of 
dialysis organizations; a regional health system; a provider advocacy 
organization; a non-profit dialysis association; and a

[[Page 89169]]

home dialysis stakeholder alliance commented on the proposed payment 
adjustment for training of beneficiaries with AKI that elect to dialyze 
in a home setting. The following is a summary of the public comments 
received on these proposals and our responses.
    Comment: Several commenters stated concerns regarding budget 
neutrality. The commenters indicated that they believe the home 
dialysis training add-on payment adjustment was previously budget 
neutralized in the ESRD PPS CY 2017 final rule. Additionally, they 
stated that they believe ESRD facilities that have provided services to 
beneficiaries with AKI have been underpaid since the budget 
neutralization in the CY 2017 ESRD PPS final rule. A few of the 
commenters indicated that beneficiaries with AKI that progressed to 
ESRD would already have received training for home dialysis and would 
not need to receive training as a beneficiary with ESRD. They believed 
this satisfied the budget neutrality requirement. Additionally, some 
commenters urged that CMS delay implementation of budget neutrality for 
these training add-on payment adjustments for AKI beneficiaries until 
sufficient data was collected on home utilization in the AKI 
beneficiary population.
    Response: We appreciate the concerns of commenters that believe the 
training add-on payment adjustment was previously budget neutralized 
and therefore budget neutrality should not be a factor in this rule. We 
find that interpretation to be inconsistent with the statute because it 
would result in increased total AKI payments for CY 2025 relative to 
what they would be if CMS did not incorporate the training add-on 
payment adjustment. CMS rejected this premise in the ESRD PPS CY 2017 
final rule where we indicated we interpret the payment rate for AKI to 
be the finalized base payment rate for ESRD, as the statute was clear 
that the payment rate for AKI dialysis must be the ESRD PPS base rate 
determined for a year under section 1881(b)(14) of the Act (81 FR 
77867). CMS is compelled by section 1834(r)(1) of the Act to apply 
budget neutrality to the AKI payment to maintain total payments under 
section 1834(r) of the Act when incorporating an adjustment factor 
under subparagraph (D) of section 1881(b)(14) of the Act.
    CMS appreciates the commenters that expressed that training 
beneficiaries with AKI for home dialysis would offset the training for 
the beneficiaries who progress to ESRD. However, the beneficiaries who 
progress to ESRD would be eligible for the onset add-on payment 
adjustment, since both the training add-on payment adjustment and onset 
add-on payment adjustment cannot be applied at the same time (75 FR 
49063). Furthermore, we would not rule out that some beneficiaries with 
AKI might require retraining after their disease progresses to ESRD. We 
do not believe that training beneficiaries to perform self-dialysis 
would create budget neutrality if their disease should progress to 
ESRD. Additionally, we appreciate the commenter who suggested that 
budget neutrality be delayed until sufficient data was collected. 
However, this would not be consistent with our general interpretation 
of statutes requiring budget neutrality, such as section 1834(r)(1) of 
the Act, as payments would increase for CY 2025. Generally, when we 
implement policies within the ESRD PPS budget neutrally, we do so based 
on estimates for the rulemaking year rather than retrospectively, and 
we do not adjust such adjustment post-hoc. For example, when we 
implemented the LVPA in CY 2011 we applied a budget-neutrality 
adjustment factor to the CY 2011 ESRD PPS base rate which accounted for 
all budget-neutral payment adjustments, including the LVPA, by holding 
total estimated payments for CY 2011 constant (75 FR 49194). Because 
this downward adjustment to the CY 2011 ESRD PPS base rate carried 
forward into future years (in which the base rate is only increased by 
the applicable annual market basket increase), it continues to offset 
the spending associated with those budget-neutral payment adjustments 
in future years as well.
    Comment: Several commenters expressed concern that CMS had over-
estimated the utilization of home modalities in the AKI beneficiary 
population. These commenters believe that providers and patients would 
need time to receive education about beneficiaries with AKI receiving 
dialysis in a home setting and that growth would be slow. These 
commenters believe that because of the over-estimation of utilization 
there is the potential to disincentivize ESRD facilities from providing 
services to beneficiaries with AKI. Additionally, some of the 
commenters indicated that CMS had over-estimated the number of training 
sessions that would be required for beneficiaries with AKI to 
successfully manage a home modality. These commenters indicated that 
initial training for a home dialysis modality may be provided while the 
beneficiary is hospitalized. They indicated that beneficiaries with AKI 
would likely only require 5 to 6 training sessions to successfully 
manage a home dialysis modality.
    Response: We appreciate the commenters that provided information 
regarding CMS's estimation of utilization in the CY 2025 ESRD PPS 
proposed rule (89 FR 55809). We agree with commenters that the majority 
of beneficiaries with AKI who choose a home dialysis modality likely 
will be those that transition from the hospital utilizing PD as their 
home treatment modality. Additionally, we agree that utilization of 
home modalities for beneficiaries with AKI will be dependent on 
education to providers and patients. We have reviewed the available 
data considering these comments and have made revisions to the 
calculation for budget neutrality. After considering the comments on 
the use of PD for AKI, we have determined that it would be more 
reasonable to estimate utilization for home AKI based on in-center PD 
utilization. We found that from 2017 through 2023, there were 10 
beneficiaries with AKI that received PD in-center. For the calculation 
of budget neutrality, this is approximately 2 beneficiaries with AKI 
per year receiving PD. As we agree with commenters that beneficiaries 
with AKI likely will receive partial training in the hospital to manage 
the home dialysis modality, we will estimate 6 training treatments for 
beneficiaries with AKI transitioning to a home modality. Lastly, as the 
training add-on payment adjustment would be adjusted by the wage index 
for the ESRD facility furnishing the training, we will multiply the 
training add-on payment adjustment amount of $95.60 by the average wage 
index for AKI, which is 1.0204. Using this data, we could estimate a 
cost of training to be $1170.60 (2 x 6 x $95.60 x 1.0204) or $0.0042. 
($1170.60/279,000) per AKI treatment. Since the per treatment budget 
neutrality estimate would round to $0.00, we believe that applying this 
amount of reduction to the AKI base payment will be negligible. While 
budget neutrality was applied to the AKI base rate for home training 
for beneficiaries with AKI, we note that the actual amount of the 
reduction to the AKI payment per treatment rounds to $0.00, and 
therefore the AKI CY 2025 base rate would be $273.82 ($273.82 - $0.00) 
using this estimate. We plan to monitor data related to AKI including 
the uptake of home dialysis. We may revisit the calculation for budget 
neutrality as appropriate in the future.
    Comment: One commenter suggested that training within a nursing 
facility should be paid only if the patient was

[[Page 89170]]

transitioning to home dialysis outside of the nursing facility.
    Response: We note the commenter addressed concerns regarding 
training of beneficiaries with AKI in nursing facilities. CMS addressed 
this in the ESRD PPS CY 2011 final rule. Nursing caregivers at nursing 
facilities are not paid through the ESRD PPS (75 FR 49057). Therefore, 
training provided by nursing caregivers at nursing facilities would not 
be paid through the ESRD PPS. A nursing home resident that is 
independently performing home dialysis treatments would be eligible for 
a training add-on adjustment if there is the expectation the 
beneficiary can successfully complete the training and perform self-
dialysis.
    Final Rule Action: We are finalizing our proposal to extend a 
payment adjustment for training of beneficiaries with AKI that elect to 
dialyze in a home setting, beginning January 1, 2025. Specifically, we 
are finalizing our proposal to provide a payment for home dialysis 
training and home dialysis modalities for beneficiaries with AKI, with 
certain changes to the proposed methodology for calculating budget 
neutrality. As discussed previously, we are finalizing the requirement 
for a per-treatment budget neutrality reduction of $0.00 ($1146.84/
279,000) which would be applied to the AKI base payment rate. We are 
codifying this requirement in regulation at Sec.  413.373. As discussed 
in section III.C.3. of this final rule, we are finalizing the addition 
of a wage-adjusted training add-on payment adjustment per treatment for 
home and self-dialysis training as set forth at Sec.  413.235(c) to 
payments for AKI dialysis claims. Furthermore, we are codifying in 
regulation at Sec.  410.52, as discussed in section III.C.3. of this 
final rule, to provide Medicare payment for the treatment of patients 
with AKI in the home setting.

D. AKI and the ESRD Facility Conditions for Coverage

1. Statutory and Regulatory Background
    ESRD is a kidney impairment that is irreversible and permanent. 
Dialysis is a process for cleaning the blood and removing excess fluid 
artificially with special equipment when the kidneys have failed. 
People with ESRD require either a regular course of dialysis or kidney 
transplantation to live. Given the high costs and absolute necessity of 
transplantation or dialysis for people with failed kidneys, Medicare 
provides health care coverage to qualifying individuals diagnosed with 
ESRD, regardless of age, including coverage for kidney transplantation, 
maintenance dialysis, and other health care needs. Acute kidney injury 
(AKI) is different than ESRD; it is an acute decrease in kidney 
function due to kidney damage or kidney failure that may require 
dialysis. Unlike people with ESRD, most individuals with AKI who 
require dialysis are expected to regain kidney function within three 
months. People with either ESRD or AKI can receive outpatient dialysis 
services from Medicare-certified ESRD facilities, also called dialysis 
facilities.
    The Medicare ESRD program became effective July 1, 1973, and 
initially operated under interim regulations published in the Federal 
Register on June 29, 1973 (38 FR 17210). In the July 1, 1975, Federal 
Register (40 FR 27782), we published a proposed rule that proposed to 
revise sections of the ESRD requirements. On June 3, 1976, the final 
rule was published in the Federal Register (41 FR 22501). Subsequently, 
the ESRD Amendments of 1978 (Pub. L. 95-292), amended title XVIII of 
the Social Security Act (the Act) by adding section 1881. Sections 
1881(b)(1) and 1881(f)(7) of the Act further authorize the Secretary to 
prescribe health and safety requirements (known as conditions for 
coverage or CfCs) that a facility providing dialysis and 
transplantation services to dialysis patients must meet to qualify for 
Medicare payment. In addition, section 1881(c) of the Act establishes 
ESRD Network areas and Network organizations to assure that dialysis 
patients are provided appropriate care. The ESRD facility CfCs were 
first adopted in 1976 and comprehensively revised in 2008 (73 FR 
20369). The Trade Preferences Extension Act of 2015 (TPEA) (Pub. L. 
114-27) was enacted on June 29, 2015, and amended the Act to provide 
coverage and payment for dialysis furnished by an ESRD facility to an 
individual with AKI. Specifically, section 808(a) of the TPEA amended 
section 1861(s)(2)(F) of the Act to provide coverage for renal dialysis 
services furnished on or after January 1, 2017, by a renal dialysis 
facility or a provider of services paid under section 1881(b)(14) of 
the Act to an individual with AKI. Section 808(b) of the TPEA amended 
section 1834 of the Act by adding a subsection (r) to provide payment, 
beginning January 1, 2017, for renal dialysis services furnished by 
renal dialysis facilities or providers of services paid under section 
1881(b)(14) of the Act to individuals with AKI at the ESRD PPS base 
rate, as adjusted by any applicable geographic adjustment applied under 
section 1881(b)(14)(D)(iv)(II) of the Act and adjusted (on a budget 
neutral basis for payments under section 1834(r) of the Act) by any 
other adjustment factor under section 1881(b)(14)(D) of the Act that 
the Secretary elects.
    Medicare pays for routine maintenance dialysis provided by 
Medicare-certified ESRD facilities, also known as dialysis facilities. 
To gain certification, the State survey agency or CMS-approved 
accrediting organization performs an on-site survey of the facility to 
determine if it meets the ESRD facility CfCs at 42 CFR part 494. If a 
survey indicates that a facility is in compliance with the conditions, 
and all other Federal requirements are met, CMS then certifies the 
facility as qualifying for Medicare payment. Medicare payment for 
outpatient maintenance dialysis is limited to facilities meeting these 
conditions. As of March 2024, there are approximately 7,700 Medicare-
certified dialysis facilities in the United States,\99\ providing 
dialysis services and specialized care to people with ESRD; 3,700 of 
which provide home dialysis services, including training and 
support.\100\
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    \99\ https://qcor.cms.gov/active_nh.jsp?which=7&report=active_nh.jsp.
    \100\ https://qcor.cms.gov/active_nh.jsp?which=7&report=active_nh.jsp.
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    The ESRD facility CfCs found at 42 CFR part 494, consist of the 
health and safety standards that all Medicare participating dialysis 
facilities must meet. These standards set baseline requirements for 
patient safety, infection control, care planning, staff qualifications, 
record keeping, and other matters to ensure that all patients with 
kidney failure receive safe and appropriate care. In addition, the CfCs 
require patients to be informed about all treatment modalities 
(hemodialysis or peritoneal dialysis) and settings (home dialysis 
modalities or in-facility hemodialysis) (Sec.  494.70(a)(7)). A 
dialysis facility that is certified to provide services to home 
patients must ensure that home dialysis services are at least 
equivalent to those provided to in-facility patients and meet all 
applicable conditions of Sec.  494.100. The patient's interdisciplinary 
team must oversee training of the home dialysis patient, the designated 
caregiver, or self-dialysis patient before the initiation of home 
dialysis or self-dialysis (as defined in Sec.  494.10). Dialysis 
facilities monitor home dialysis by documenting adequate comprehension 
of the training; retrieving and reviewing complete self-monitoring data 
and other information at least every two months; and

[[Page 89171]]

maintaining this information in the patient's medical record.
    In the CY 2017 ESRD PPS final rule (81 FR 77834), we clarified that 
ESRD facility CfCs apply to ESRD facilities, not to people with ESRD, 
and noted that the ESRD facility CfCs would be the appropriate 
regulatory location for standards addressing care provided to 
beneficiaries with AKI in ESRD facilities. While the language of the 
ESRD facility CfCs does not directly address treatment of beneficiaries 
with AKI, we believe that the current ESRD facility requirements are 
sufficient to ensure that such patients are dialyzed safely. For 
example, infection control protocols are the same for any individual 
receiving hemodialysis, regardless of the cause or likely trajectory of 
their kidney disfunction. For the areas in which care and care planning 
may differ, such as frequency of certain patient assessments, we note 
that the CfCs set baseline standards and do not limit additional or 
more frequent services that may be necessary for beneficiaries with AKI 
receiving temporary dialysis as they recover kidney function.
    During the development of the CY 2017 ESRD PPS final rule, we did 
not anticipate that beneficiaries with AKI would be candidates for home 
dialysis due to the likely short-term duration of treatment and the 
unique needs of AKI. Therefore, we did not propose to extend the home 
dialysis benefit to beneficiaries with AKI at that time (81 FR 77870). 
The initial concerns about the appropriateness of dialysis at home for 
individuals with AKI have been allayed by the existing scientific 
evidence of the effectiveness of that modality in this population. By 
revising the CfCs to facilitate beneficiaries with AKI utilizing home 
dialysis, we would increase patient options for renal replacement 
treatment beyond in-center hemodialysis and better empower these 
patients to make decisions about their care. We encourage readers to 
refer to the CY 2025 ESRD PPS proposed rule for this detailed 
discussion (CMS-1805-P).
2. Provisions of the Proposed Regulations and Analysis and Response to 
Public Comments
    In response to the proposed rule, we received 22 comments 
pertaining to the expansion of home dialysis for AKI patients, with 6 
comments specifically mentioning the conforming changes to the CfCs. 
Commenters included patient care organizations, dialysis facilities, 
and individual patients. To support treatment location choices for 
individuals with AKI requiring dialysis and to align with the coverage 
changes, we proposed conforming changes throughout the ESRD facility 
CfCs at 42 CFR part 494. We noted that the phrase ``ESRD patients'' is 
exclusive of beneficiaries with AKI, while phrase ``kidney failure'' is 
inclusive of people whose kidney function is inadequate such that 
dialysis is necessary to maintain or prolong life. This can be a 
temporary (AKI) or permanent (ESRD) condition. Accordingly, we proposed 
to amend the definitions of home dialysis and self-dialysis at 
Sec. Sec.  494.10, 494.70(c)(1)(i), and 494.130 introductory text by 
removing the descriptor ``ESRD.'' In addition, we proposed to amend the 
following requirements: Sec. Sec.  494.70(a)(1) and (10) and 494.80 
introductory texts by revising the phrase ``ESRD'' to say ``kidney 
failure;'' Sec.  494.90(b)(4) by revising the phrase ``ESRD care'' to 
say ``dialysis care;'' Sec.  494.100(a)(3)(i) by revising the phrase 
``management of ESRD'' to say ``management of their kidney failure;'' 
Sec.  494.120 introductory text by revising the phrase ``serve ESRD 
patients'' to say ``serve patients with kidney failure;'' and lastly 
Sec.  494.170 introductory text by revising the phrase ``provider of 
ESRD services'' to say ``provider of dialysis services.''
    Comment: All the comments expressed support for the expansion of 
coverage for home dialysis to beneficiaries with AKI, with a couple 
specifically agreeing with the conforming changes in the CFCs. 
Commenters cited many benefits including choosing hours that work best 
for the patient, reducing travel burden (especially for patients in 
rural areas), and saving on healthcare costs. In addition to increasing 
access to home dialysis for all AKI patients, commenters indicated that 
they believe this policy supports our goal to expand home dialysis 
services for those AKI patients that proceed to ESRD. Commenters stated 
that the provision would reduce health disparities associated with home 
dialysis services. Commenters agreed that ``patient'' and ``kidney 
failure'' are the appropriate terminology for the CfCs to encompass 
both ESRD & AKI patients.
    One commenter shared concerns about the safety of getting dialysis 
at home for what will generally be a short or limited period. Another 
commenter requested clarification on application of this policy to 
residents of long-term care facilities.
    Response: We thank commenters for their support and taking the time 
to respond. We believe that patients with AKI are medically complex, 
and the clinical decision regarding the next stage of treatment should 
be evaluated by a physician or other licensed advanced practitioner and 
agreed upon mutually among the patient, care partners, and physician. 
Importantly, the entire armamentarium of treatment options must be 
available to provide the most patient-centered care and allow for the 
best outcomes. This policy aligns with the broader goals of patient-
centered care and individualized treatment plans. We believe the 
current CfCs for home dialysis services provide sufficient training, 
education, and safety standards for AKI patients to safely dialyze at 
home, regardless of the duration of the services. We view home 
therapies as supervised care that is of at least similar quality and 
intensity to in-center hemodialysis and highlight our commitment to 
ensuring the success of all patients with AKI, regardless of whether 
they are receiving dialysis in the home or in a hemodialysis facility. 
Additionally, the home dialysis CfCs are applicable to home dialysis 
suppliers who provide such services in long-term care settings, since 
these locations are considered to be a patient's home. The Quality, 
Safety and Oversight Group (QSOG) has published sub-regulatory guidance 
(QSO-18-24-ESRD) that addresses patients receiving home dialysis 
services in nursing homes. This guidance is applicable to AKI patients 
receiving home dialysis services in LTC facilities.
    Final Rule Action: We are finalizing our proposal to amend the ESRD 
facility CfCs to be inclusive of patients with AKI, without 
modification. For the reasons discussed in section III.B. of this final 
rule, we are extending coverage of home dialysis services to 
beneficiaries with AKI, allowing them flexibility in choosing their 
preferred treatment modality (hemodialysis vs. peritoneal dialysis) and 
location (in-center vs. home). Since the ESRD facility CfCs apply to 
ESRD facilities as a whole, not to solely to their patients with ESRD, 
we are providing clarifying revisions to the CfCs to align with the 
final coverage changes.
3. Expected Impact
    Beneficiaries with AKI requiring dialysis represent a small subset 
of individuals treated in outpatient dialysis facilities. Specifically, 
around 12,000 patients will be eligible for this optional service.\101\ 
Expanding coverage to include beneficiaries with AKI will not present 
any changes in burden on ESRD facilities or establish new information 
collections subject to the Paperwork Reduction Act.
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    \101\ USRDS Annual Data Report 2023.

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[[Page 89172]]

E. Clarification About Medicare Payment for Phosphate Binders for 
Beneficiaries With AKI

    In the CY 2025 ESRD PPS proposed rule, we did not propose any 
policies related to payment for phosphate binders for beneficiaries 
with AKI during the period beginning January 1, 2025, when these drugs 
will be incorporated into the ESRD PPS and paid for using the TDAPA. 
While we did not receive any public comments on this topic, we are 
taking the opportunity in this final rule to provide clarity on this 
issue.
    Under our longstanding policy, we have not applied any ESRD PPS 
adjustments to the AKI payment amount, other than the wage index 
adjustment. When we established the AKI benefit in the CY 2017 ESRD PPS 
final rule, we adopted regulations at Sec.  413.372, which specify that 
only the adjustment for wages as set forth in Sec.  413.231 shall apply 
to the amount of payment for AKI dialysis services. We also finalized 
regulations at Sec.  413.373, which state that any other adjustment 
factor under subparagraph (D) of section 1881(b)(14) of the Act that 
may be applied to the payment for AKI dialysis services is applied on a 
budget neutral basis for payments under section 1834(r). We stated in 
the CY 2017 ESRD PPS final rule that we were not adjusting the payment 
amount by any other factors at that time but indicated that we would 
potentially do so in future years (81 FR 77868). In that same final 
rule, we further explained that we finalized a policy to pay separately 
for all items and services that are not part of the ESRD PPS base rate. 
We explained that once we have substantial data related to the AKI 
population and its associated utilization, we would determine the 
appropriate steps toward further developing the AKI payment rate (81 FR 
77868).
    In the CY 2018 ESRD PPS final rule, a commenter requested that we 
clarify whether the TDAPA applies to AKI renal dialysis services. In 
response, we stated that we would issue additional program guidance 
that would address the application of the TDAPA to AKI services and 
other billing guidance. We stated that if we determine that it is 
appropriate for the TDAPA to apply to AKI services, we would consider 
that to be a substantive payment policy, which would be established 
through notice and comment rulemaking (82 FR 50756). CMS subsequently 
issued guidance <SUP>102 103</SUP> which clarified that ESRD facilities 
would not be responsible for furnishing calcimimetics to individuals 
with AKI while calcimimetics were being paid for under the TDAPA. We 
further explained that Sensipar (HCPCS code J0604) remained payable 
under Medicare Part D for AKI beneficiaries until the costs were rolled 
into the ESRD PPS bundled payment, at which point it would transition 
to the bundled payment amount. With regard to Parsabiv (HCPCS code 
J0606), we stated that this drug was not indicated for AKI and 
therefore no bills should be submitted for Parsabiv in the AKI 
population.
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    \102\ https://www.cms.gov/regulations-and-guidance/guidance/
transmittals/2017downloads/r1941otn.pdf.
    \103\ https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/mm102811.pdf.
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    We believe that with respect to Medicare payment for phosphate 
binders for beneficiaries with AKI, it is appropriate to maintain the 
same policy which applied for calcimimetics during the period in which 
they were paid for using the TDAPA under the ESRD PPS. Section 1834(r) 
of the Act requires that any adjustments made to the AKI payment amount 
under 1881(b)(14)(D) of the Act, other than the applicable geographical 
adjustment factor applied under subparagraph (D)(iv)(II) of the Act, 
must be applied on a budget neutral basis for payments under section 
1834(r) of the Act. Because the TDAPA is a non-budget neutral add-on 
payment adjustment under section 1881(b)(14)(D)(iv) of the Act, we do 
not believe that it is appropriate to apply the TDAPA to claims for AKI 
dialysis under section 1834(r) of the Act. More specifically, if we 
were to apply the TDAPA to AKI payments, we believe that section 
1834(r) of the Act would require us to apply a budget neutrality 
adjustment factor, which would reduce the AKI dialysis payment rate and 
be contrary to the policy objective of the TDAPA to provide additional 
payment for certain new renal dialysis drugs and biological products.
    We also believe that consistent with our policy for calcimimetics 
during CY 2018 through CY 2020, allowing phosphate binders to remain 
separately payable under Part D for beneficiaries with AKI that have a 
Part D medically-accepted indication meets the requirements under 
section 1834(r) of the Act and the requirements under Sec.  413.374(a) 
to make payment under the AKI dialysis payment rate for renal dialysis 
services (as defined in subparagraph (B) of section 1881(b)(14) of the 
Act) furnished under Part B by a renal dialysis facility or provider of 
services paid under section 1881(b)(14) of the Act. We have not 
interpreted these statutory and regulatory requirements to apply to 
renal dialysis drugs and biological products that are not considered 
included in the ESRD PPS base rate. Specifically, we note that oral-
only drugs are renal dialysis services under subparagraph (B) of 
section 1881(b)(14) of the Act; however, we have not paid for these 
drugs as part of the AKI dialysis payment rate, because they were not 
included in the ESRD PPS base rate. If we had interpreted section 
1834(r) of the Act and Sec.  413.374(a) to require payment under the 
AKI dialysis payment rate for oral-only renal dialysis drugs and 
biological products, then we would have been required to include 
payment for these drugs in the AKI dialysis payment rate before payment 
was included under the ESRD PPS, which we believe would have conflicted 
with the statutory requirements of ATRA, as amended by PAMA, and 
amended by ABLE, which ultimately delayed the inclusion of oral-only 
drugs into the ESRD PPS until January 1, 2025. Rather, we have 
interpreted the requirements of section 1834(r) of the Act and Sec.  
413.374(a) to provide a single payment for those renal dialysis 
services that are considered included in the ESRD PPS base rate. 
Consistent with that interpretation, as discussed earlier in this final 
rule, we explained in sub-regulatory guidance that oral calcimimetics 
remained separately payable under part D for AKI beneficiaries until 
they were incorporated into the ESRD PPS base rate.
    For this CY 2025 ESRD PPS final rule, we are clarifying that we are 
maintaining the same policy for phosphate binders provided to 
beneficiaries with AKI that we applied to calcimimetics. That is, we 
are clarifying that ESRD facilities will not be responsible for 
furnishing phosphate binders to individuals with AKI while phosphate 
binders are being paid for using the TDAPA under the ESRD PPS. As 
discussed in section II.B.7 of this final rule, CMS published guidance 
containing information about the HCPCS codes for phosphate binders at 
https://www.cms.gov/files/document/including-oral-only-drugs-esrd-pps-bundled-payment.pdf. None of the drugs described by these HCPCS codes 
is indicated for patients with AKI, and therefore we do not expect 
these drugs will be provided for the treatment of AKI and billed for on 
AKI claims. To the extent that phosphate binders are provided to AKI 
beneficiaries other than for the treatment of their AKI, such as for 
preexisting chronic kidney disease, they will remain separately payable

[[Page 89173]]

under Part D for beneficiaries with AKI that have a Part D medically-
accepted indication until they are incorporated into the ESRD PPS base 
rate. We believe this policy will provide appropriate payment for 
phosphate binders furnished to beneficiaries with AKI.

IV. Updates to the End-Stage Renal Disease Quality Incentive Program 
(ESRD QIP)

A. Background

    For a detailed discussion of the ESRD QIP's background and history, 
including a description of the Program's authorizing statute and the 
policies that we have adopted in previous final rules, we refer readers 
to the citations provided at IV.A of the CY 2024 ESRD PPS final rule 
(88 FR 76433). We have also codified many of our policies for the ESRD 
QIP at 42 CFR 413.177 and 413.178.

B. Updates to Requirements Beginning With the PY 2027 ESRD QIP

1. PY 2027 ESRD QIP Measure Set
    In the proposed rule, we proposed to replace the Kt/V Dialysis 
Adequacy Comprehensive clinical measure, a comprehensive measure on 
which facilities are scored for each payment year using one set of 
performance standards, with a Kt/V measure topic comprised of four 
individual Kt/V measures, beginning with PY 2027 (89 FR 55814 through 
55815). We also proposed to remove the National Healthcare Safety 
Network (NHSN) Dialysis Event reporting measure from the ESRD QIP 
measure set beginning with PY 2027 (89 FR 55815 through 55816). Table 
12 of the proposed rule summarized the previously finalized and 
proposed updated measures that we would include in the PY 2027 ESRD QIP 
measure set (89 FR 55813). As discussed in IV.B.2 and IV.B.3 of this 
final rule, we are finalizing our updates to the PY 2027 ESRD QIP 
measure set as proposed. We describe the finalized PY 2027 ESRD QIP 
measure set in Table 13, which includes the previously finalized 
measures and the measures we are finalizing in this final rule. In the 
proposed rule, we stated that the technical specifications for current 
measures that would remain in the measure set for PY 2027 can be found 
in the CMS ESRD Measures Manual for the 2024 Performance Period (89 FR 
55812).\104\ We also noted that the proposed technical specifications 
for the measures in the proposed Kt/V measure topic can be viewed at 
https://www.cms.gov/medicare/quality/end-stage-renal-disease-esrd-quality-incentive-program/technical-specifications-esrd-qip-measures. 
Finally, we stated that if the Kt/V measure topic is finalized, these 
specifications will be included in the CMS ESRD Measures Manual for the 
2025 Performance Period.
---------------------------------------------------------------------------

    \104\ https://www.cms.gov/files/document/esrd-measures-manual-v91.pdf.
    \105\ In previous years, we referred to the consensus-based 
entity by corporate name. We have updated this language to refer to 
the consensus-based entity more generally.
[GRAPHIC] [TIFF OMITTED] TR12NO24.012


[[Page 89174]]


[GRAPHIC] [TIFF OMITTED] TR12NO24.013

2. Replacement of the Kt/V Dialysis Adequacy Comprehensive Clinical 
Measure With a Kt/V Dialysis Adequacy Measure Topic Beginning With the 
PY 2027 ESRD QIP
    Section 1881(h)(2)(A)(i) states that the ESRD QIP must evaluate 
facilities based on measures of dialysis adequacy. Beginning with the 
PY 2027 ESRD QIP, we proposed to replace the Kt/V Dialysis Adequacy 
Comprehensive clinical measure, a single comprehensive measure on which 
facility performance is calculated using one set of performance 
standards for each payment year, with a Kt/V Dialysis Adequacy Measure 
Topic, a measure topic comprising four individual Kt/V measures on 
which facility performance is calculated using performance standards 
for each individual Kt/V measure (89 FR 55814 through 55815).\106\ In 
the CY 2025 ESRD PPS proposed rule, we proposed to remove the Kt/V 
Dialysis Adequacy Comprehensive clinical measure under Sec.  
413.178(c)(5)(i)(E), which is Measure Removal Factor 5 (a measure that 
is more strongly associated with desired patient outcomes for the 
particular topic becomes available), and proposed to replace it with 
the proposed Kt/V Dialysis Adequacy Measure Topic, which consists of 
four individual Kt/V measures. Under this proposed update, we stated 
that the individual Kt/V measures would be adult hemodialysis (HD) Kt/
V, adult peritoneal dialysis (PD) Kt/V, pediatric HD Kt/V, and 
pediatric PD Kt/V (89 FR 55814).
---------------------------------------------------------------------------

    \106\ For further information related to the Kt/V Dialysis 
Adequacy Comprehensive clinical measure, we refer readers to 77 FR 
67487 through 67490, 79 FR 66197 through 66198, and 80 FR 69053 
through 69057.
---------------------------------------------------------------------------

    By replacing the current Kt/V Dialysis Adequacy Comprehensive 
clinical measure with four separate measures, we noted that we would be 
able to assess Kt/V performance more accurately based on whether the 
patient is an adult or child and what type of dialysis modality the 
patient is receiving. We also proposed to score the four measures as a 
Kt/V Dialysis Adequacy Measure Topic and to limit the total weight of 
that topic to 11 percent of the total performance score (TPS), which we 
stated is the weight of the current Kt/V Dialysis Adequacy 
Comprehensive clinical measure. We noted that these proposals would 
continue to maintain Kt/V measurement as an important part of the 
quality of care assessed by the ESRD QIP (89 FR 55814). Facilities are 
eligible to receive an individual Kt/V measure score if they treat at 
least 11 eligible patients using the modality addressed by that 
particular measure. For example, a facility treating at least 11 
eligible pediatric HD patients during the applicable performance period 
would be scored on the Kt/V Pediatric HD measure. In the proposed rule, 
we stated that we would calculate a facility's measure topic score by 
first calculating the facility's performance on each of the Adult HD 
Kt/V, Adult PD Kt/V, Pediatric HD Kt/V, and Pediatric PD Kt/V measures, 
as applicable, using the applicable achievement threshold, benchmark, 
and improvement threshold for the payment year (89 FR 55814). Second, 
we would calculate the total number of eligible patients for weighting 
each of these measure scores to calculate a single measure topic score. 
We would calculate this total number by summing all eligible patients 
included in the denominator for each individual measure. Third, we 
would calculate the weighted score for each

[[Page 89175]]

measure within the measure topic by dividing the number of patients 
included in the denominator for each individual measure by the total 
number of eligible patients for all of the measures within the measure 
topic and multiplying by the respective measure score. Finally, we 
would add the weighted measure scores together and round them to the 
nearest integer. An example of how we would calculate the measure topic 
score for a facility that treats the minimum number of patients to be 
eligible for scoring on all four of the measures is provided below.
[GRAPHIC] [TIFF OMITTED] TR12NO24.014

    We noted in the proposed rule that a facility would not need to be 
eligible for scoring on all four individual measures to receive a 
measure topic score (89 FR 55814). For example, a facility that 
exclusively treats adult HD patients and, for that reason, is eligible 
to be scored on only the Kt/V Adult HD measure would receive a topic 
score that is the same score as its individual Kt/V measure score. We 
stated that the proposed measure topic scoring considers both a 
facility's individual ESRD patient population and the treatment 
modalities it offers, and then weights its performance on the topic 
proportionately to its overall ESRD patient population. As a result, we 
believe that a facility's measure topic score will be more reflective 
of its actual performance among its patient population and offered 
modalities than its current Kt/V Dialysis Adequacy Comprehensive 
clinical measure score, which is a composite assessment that blends the 
Kt/V measure data of all patients treated at that facility.
    We noted that we previously adopted a Kt/V Dialysis Adequacy 
Measure Topic that included three of the four measures that we were now 
proposing to include in the topic (adult HD Kt/V, adult PD Kt/V, and 
pediatric HD Kt/V) in the CY 2013 ESRD PPS final rule (77 FR 67487 
through 67490). In the CY 2015 ESRD PPS final rule (79 FR 66197 through 
66198), we updated the Kt/V Dialysis Adequacy Measure Topic to include 
the pediatric PD Kt/V measure as well. In the CY 2016 ESRD PPS final 
rule (80 FR 69053 through 69057), we replaced the Kt/V Dialysis Measure 
Topic with the current Kt/V Dialysis Adequacy Comprehensive clinical 
measure, which assesses the percentage of all patient-months for both 
adult and pediatric patients whose average delivered dose of dialysis 
(either hemodialysis or peritoneal dialysis) met the specified 
threshold during the performance period. This change allowed more 
facilities to be eligible for measure scoring, which in turn allowed us 
to evaluate the care provided to a greater proportion of ESRD patients.
    At the time we finalized the Kt/V Dialysis Adequacy Comprehensive 
clinical measure, three facilities were eligible for scoring on the 
pediatric HD Kt/V measure, six facilities were eligible for scoring on 
the pediatric PD Kt/V measure, 1,402 facilities were eligible for 
scoring on the adult PD Kt/V measure, and 6,117 facilities were 
eligible for scoring on the adult HD Kt/V measure. Given the relatively 
low numbers of facilities eligible for scoring on the pediatric HD Kt/
V, pediatric PD KT/V, and adult PD Kt/V measures at that time, we 
adopted the Kt/V Dialysis Adequacy Comprehensive clinical measure to 
help ensure that data reflecting those patient populations contributed 
to facilities' total performance scores. Since the CY 2016 ESRD PPS 
final rule, however, we noted that Kt/V measure data (using the PY 
2024/CY 2022 ESRD QIP eligible facility list, CY 2022 EQRS data, and CY 
2022 claims data) indicates that more facilities are treating greater 
numbers of pediatric HD patients and pediatric PD patients, as well as 
greater numbers of adult PD patients, and therefore would be eligible 
to be scored on the individual measures based on an 11-patient case 
minimum (89 FR 55815). For example, there are now 21 pediatric HD 
facilities and 28 pediatric PD facilities with at least 11 qualifying 
patients. We stated that this shows a 600 percent increase in 
facilities eligible to be scored on the pediatric HD Kt/V measure, and 
a 366 percent increase in facilities eligible to be scored on the 
pediatric PD Kt/V measure, since the CY 2016 ESRD PPS final rule (89 FR 
55815). Additionally, there are now 2,538 facilities eligible for 
scoring on the adult PD Kt/V measure, an 81 percent increase since the 
CY 2016 ESRD PPS final rule. By contrast, we noted that the number of 
facilities eligible for scoring on the adult HD Kt/V measure has 
increased by 14 percent during that same period of time.
    In light of the increase in the proportions of pediatric HD 
patients, pediatric PD patients, and adult PD patients being treated at 
ESRD facilities since the time we adopted the Kt/V Dialysis Adequacy 
Comprehensive clinical measure, we have determined that it is 
appropriate and more reflective of facility performance to reintroduce 
the Kt/V Dialysis Adequacy Measure Topic in the ESRD QIP. In addition, 
we stated in the proposed rule that the proposed measure topic scoring 
methodology will more accurately capture facility performance with 
respect to dialysis adequacy because it assesses those facilities based 
on performance standards tailored according to Kt/V measurements that 
reflect ESRD patient age and treatment modality (89 FR 55815).
    We noted that the proposed replacement of the Kt/V Dialysis 
Adequacy Comprehensive clinical measure with a Kt/V Dialysis Adequacy 
Measure Topic would also not affect a facility's measure data reporting 
requirements. A facility would continue to report the same Kt/V measure 
data into EQRS and Medicare claims as it would for the current Kt/V 
Dialysis Adequacy Comprehensive clinical measure. However, under the 
proposed Kt/V Dialysis Adequacy Measure Topic, the measure data would 
be used to score the facility on four individual Kt/V measures, as 
applicable based on their

[[Page 89176]]

ESRD patient population and treatment modalities.
    In the proposed rule, we stated that the proposed replacement of 
the Kt/V Dialysis Adequacy Comprehensive clinical measure with a Kt/V 
Dialysis Adequacy Measure Topic would also advance the CMS National 
Quality Strategy Goals by scoring facilities on measure data that more 
accurately reflects the quality of care provided to different kinds of 
ESRD patients on different treatment modalities (89 FR 55815). We noted 
that the proposed Kt/V Dialysis Adequacy Measure Topic would allow us 
to evaluate dialysis adequacy in adult HD patients, adult PD patients, 
pediatric HD patients, and pediatric PD patients by scoring facilities 
in a way that accounts for differences in patient populations and 
treatment modalities. Therefore, this proposed update would ensure that 
a facility's performance on the measure topic more accurately reflects 
the quality of care provided by the facility.
    We welcomed public comment on this proposal to replace the Kt/V 
Dialysis Adequacy Comprehensive clinical measure with a Kt/V Dialysis 
Adequacy Measure Topic consisting of an adult HD Kt/V measure, an adult 
PD Kt/V measure, a pediatric HD Kt/V measure, and a pediatric PD Kt/V 
measure, for the PY 2027 ESRD QIP and subsequent years. The comments we 
received, and our responses are set forth below.
    Comment: Several commenters expressed support for the proposal to 
remove the current Kt/V Dialysis Adequacy Comprehensive clinical 
measure and replace it with a Kt/V Dialysis Adequacy Measure Topic, 
noting that the measure topic will more accurately reflect a facility's 
performance based on different patient populations and treatment 
modalities. Several commenters expressed the belief that the proposed 
Kt/V Dialysis Adequacy Measure Topic will provide a more nuanced 
assessment of dialysis adequacy which will enhance the accuracy and 
relevance of quality assessments within the program. A few commenters 
also expressed support for the proposed Kt/V Dialysis Adequacy Measure 
Topic, noting that the current Kt/V Dialysis Adequacy Comprehensive 
clinical measure lacks transparency in terms of performance regarding 
patient population or dialysis modality, and also masks underlying 
social disparities in dialysis adequacy. A commenter expressed support 
for the proposal to replace the Kt/V Dialysis Adequacy Comprehensive 
clinical measure with a Kt/V Dialysis Adequacy Measure Topic, noting 
that it does not change the current Kt/V data reporting requirements so 
there is minimal administrative burden associated with the proposed 
change.
    Response: We thank the commenters for their support.
    Comment: A few commenters expressed support for the proposal to 
replace the Kt/V Dialysis Adequacy Comprehensive clinical measure with 
the four individual Kt/V Dialysis Adequacy measures. A commenter 
expressed appreciation that the proposed update would align with other 
publicly reported data programs.
    Response: We thank the commenters for their support.
    Comment: A commenter expressed support for the inclusion of the 
pediatric HD Kt/V Dialysis Adequacy measure and the pediatric PD Kt/V 
Dialysis Adequacy measure, noting that including these measures in the 
Kt/V Dialysis Adequacy Measure Topic will help account for meaningful 
differences between pediatric and adult patient populations.
    Response: We thank the commenter for their support.
    Comment: A few commenters recommended that CMS adopt the original 
reporting requirements that assessed performance at the individual 
measure level, noting that reporting facility performance on the 
individual Kt/V measures would provide greater transparency to 
patients, caregivers, and health care providers. These commenters 
believed that such reporting requirements would be consistent with the 
legislative intent underlying the statutory authority of the ESRD QIP. 
A different commenter expressed concern that the measure data is not 
sufficiently transparent and that patients would not be able to assess 
a facility's performance relative to their specific treatment modality.
    Response: We believe that the Kt/V Dialysis Adequacy Measure Topic, 
consisting of an adult HD Kt/V measure, an adult PD Kt/V measure, a 
pediatric HD Kt/V measure, and a pediatric PD Kt/V measure, strikes a 
balance between scoring a facility on its overall quality of care 
related to Kt/V dialysis adequacy while also reflecting its performance 
on Kt/V dialysis adequacy specific to different patient populations and 
treatment modalities. We note that information regarding a facility's 
performance on the individual measures, as well as the resulting 
measure topic score, is provided during the preview period and in final 
reports shared with the facility. We believe that this approach to 
measuring dialysis adequacy will further incentivize improvement on 
dialysis adequacy performance standards, consistent with section 
1881(h) of the Act. We also note that data regarding facility 
performance on individual Kt/V dialysis adequacy measures is available 
through Dialysis Facility Compare, which reports the Kt/V dialysis 
adequacy measures individually on Care Compare. We will continue to 
monitor the Kt/V Dialysis Adequacy Measure Topic as it is implemented 
to ensure that it is sufficiently transparent in a way that is 
meaningful to patients, caregivers, and health care providers.
    Comment: A commenter recommended that CMS ensure that the new 
individual measures do not impose new administrative or reporting 
burdens on care providers that may divert resources away from patient 
care.
    Response: As we stated in the CY 2025 ESRD PPS proposed rule, the 
replacement of the Kt/V Dialysis Adequacy Comprehensive clinical 
measure with a Kt/V Dialysis Adequacy Measure Topic would not affect a 
facility's measure data reporting requirements, and therefore would not 
impose new administrative or reporting burdens on care providers (89 FR 
55815). A facility would continue to report the same Kt/V measure data 
into EQRS and Medicare claims as it does for the current Kt/V Dialysis 
Adequacy Comprehensive clinical measure.
    Comment: A commenter recommended including a measurement of 
residual kidney function (RKF) when appropriate in the determination of 
the HD Kt/V measure, noting the importance of taking RKF into account 
when assessing dialysis adequacy and the potential benefit to patient 
outcomes. Another commenter recommended that CMS adopt an alternate 
measure of dialysis adequacy for HD patients by looking at the percent 
of patients leaving dialysis at +/- 2 kg above/below their estimated 
dry weight.
    Response: We thank the commenters for these recommendations and 
will take them into consideration for future updates. We consider the 
current HD Kt/V measure specifications to be sufficient for purposes of 
assessing dialysis adequacy among HD patients because these 
specifications reflect current clinical practices in dialysis adequacy 
measurement and assess measurable data that may incentivize improvement 
in quality of care provided to HD patients. However, we will continue 
to monitor the HD Kt/V dialysis adequacy measures and will also 
continue to monitor scientific advances in the field of ESRD care to 
assess appropriate alternative measures of dialysis adequacy for 
consideration in future rulemaking.

[[Page 89177]]

    Comment: A commenter expressed concern regarding the use of Kt/V as 
a measure of dialysis adequacy for PD patients, noting that it may not 
be the most appropriate metric for patients who are new to dialysis or 
who have residual kidney function. This commenter recommended that CMS 
explore alternative measures of assessing dialysis adequacy for PD 
patients in future rulemaking.
    Response: We thank the commenters for these recommendations and 
will take them into consideration for future updates. The current PD 
Kt/V measure considers residual kidney function as part of the measure 
calculation, and excludes patients who have been on ESRD treatment for 
less than 91 days as of the first day of the reporting month, which 
makes it an appropriate metric for all PD patients who have residual 
kidney function and have been on ESRD treatment long enough to be 
eligible for inclusion in the measure's calculations.\107\ We consider 
the current PD Kt/V measure specifications to be sufficient for 
purposes of assessing dialysis adequacy among PD patients because these 
specifications reflect current clinical practices in dialysis adequacy 
measurement and assess measurable data that may incentivize improvement 
in quality of care provided to PD patients. However, we will continue 
to monitor the PD Kt/V dialysis adequacy measures for potential 
unintended consequences and will also continue to monitor scientific 
advances in the field of ESRD care to assess appropriate alternative 
measures of dialysis adequacy for PD patients for consideration in 
future rulemaking.
---------------------------------------------------------------------------

    \107\ https://www.cms.gov/files/document/esrd-measures-manual-v100.pdf.
---------------------------------------------------------------------------

    Comment: A few commenters expressed concern regarding the potential 
impact of the proposed Kt/V Dialysis Adequacy Measure Topic on home 
dialysis patients. A commenter expressed concern that the PD Kt/V 
measures could have unintentional consequences such as incentivizing 
in-center dialysis over home dialysis, which the commenter believed 
would result in diminished patient experience. A different commenter 
expressed concern that the proposed Kt/V Dialysis Adequacy Measure 
Topic will not sufficiently capture dialysis adequacy for home dialysis 
patients and recommended that CMS continue to explore ways to measure 
quality of care for home dialysis patients.
    Response: For facilities offering both in-center dialysis and home 
dialysis treatment options, the Kt/V Dialysis Adequacy Measure Topic 
will more accurately reflect a facility's dialysis adequacy performance 
by differentiating between the Kt/V measure data of all patients 
treated at that facility and assessing facilities based on the Kt/V 
measurements according to ESRD patient age and treatment modality. 
Because of this differentiation, we expect that the Kt/V Dialysis 
Adequacy Measure Topic will better reflect the quality of care provided 
to patients on home dialysis, without incentivizing in-center 
hemodialysis over home dialysis. We expect that care providers will 
assess whether in-center hemodialysis or home dialysis would be more 
appropriate for a patient based on the patient's specific case and 
treatment plan. However, we will continue to monitor the Kt/V Dialysis 
Adequacy Measure Topic as it is implemented to assess the impact on the 
home dialysis patient population.
    Comment: A few commenters did not support the proposal to replace 
the Kt/V Dialysis Adequacy Comprehensive clinical measure with a Kt/V 
Dialysis Adequacy Measure Topic. A commenter expressed concern that the 
Kt/V Dialysis Adequacy Comprehensive clinical measure is topped out. 
This commenter stated that replacing the Kt/V Dialysis Adequacy 
Comprehensive clinical measure with a Kt/V Dialysis Adequacy Measure 
Topic comprised of individual Kt/V Dialysis Adequacy measures will not 
be effective because the commenter believed that those individual 
measures are also topped out, and therefore recommended changing the 
current Kt/V Dialysis Adequacy Comprehensive clinical measure to a 
reporting measure instead. Another commenter recommended that, instead 
of the proposed update to measure Kt/V data by different modalities and 
patient ages, CMS should measure dialysis adequacy based on patient 
differences.
    Response: We disagree with the commenter's assertion that the 
individual Kt/V measures are topped out and therefore would make the 
Kt/V Dialysis Adequacy Measure Topic ineffective as a measure of a 
facility's dialysis adequacy performance. Quality measures that have 
been in use for several years may reach a stage where meaningful 
differences and improvement in performance are no longer achievable. 
These measures are referred to as ``topped-out'' and considered for 
removal from CMS quality improvement or value-based purchasing programs 
such as the ESRD QIP. When developing proposals for the CY 2025 ESRD 
PPS proposed rule, we assessed the ESRD QIP measure set to identify any 
measures that may be appropriate for removal due to their topped-out 
status. Based on our analysis, the NHSN Dialysis Event reporting 
measure was the only measure that achieved topped-out status. 
Furthermore, a facility's score on the Kt/V Dialysis Adequacy Measure 
Topic, consisting of an adult HD Kt/V measure, an adult PD Kt/V 
measure, a pediatric HD Kt/V measure, and a pediatric PD Kt/V measure, 
would be unique to each facility based on its own patient populations 
and their specific treatment modalities. This approach takes patient 
differences into account when measuring dialysis adequacy.
    Final Rule Action: After considering public comments, we are 
finalizing our proposal to replace the Kt/V Dialysis Adequacy 
Comprehensive clinical measure with a Kt/V Dialysis Adequacy Measure 
Topic consisting of an adult HD Kt/V measure, an adult PD Kt/V measure, 
a pediatric HD Kt/V measure, and a pediatric PD Kt/V measure, for the 
PY 2027 ESRD QIP and subsequent years.
3. Removal of the NHSN Dialysis Event Reporting Measure From the ESRD 
QIP Measure Set Beginning With PY 2027
    To ensure continued impact and effectiveness of our measure set on 
facility performance, we proposed to remove the NHSN Dialysis Event 
reporting measure beginning with PY 2027 (89 FR 55815). When we first 
adopted the NHSN Dialysis Event reporting measure in the CY 2012 ESRD 
PPS final rule (76 FR 70268 through 70269), we stated that reporting 
dialysis events to the NHSN by all facilities supports national goals 
for patient safety, including the reduction of Hospital Acquired 
Infections (HAIs). In the CY 2014 ESRD PPS final rule, we replaced the 
NHSN Dialysis Event reporting measure with the NHSN Bloodstream 
Infection (BSI) clinical measure (78 FR 72204 through 72207). We 
introduced the clinical version of the measure to hold facilities 
accountable for monitoring and preventing infections in the ESRD 
population, and to hold facilities accountable for their actual 
clinical performance on the measure. In the CY 2017 ESRD PPS final rule 
(81 FR 77879 through 77882), we reintroduced the NHSN Dialysis Event 
reporting measure to complement the NHSN BSI clinical measure as a way 
to incentivize facilities to report complete and accurate monthly 
dialysis event data in compliance with the NHSN Dialysis Event 
protocol.\108\ In reintroducing the

[[Page 89178]]

measure, we noted our concerns that facilities were not consistently 
reporting monthly dialysis event data, given the incentive to achieve 
high clinical performance scores on the NHSN BSI clinical measure. We 
stated that this may have been an unintended consequence of replacing 
the previous NHSN Dialysis Event reporting measure with the NHSN BSI 
clinical measure (81 FR 77879). Therefore, in the CY 2017 ESRD PPS 
final rule, we reintroduced the NHSN Dialysis Event reporting measure 
to be included in the ESRD QIP measure set along with the NHSN BSI 
Clinical Measure.
---------------------------------------------------------------------------

    \108\ For further information related to the NHSN Dialysis Event 
reporting measure, we refer readers to 76 FR 70268 through 70269 and 
78 FR 72204 through 72207.
---------------------------------------------------------------------------

    In the CY 2025 ESRD PPS proposed rule, we stated that, based on our 
analyses, facilities are consistently reporting monthly dialysis event 
data, and have been doing so for several years (89 FR 55815). In an 
assessment of ESRD QIP measure rate performance trends during PY 2020 
through PY 2022, performance in the 5th percentile through the 100th 
percentile was 100 percent on the NHSN Dialysis Event reporting measure 
for all three performance years, meaning that most eligible facilities 
reported data on the measure for each of those years.\109\ If most 
eligible facilities are reporting NHSN Dialysis Event measure data each 
year and measure performance levels at the 5th percentile and the 100th 
percentile are the same each year, then NHSN dialysis event data are 
now reported consistently and the measure is not likely to drive 
improvements in care.
---------------------------------------------------------------------------

    \109\ Partnership for Quality Measurement. 2023 Measure Set 
Review (MSR): End Stage Renal Disease Quality Incentive Program 
(ESRD-QIP). September 2023. Available at: https://p4qm.org/sites/default/files/2023-09/MSR-Report-ESRD-QIP-20230911.pdf.
---------------------------------------------------------------------------

    We stated that our proposal to remove the NHSN Dialysis Event 
reporting measure is consistent with evolving the program to focus on a 
measure set of high-value, impactful measures that have been developed 
to drive care improvements for a broader set of ESRD patients (89 FR 
55816). As such, we proposed to remove this measure from the ESRD QIP 
measure set under Sec.  413.178(c)(5)(i)(A), which is Measure Removal 
Factor 1 (measure performance among the majority of ESRD facilities is 
so high and unvarying that meaningful distinctions in improvements or 
performance can no longer be made). Although we believe that removing 
this measure would enable facilities to focus on the remaining measures 
in the ESRD QIP measure set, we noted that facilities would still be 
required to fully comply with the NHSN Dialysis Event protocol and 
report all dialysis event data, including BSI, for the NHSN BSI 
Clinical Measure.
    We welcomed public comment on our proposal to remove the NHSN 
Dialysis Event reporting measure from the ESRD QIP measure set, 
beginning with PY 2027. The comments we received, and our responses are 
set forth below.
    Comment: Several commenters expressed support for the proposal to 
remove the NHSN Dialysis Event reporting measure from the ESRD QIP 
measure set, beginning with PY 2027. A few commenters expressed support 
for the proposed removal because the measure is unlikely to drive 
improvements in care due to consistent reporting and high compliance. A 
few commenters expressed the belief that removing the measure from the 
ESRD QIP measure set will allow dialysis centers to focus on impactful 
measures and meaningful improvements in care. A few commenters 
recommended that CMS continue to reduce the number of measures in the 
ESRD QIP and focus on incentivizing improvements in critical and 
meaningful quality measures. A commenter expressed support for the 
proposed removal of the NHSN Dialysis Event reporting measure because 
facilities will still be required to comply with NHSN dialysis event 
protocol for the NHSN BSI clinical measure. A different commenter 
expressed support for the proposed removal because it would align the 
ESRD QIP with other publicly reported data programs. Another commenter 
expressed support for the proposal to remove the NHSN Dialysis Event 
reporting measure because the commenter believed the measure created 
incentives to decrease reported events that would potentially 
negatively impact patient care.
    Response: We thank the commenters for their support.
    Comment: A few commenters did not support the proposal to remove 
the NHSN Dialysis Event reporting measure from the ESRD QIP measure 
set, beginning with PY 2027. A commenter recommended that CMS retain 
the NHSN Dialysis Event reporting measure, noting that facilities would 
still need to report the data to comply with Dialysis Event protocol as 
part of the NHSN BSI clinical measure and therefore removing the 
measure from the ESRD QIP would not alleviate facility burden. A 
different commenter expressed concern with the proposal to remove the 
NHSN Dialysis Event reporting measure, believing that the removal will 
lead to facilities underreporting adverse events and recommended 
retaining the measure to encourage and incentivize accurate reporting 
to NHSN.
    Response: We thank the commenters for their feedback. Although we 
endeavor to minimize facility burden to the extent feasible, we 
proposed to remove the NHSN Dialysis Event reporting measure from the 
ESRD QIP measure set because 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. Additionally, 
removing the NHSN Dialysis Event reporting measure would enable 
facilities to focus on the remaining measures in the ESRD QIP measure 
set. We do not anticipate that removing the NHSN Dialysis Event 
reporting measure from the ESRD QIP measure set will lead to 
underreporting, as facilities would still be required to fully comply 
with the NHSN Dialysis Event protocol and report all dialysis event 
data (that is, BSI, IV antimicrobial starts, and pus, redness, and 
swelling) for the NHSN BSI Clinical Measure.
    Final Rule Action: After considering public comments, we are 
finalizing our proposal to remove the NHSN Dialysis Event reporting 
measure from the ESRD QIP measure set, beginning with PY 2027.
4. Revisions to the Clinical Care and Reporting Measure Domains 
Beginning With the PY 2027 ESRD QIP
    In the CY 2024 ESRD PPS final rule (88 FR 76481 through 76482), we 
finalized revisions to the ESRD QIP measure domains beginning with PY 
2027. The measure domains and weights we finalized in the CY 2024 ESRD 
PPS final rule were depicted in Table 13a of the CY 2025 ESRD PPS 
proposed rule (89 FR 55816) and are depicted in this final rule in 
Table 14a.

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    In the proposed rule, we proposed to revise the Clinical Care 
Domain beginning with PY 2027 to reflect our proposal to replace the 
Kt/V Comprehensive Dialysis Adequacy Comprehensive clinical measure 
with a Kt/V Dialysis Adequacy Measure Topic, and to revise the measure 
weights in the Reporting Measure Domain to reflect our proposal to 
remove the NHSN Dialysis Event reporting measure from the ESRD QIP 
measure set (89 FR 55816). Under our proposal, we stated that the 
weight of the Kt/V Dialysis Adequacy Topic would continue to be the 
same as the current weight of the Kt/V Dialysis Adequacy Comprehensive 
Measure, but that weight would be applied to a facility's measure topic 
score, instead of being applied, as it is now, to a facility's score on 
the single Kt/V Comprehensive Dialysis Adequacy Comprehensive clinical 
measure.
    Given our proposal to remove the NHSN Dialysis Event reporting 
measure from the ESRD QIP beginning with PY 2027, we also proposed to 
update the individual measure weights in the Reporting Domain to 
accommodate the proposed new number of measures (89 FR 55816). 
Consistent with our approach in the CY 2023 ESRD PPS final rule, we 
proposed to assign individual measure weights to reflect the proposed 
updated number of measures in the Reporting Measure Domain so that each 
measure is weighted equally (87 FR 67251 through 67253). Although we 
proposed to change the number of measures and the weights of the 
individual measures in the Reporting Measure Domain, we did not propose 
to change the weight of any of the five domains. The measures that 
would be included in each domain, along with the proposed new measure 
weights, for PY 2027 were depicted in Table 13b of the CY 2025 ESRD PPS 
proposed rule (89 FR 55817). These measure domains and weights, which 
we are finalizing as proposed, are depicted in this final rule in Table 
14b.

[[Page 89180]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.016

    We welcomed public comment on these proposals to update the 
Clinical Care Measure Domain and Reporting Measure Domain. The comments 
we received, and our responses are set forth below.
    Comment: A few commenters expressed support for the proposal to 
weight the Kt/V Dialysis Adequacy Measure Topic at 11 percent. A few 
commenters expressed appreciation that the weight appropriately 
reflects the statutorily required nature of the measure, while also 
allowing flexibility to assign more weight to other measures for which 
there is greater room for improvement. Another commenter expressed 
support for the proposed weight for the Kt/V Dialysis Adequacy Measure 
Topic because it is the same weight as the current Kt/V Dialysis 
Adequacy Comprehensive clinical measure.
    Response: We thank the commenters for their support.
    Comment: A few commenters expressed concern with the proposal to 
weight the Kt/V Dialysis Adequacy Measure Topic at 11 percent, 
believing that the proposed measure weight will disproportionately 
impact certain types of facilities. A commenter expressed concern that 
the proposed measure weight for the Kt/V Dialysis Adequacy Measure 
Topic disproportionately impacts home dialysis-only facilities, noting 
that they are not eligible for scoring on certain other measures. 
Another commenter recommended that CMS not limit the measure weight to 
11 percent, and to only score pediatric facilities on pediatric-
specific or cohort-neutral measures to ensure that the QIP is relevant 
to pediatric programs. This commenter expressed the belief that such 
steps are necessary to prevent unfair or inaccurate penalties based on 
ESRD QIP measures that are not relevant to the pediatric patient 
population.
    Response: We thank the commenters for their feedback and appreciate 
their concerns. The Kt/V Dialysis Adequacy Measure Topic will more 
accurately reflect a facility's dialysis adequacy performance by 
differentiating between the Kt/V measure data of all patients treated 
at that facility and assessing facilities based on the Kt/V 
measurements according to ESRD patient age and treatment modality. 
Although facilities are only scored on measures they are eligible for 
based on their reported data, we acknowledge that home dialysis 
facilities and pediatric facilities may be

[[Page 89181]]

disproportionately impacted because they are not eligible to be scored 
on certain ESRD QIP measures due to their specific patient population. 
However, we have concluded that the importance of accurately measuring 
dialysis adequacy for home dialysis ESRD patients and pediatric ESRD 
patients to incentivize improvements in the quality of care provided to 
those patient populations outweighs possible concerns regarding 
potential disproportionate impacts. Because facilities are not scored 
on measures for which they are not eligible based on their reported 
data, their score reflects the quality of care provided to patients 
based on the measures for which they are eligible. We will continue to 
assess potential policies aimed at expanding measure eligibility for 
these facilities in future rulemaking.
    Comment: A commenter requested that CMS limit the total weight of 
Kt/V measures to 11 percent because the commenter believed that the 
measure is topped out in many cases.
    Response: In the CY 2025 ESRD PPS proposed rule, we proposed that 
the weight of the Kt/V Dialysis Adequacy Topic would be 11 percent, the 
same weight as the Kt/V Dialysis Adequacy Comprehensive Measure (89 FR 
55816). Under our proposal, the total weight of the Kt/V measures would 
be 11 percent under the Kt/V Dialysis Adequacy Measure Topic.
    Comment: A few commenters expressed concern that the weights of 
individual measures in the Reporting Measure Domain do not adequately 
reflect the burden associated with each measure's criteria and 
reporting requirements. A commenter recommended that the Reporting 
Measure Domain carry a higher weight to reflect the significance of the 
individual reporting measures, as well as the substantial burden 
associated with compliance.
    Response: We take numerous factors into account when determining 
appropriate domain and measure weights, including clinical evidence, 
opportunity for improvement, clinical significance, and patient and 
provider burden (83 FR 56995 through 56996). We also consider (1) the 
number of measures and measure topics in a domain; (2) how much 
experience facilities have had with the measures and measure topics in 
a domain; and (3) how well the measures align with CMS's highest 
priorities for quality improvement for patients with ESRD (79 FR 
66214). We assign weights to the measure domains based on the clinical 
value and meaningfulness of the measures to patients, and the burden of 
complying with individual measure requirements. We believe that the 
Reporting Measure Domain weights are appropriate to incentivize the 
provision of high-quality health care for all ESRD QIP measures.
    Comment: A few commenters expressed the belief that the ESRD QIP's 
focus on meaningful measures should be reflected in the weights 
assigned to measure domains and individual measures. To ensure that the 
ESRD QIP takes a clinically driven approach to incentivizing 
improvement, a few commenters recommended that CMS work with 
organizations and care providers in the ESRD community to identify 
potential modifications to the individual measure weights. A few 
commenters expressed concern regarding the weighting distribution of 
individual measures relative to the growing number of measures in the 
ESRD QIP measure set. These commenters expressed the belief that there 
are too many individual measures within the ESRD QIP measure set, and 
that scoring facilities based on nearly 20 individual measures means 
that a facility's performance on each individual measure has little 
impact on the facility's overall score. A few commenters recommended 
that CMS reduce the ESRD QIP measure set by moving certain measures to 
Dialysis Facility Compare or by removing certain measures altogether 
where appropriate.
    Response: We agree with commenters that the weights should reflect 
clinical value and meaningfulness to patients, which we took into 
account in developing our measure domains and individual measure 
weights. We expect that the measure domains and weights provide 
facilities with meaningful incentives to improve performance on 
measures that align with clinical value and importance to patients. We 
note that we have developed the ESRD QIP measure set specifically to 
ensure that facilities focus on the most relevant clinical topics that 
will lead to improved quality of care and better outcomes for patients. 
Although we aim to minimize facility burden as much as feasible, we 
disagree that reducing the number of measures in the ESRD QIP should be 
a goal, absent justification under our measure removal factors codified 
at Sec.  413.178(c)(5)(i).
    Final Rule Action: After considering public comments, we are 
finalizing our proposals to update the Clinical Care Measure Domain and 
Reporting Measure Domain, beginning with PY 2027 as proposed, and 
therefore, are finalizing the ESRD QIP measure domains and measure 
weights provided in Table 14b in this section of the final rule.
5. Performance Standards for the PY 2027 ESRD QIP
    Section 1881(h)(4)(A) of the Act requires the Secretary to 
establish performance standards with respect to the measures selected 
for the ESRD QIP for a performance period with respect to a year. The 
performance standards must include levels of achievement and 
improvement, as determined appropriate by the Secretary, and must be 
established prior to the beginning of the performance period for the 
year involved, as required by sections 1881(h)(4)(B) and (C) of the 
Act. We refer readers to the CY 2013 ESRD PPS final rule (76 FR 70277), 
as well as Sec.  413.178(a)(1), (3), (7), and (12), for further 
information related to performance standards.
    In the CY 2024 ESRD PPS final rule (88 FR 76480 through 76481), we 
set the performance period for the PY 2027 ESRD QIP as CY 2025 and the 
baseline period as CY 2023. In the proposed rule, we estimated the 
performance standards for the PY 2027 clinical measures in Table 14 
using data from CY 2022, which was the most recent data available (89 
FR 55818). We are updating these performance standards for all 
measures, using CY 2023 data, in this final rule, in Table 15.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR12NO24.017

    In addition, we summarize in Table 16 our requirements for 
successful reporting on our previously finalized reporting measures for 
the PY 2027 ESRD QIP.

[[Page 89183]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.018

6. Eligibility Requirements for the PY 2027 ESRD QIP
    In the proposed rule, we proposed to update eligibility 
requirements as part of our proposal to replace the Kt/V Dialysis 
Adequacy Comprehensive clinical measure with a Kt/V Dialysis Adequacy 
Measure Topic beginning with PY 2027 (89 FR 55819). Our previously 
finalized and proposed new minimum eligibility requirements are 
described in Table 16 of the CY 2025 ESRD PPS proposed rule (89 FR 
55820) and provided in Table 17 of this final rule.

[[Page 89184]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.019


[[Page 89185]]


[GRAPHIC] [TIFF OMITTED] TR12NO24.020

BILLING CODE 4120-01-C
    We welcomed public comment on these proposals to update the minimum 
eligibility requirements to reflect the proposed Kt/V Dialysis Adequacy 
Measure Topic. We did not receive any comments on our proposals to 
update the minimum eligibility requirements to reflect the Kt/V 
Dialysis Adequacy Measure Topic.
    Final Rule Action: We are finalizing our proposals to update the 
minimum eligibility requirements to reflect the Kt/V Dialysis Adequacy 
Measure Topic, beginning with PY 2027 as proposed, and therefore, are 
finalizing the ESRD QIP eligibility requirements provided in Table 17 
in this section of the final rule.
7. Payment Reduction Scale for the PY 2027 ESRD QIP
    Under our current policy, a facility does not receive a payment 
reduction for a payment year in connection with its performance under 
the ESRD QIP if it achieves a TPS that is at or above the minimum TPS 
(mTPS) that we establish for the payment year. We have defined the mTPS 
in our regulations at Sec.  413.178(a)(8).
    Under Sec.  413.177(a), we implement the payment reductions on a 
sliding scale using ranges that reflect payment reduction differentials 
of 0.5 percent for each 10 points that the facility's TPS falls below 
the mTPS, up to a maximum reduction of 2 percent. In the proposed rule, 
we stated that for PY 2027, we estimated using available data that a 
facility must meet or exceed an mTPS of 51 to avoid a payment reduction 
(89 FR 55821). We noted that the mTPS estimated in the proposed rule 
was based on data from CY 2022 instead of the PY 2027 baseline period 
(CY 2023) because CY 2023 data were not yet available. We presented the 
estimated payment reduction scale in Table 17 of the CY 2025 ESRD PPS 
proposed rule (89 FR 55821). We stated our intention to update and 
finalize the mTPS and associated payment reduction ranges for PY 2027, 
using CY 2023 data, in this CY 2025 ESRD PPS final rule. We have now 
finalized the payment reductions that will apply to the PY 2027 ESRD 
QIP using updated CY 2023 data. The mTPS for PY 2027 will be 51, and 
the finalized payment reduction scale is shown in Table 18.
[GRAPHIC] [TIFF OMITTED] TR12NO24.021

C. Requests for Information (RFIs) on Topics Relevant to ESRD QIP

    As discussed in the following sections, in the CY 2025 ESRD PPS 
proposed rule we requested information on two topics to inform future 
revisions to the ESRD QIP. First, we requested information regarding 
potential future modifications to the existing ESRD QIP scoring 
methodology to reward facilities based on their performance and the 
proportion of their patients who are dually eligible for Medicare and 
Medicaid (89 FR 55822). Second, we requested information regarding 
potential updates to the data validation policy to encourage accurate, 
comprehensive reporting of ESRD QIP data (89 FR 55822 through 55823).
    In the CY 2025 ESRD PPS proposed rule, we noted that each of these 
sections in the proposed rule is a RFI only (89 FR 55821). In 
accordance with the implementing regulations of the Paperwork Reduction 
Act of 1995 (PRA), specifically 5 CFR 1320.3(h)(4), these general 
solicitations are exempt from the PRA. Facts or opinions submitted in 
response to general solicitations of comments from the public, 
published in the Federal Register or other publications, regardless of 
the form or format thereof, provided that no person is required to 
supply specific information pertaining to the commenter, other than 
that necessary for self-identification, as a condition of the agency's 
full consideration, are not generally considered information 
collections and therefore not subject to the PRA.

[[Page 89186]]

    We stated that respondents are encouraged to provide complete but 
concise responses (89 FR 55821). These RFIs are issued solely for 
information and planning purposes; they do not constitute a Request for 
Proposal (RFP), applications, proposal abstracts, or quotations. These 
RFIs do not commit the United States Government to contract for any 
supplies or services or make a grant award. Further, we noted that we 
were not seeking proposals through these RFIs and will not accept 
unsolicited proposals. Responders were advised that the United States 
Government will not pay for any information or administrative costs 
incurred in response to these RFIs; all costs associated with 
responding to these RFIs will be solely at the interested party's 
expense. Not responding to these RFIs does not preclude participation 
in any future procurement, if conducted. It is the responsibility of 
the potential responders to monitor these RFI announcements for 
additional information pertaining to this request. We noted that we 
will not respond to questions about the policy issues raised in these 
RFIs. CMS may or may not choose to contact individual responders. Such 
communications would only serve to further clarify written responses. 
Contractor support personnel may be used to review RFI responses. 
Responses to this notice are not offers and cannot be accepted by the 
United States Government to form a binding contract or issue a grant. 
We stated that information obtained as a result of these RFIs may be 
used by the United States Government for program planning on a non-
attribution basis (89 FR 55822). Respondents should not include any 
information that might be considered proprietary or confidential. These 
RFIs should not be construed as a commitment or authorization to incur 
cost for which reimbursement would be required or sought. All 
submissions become United States Government property and will not be 
returned. Finally, we noted that CMS may publicly post the comments 
received, or a summary thereof.
1. Request for Public Comment on Future Change to the Scoring 
Methodology To Add a New Adjustment That Rewards Facilities Based on 
Their Performance and the Proportion of Their Patients Who Are Dually 
Eligible for Medicare and Medicaid
    Achieving health equity, addressing health disparities, and closing 
the performance gap in the quality of care provided to disadvantaged, 
marginalized, or underserved populations continue to be priorities for 
CMS as outlined in the CMS National Quality Strategy.\110\ CMS defines 
``health equity'' as the attainment of the highest level of health for 
all people, where everyone has a fair and just opportunity to attain 
their optimal health regardless of race, ethnicity, disability, sexual 
orientation, gender identity, socioeconomic status, geography, 
preferred language, or other factors that affect access to care and 
health outcomes.\111\ We are working to advance health equity by 
designing, implementing, and operationalizing policies and programs 
that reduce avoidable differences in health outcomes.
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    \110\ Centers for Medicare & Medicaid Services. (2022) CMS 
National Quality Strategy. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/CMS-Quality-Strategy.
    \111\ Health Equity Strategic Pillar. Centers for Medicare & 
Medicaid Services. https://www.cms.gov/pillar/health-equity.
---------------------------------------------------------------------------

    The ESRD QIP adopted three new health-equity focused quality 
measures in the CY 2024 ESRD PPS final rule (88 FR 76437 through 76446; 
76466 through 76480). Although commenters were generally supportive of 
the new measures, a few commenters recommended that the ESRD QIP take 
additional action to support facilities that treat patient populations 
with higher proportions of health-related social needs (HRSNs) (88 FR 
76473). In the CY 2025 ESRD PPS proposed rule, we stated that we are 
considering updating our scoring methodology in future rulemaking to 
add Health Equity Adjustment bonus points to a facility's TPS that 
would be calculated using a methodology that incorporates a facility's 
performance across all five domains for the payment year and its 
proportion of patients with dual eligibility status (DES), meaning 
those who are eligible for both Medicare and Medicaid coverage (89 FR 
55822).
    In the 2016 Report to Congress on Social Risk Factors and 
Performance Under Medicare's Value-Based Purchasing Programs, the 
Office of the Assistant Secretary for Planning and Evaluation (ASPE) 
reported that beneficiaries with social risk factors had worse outcomes 
and were more likely to receive a lower quality of care.\112\ Patients 
with DES experience significant disparities are also likely to be more 
medically complex and remain one of the most vulnerable 
populations.\113\ \114\ \115\ DES remains the strongest predictor of 
negative health outcomes.\116\
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    \112\ Office of the Assistant Secretary for Planning and 
Evaluation, U.S. Department of Health & Human Services. First Report 
to Congress on Social Risk Factors and Performance in Medicare's 
Value-Based Purchasing Program. 2016. Available at: https://aspe.hhs.gov/sites/default/files/migrated_legacy_files/171041/ASPESESRTCfull.pdf.
    \113\ Johnston, K.J., & Joynt Maddox, K.E. (2019). The Role of 
Social, Cognitive, And Functional Risk Factors In Medicare Spending 
For Dual And Nondual Enrollees. Health Affairs (Project Hope), 
38(4), 569-576. https://doi.org/10.1377/hlthaff.2018.05032.
    \114\ Johnston, K.J., & Joynt Maddox, K.E. (2019). The Role of 
Social, Cognitive, and Functional Risk Factors in Medicare Spending 
for Dual and Nondual Enrollees. Health Affairs (Project Hope), 
38(4), 569-576. https://doi.org/10.1377/hlthaff.2018.05032.
    \115\ Wadhera, R.K., Wang, Y., Figueroa, J.F., Dominici, F., 
Yeh, R.W., & Joynt Maddox, K.E. (2020). Mortality and 
Hospitalizations for Dually Enrolled and Nondually Enrolled Medicare 
Beneficiaries Aged 65 Years or Older, 2004 to 2017. JAMA, 323(10), 
961-969. https://doi.org/10.1001/jama.2020.1021.
    \116\ Office of the Assistant Secretary for Planning and 
Evaluation, U.S. Department of Health & Human Services. Second 
Report to Congress on Social Risk Factors and Performance in 
Medicare's Value-Based Purchasing Program. 2020. Available at: 
https://aspe.hhs.gov/reports/second-report-congress-social-risk-medicares-value-based-purchasing-programs.
---------------------------------------------------------------------------

    We recently finalized a Health Equity Adjustment scoring policy for 
the Hospital Value-Based Purchasing (VBP) Program (88 FR 59092 through 
59106) and the Skilled Nursing Facility (SNF) VBP Program (88 FR 53304 
through 53316). These policies provide Health Equity Adjustment bonus 
points to top tier performing hospitals and SNFs with a high proportion 
of patients with DES, and each program's policy is tailored to meet the 
needs of the specific program. For example, in the Hospital VBP 
Program, the Health Equity Adjustment bonus is calculated based on a 
hospital's performance on each of the four measure domains and its 
proportion of patients with DES (88 FR 59095 through 59096). In the SNF 
VBP Program, the Health Equity Adjustment bonus is calculated based on 
a facility's performance on each measure and its proportion of patients 
with DES (88 FR 53309 through 53311).
    Our policy for scoring performance on the ESRD QIP is codified at 
Sec.  413.178(e). In the proposed rule, we requested public comment on 
potential future modifications to the existing scoring methodology to 
reward excellent care to underserved populations (89 FR 55822). We also 
noted that any Health Equity Adjustment bonus for the ESRD QIP would 
need to align with the Program's statutory requirements under section 
1881(h) of the Act. We welcomed public comment on the following:
    <bullet> Would a Health Equity Adjustment be valuable to the ESRD 
QIP?
    ++ If a Health Equity Adjustment would be valuable to the ESRD QIP, 
how should it be structured?

[[Page 89187]]

    ++ If a Health Equity Adjustment would not be valuable to the ESRD 
QIP, why not?
    <bullet> Are there other approaches that the ESRD QIP could propose 
to adopt to effectively address healthcare disparities and advance 
health equity?
    We received comments in response to this request for information 
and have summarized them here.
    Comment: Many commenters provided feedback on a Health Equity 
Adjustment. Several commenters expressed support for a Health Equity 
Adjustment, believing that it would be valuable to the ESRD QIP. 
Several commenters noted that ESRD is more prevalent among patient 
populations with higher social risk factors or from lower socioeconomic 
status or communities of color and observed that a Health Equity 
Adjustment could help promote more equitable care by rewarding 
excellent performance to underserved populations. Several commenters 
expressed support for a Health Equity Adjustment specific to the ESRD 
QIP, believing that it will help to reduce disparities among facilities 
that treat a greater proportion of DES patients. A few of these 
commenters observed that a Health Equity Adjustment may help to 
mitigate the impact of payment reductions that may disproportionately 
impact facilities that care for a greater proportion of low-income 
patients. A few other commenters noted that many facilities require 
more resources and specific care expertise to meet the care needs 
relevant to this patient population, and that a Health Equity 
Adjustment may further incentivize parity among care providers by 
providing them with resources necessary to provide high quality care to 
a complex patient population. A commenter expressed support for 
adopting a bonus scoring methodology for a Health Equity Adjustment in 
the ESRD QIP, noting that such a framework would align with current 
Health Equity Adjustments implemented in IPPS, SNF VBP, and ETC Model.
    A few commenters agreed that a Health Equity Adjustment would be 
valuable to the care providers and patients. These commenters 
recommended that CMS engage with organizations and care providers in 
the ESRD community to discuss potential Health Equity Adjustment 
options and related policies for inclusion in future rulemaking, which 
commenters believed would be helpful to ensure that a future Health 
Equity Adjustment is developed and implemented in a meaningful way.
    Several commenters expressed support for structuring the Health 
Equity Adjustment as a bonus that is applied to a facility's TPS. A few 
commenters recommended adding a Health Equity Adjustment bonus to a 
facility's TPS based on its performance in each of the five measure 
domains included in the TPS, adjusted for the facility's proportion of 
socioeconomically disadvantaged patients. A few commenters recommended 
that a Health Equity Adjustment be calculated based on a facility's 
performance across select measure domains, rather than all 5 measure 
domains. A commenter noted that fewer dialysis facilities are eligible 
for scoring on ICH CAHPS due to measure eligibility requirements, and 
therefore recommended that CMS exclude the Patient & Family Engagement 
domain from the measure performance calculation for purposes of 
calculating the Health Equity Adjustment. Another commenter recommended 
that a facility's performance within each measure domain should be 
assessed independently, such that a facility may be eligible for Health 
Equity Adjustment bonus points based on its performance in each domain. 
This commenter recommended that facility performance is grouped into 
three tiers for each domain, and that eligibility for HEA points be 
calculated based on the facility's performance within a given domain's 
tertile. A different commenter recommended that CMS calculate potential 
Health Equity Adjustment bonus points based on a facility's performance 
in Coordination, Clinical Care, and Safety measure domains relative to 
the quintile of that domain score.
    Several commenters offered recommendations regarding Health Equity 
Adjustment bonus application. A commenter recommended that a future 
Health Equity Adjustment policy be designed to award bonus points to 
facilities that serve greater proportions of underserved patient 
populations and have higher quality performance. A commenter 
recommended that CMS consider structuring the Health Equity Adjustment 
as a positive payment adjustment tied to improved health outcomes for 
DES patients, citing the health equity incentives in the ETC and IOTA 
models. Another commenter suggested that Health Equity Adjustment bonus 
points be awarded based on the percentage of patients from underserved 
populations treated at the facility. This commenter believed that this 
approach would help to ensure that facilities caring for patients in 
underserved communities have adequate resources, observing that such 
facilities are more likely to be impacted by payment penalties which 
may result in decreased ability to provide care to such patient 
populations.
    A few commenters recommended that CMS apply a Health Equity 
Adjustment bonus to a facility's TPS in a way that would allow 
facilities to move to a lesser payment reduction tier or a zero-payment 
reduction tier, believing that such a methodology would support 
facilities serving greater proportions of DES patients. A commenter 
recommended that Health Equity Adjustment bonus points should be 
limited to a maximum of 10 points to appropriately reward facilities 
for delivering excellent performance to underserved populations while 
also not skewing the TPS or creating unintended incentives.
    A commenter requested that any Health Equity Adjustment policy not 
require changes to the current process for calculating a facility's TPS 
or to the payment reduction scales. This commenter suggested the 
potential equity points be combined as a weighted average that uses the 
same weights as the TPS. The commenter recommended a methodology that 
included: (1) multiplying the measure performance scalar by a logistic 
exchange function representing the facility in the percent of DES 
patient-months, which would provide the pre-scaled Health Equity 
Adjustment bonus; (2) multiplying the pre-scaled Health Equity 
Adjustment bonus by 10 to scale the Health Equity Adjustment bonus for 
incorporation into the TPS; and (3) adding the Health Equity Adjustment 
points to the existing TPS for a maximum value of 100 points. Pursuant 
to this commenter's recommended framework, although facilities would be 
assessed against a modified TPS, the payment reduction scale would be 
set based on unmodified TPS ranges.
    A few commenters recommended that a Health Equity Adjustment should 
be structured so that it is not budget neutral, and therefore would not 
negatively impact facilities that don't qualify for the Health Equity 
Adjustment bonus. A few commenters observed that potential unintended 
consequences may result from a Health Equity Adjustment in the ESRD 
QIP, due to the unique nature of the program. These few commenters 
observed that a Health Equity Adjustment within the ESRD QIP would 
likely result in a decrease in the number and size of payment 
reductions imposed and recommended that CMS should not seek to increase 
overall payment reductions through other policy changes.

[[Page 89188]]

    A few commenters offered recommendations regarding potential 
grouping methodology for calculating eligibility for a Health Equity 
Adjustment. A commenter recommended that CMS group facilities into 
quartiles or quintiles to calculate eligibility for a Health Equity 
Adjustment bonus. This commenter noted that there are a greater number 
of eligible facilities in the ESRD QIP, as compared to other CMS 
programs that apply a Health Equity Adjustment. A different commenter 
recommended that CMS structure a ESRD QIP Health Equity Adjustment by 
grouping facility performance into three tiers for each Measure Domain, 
and that eligibility for Health Equity Adjustment bonus points be 
calculated based on the facility's performance within a given domain's 
tertile.
    Several commenters provided recommendations regarding the 
applicable patient population used to determine a facility's 
eligibility for Health Equity Adjustment consideration. A few 
commenters recommended that a Health Equity Adjustment account for both 
Medicare fee-for-service patients as well as Medicare Advantage 
patients to accurately represent the proportion of the targeted patient 
population. A commenter recommended that, in addition to DES patients, 
CMS include Medicaid-only and uninsured patients in its definition of 
underserved patient population. Another commenter recommended that CMS 
expand the applicability of Health Equity Adjustment eligibility to 
include low-income subsidy recipients, noting potential different 
impacts for facilities in states that did not expand their Medicaid 
programs. A different commenter recommended that CMS award Health 
Equity Adjustment bonus points based on the percentage of DES patients 
as well as low-income subsidy patients treated at the facility, noting 
that this approach would be consistent with the ETC Model. Another 
commenter recommended that CMS set a minimum threshold of 20 percent 
DES patient population for Health Equity Adjustment eligibility, noting 
that such a threshold would be consistent with the SNF VBP scoring 
policy.
    A few commenters expressed concern regarding potential unintended 
consequences that may result from a Health Equity Adjustment in the 
ESRD QIP. A few commenters expressed concern that a Health Equity 
Adjustment may create confusion by inflating or otherwise impacting a 
facility's TPS. A commenter noted that an adjustment to a facility's 
TPS based on a Health Equity Adjustment would create further confusion 
for patients seeking to understand the significance of a facility's 
publicly available TPS. A commenter observed that a Health Equity 
Adjustment may suggest that facilities with higher proportions of DES 
patients are held to a lower standard or that those patients are 
allowed to have poorer health outcomes. Another commenter noted that a 
Health Equity Adjustment may not be valuable to all ESRD facilities and 
recommended that CMS consider the potential impact on facilities in 
certain areas that may have limited resources. A different commenter 
expressed concern that a Health Equity Adjustment may result in 
unintended financial incentives and requested that CMS ensure that any 
Health Equity Adjustment policy continues to focus on advancing health 
equity. A commenter requested that CMS clarify how it anticipates 
measuring for health equity success.
    A few commenters expressed concern that a Health Equity Adjustment 
may not be valuable to the ESRD QIP. A commenter observed that a Health 
Equity Adjustment may not be sufficient or appropriate for the ESRD QIP 
as a means to address health disparities. Another commenter expressed 
concern that a Health Equity Adjustment would not be valuable because 
the ESRD QIP is a penalty-only program that does not award bonuses.
    A commenter recommended that the ESRD QIP adopt a peer grouping 
methodology, similar to the methodology used in the Hospital 
Readmissions Reduction Program (HRRP). This commenter expressed the 
belief that stratification into quintiles would promote competition 
among facilities within the same quintile and provide a more accurate 
comparison of facility performance that takes patient population into 
account.
    Several commenters recommended other approaches that the ESRD QIP 
could propose to adopt to effectively address healthcare disparities 
and advance health equity. A few commenters recommended that the ESRD 
QIP adopt efforts that are more directly aimed at addressing health 
disparities. A commenter recommended that services aimed at navigating 
care coordination and HRSN-related needs be included as part of the 
quality care provided by ESRD facilities. This commenter noted that a 
facility that has staff trained in identifying and addressing such 
needs may help to mitigate the increased risk of poor outcomes for ESRD 
patients tied to unmet HRSNs. A different commenter expressed support 
for the three health equity measures recently added to the ESRD QIP, 
but expressed concern that the measures do little to directly address 
systemic health disparities and that facilities do not have the 
resources necessary to identify and facilitate solutions to address 
HRSNs. This commenter noted that, although collecting such data is 
essential, health disparities will persist in the absence of additional 
funding necessary to address these issues. Another commenter 
recommended that CMS explore policy approaches outside the ESRD QIP to 
reduce health disparities in the ESRD patient population, urging CMS to 
invest in structural and systemic capabilities that facilities require 
to comprehensively support the care needs of a complex patient 
population.
    A commenter recommended that CMS consider restructuring the ESRD 
QIP to incorporate both negative and positive payment adjustments to 
incentivize high quality care and provide access to additional 
resources and support. This commenter expressed the belief that 
financial penalties do not necessarily facilitate improvement in 
quality of care, noting that such penalties also potentially reduce 
resources available to facilities that would benefit from them the 
most. Another commenter recommended that CMS continue to engage with 
the ESRD community to explore effective approaches to address health 
disparities and improve the quality of care provided to underserved 
populations.
    A commenter recommended that CMS consider whether within-facility 
analysis is appropriate for addressing health disparities in the ESRD 
patient population, noting that the diversity of patient populations 
among different dialysis facilities often reflect the diversity of the 
population of the area which the facility is located. A different 
commenter recommended that CMS consider the role of patient autonomy 
and agency in developing future health equity measures, noting that 
individual patients may differ in their level of interest and 
engagement.
    Response: We appreciate all of the comments and interest in this 
topic. We believe that this input is very valuable in the continuing 
development of our efforts to effectively address healthcare 
disparities and advance health equity. We will continue to take all 
concerns, comments, and suggestions into account for future development 
and expansion of our health equity-related efforts.

[[Page 89189]]

2. Request for Public Comment on Updating the Data Validation Policy 
for the ESRD QIP
    One of the critical elements of the ESRD QIP's success is ensuring 
that the data submitted to calculate measure scores and TPSs are 
accurate. The ESRD QIP includes two types of data validation for this 
purpose: The EQRS data validation (OMB Control Number 0938-1289) and 
the NHSN validation (OMB Control Number 0938-1340). In the CY 2019 ESRD 
PPS final rule, we adopted the CROWNWeb (now EQRS) data validation as a 
permanent feature of the Program (83 FR 57003). In the CY 2020 ESRD PPS 
final rule, we adopted the NHSN data validation as a permanent feature 
of the Program (84 FR 60727). Under both data validation policies, we 
validate EQRS and NHSN data from a sample of facilities randomly 
selected for validation. If a facility is randomly selected for 
validation but does not submit the requested records, 10 points are 
deducted from the facility's TPS.
    In the proposed rule, we requested public comment on ways to update 
the data validation policy to encourage accurate, comprehensive 
reporting of ESRD QIP data (89 FR 55823). We have reviewed data 
validation policies in other quality reporting programs such as the 
Hospital Inpatient Quality Reporting (IQR) Program (81 FR 57180) and 
the Hospital Outpatient Quality Reporting (OQR) Program (76 FR 74486). 
These programs have adopted data validation policies that require a 
hospital selected for data validation to achieve a 75 percent 
reliability or accuracy threshold to receive full credit for data 
validation reporting.
    We welcomed comments on potential future policy proposals that 
would encourage accurate, comprehensive reporting for data validation 
purposes, such as introducing a penalty for facilities that do not meet 
an established reporting or data accuracy threshold, introducing a 
bonus for facilities that perform above an established reporting or 
data accuracy threshold, developing targeted education on data 
validation reporting, or requiring that a facility selected for 
validation that does not meet an established reporting or data accuracy 
threshold be selected again the next year.
    We received comments in response to this request for information 
and have summarized them here.
    Comment: A few commenters offered feedback on ways to reduce 
administrative burden associated with participating in data validation. 
A few commenters recommended that CMS focus on improving the data 
validation system because they believe that the current framework is 
too burdensome for facilities. A few commenters recommended that CMS 
prioritize enhancing the functionality of EQRS and NHSN systems to 
facilitate easier data submission and correction, which commenters 
believe will support more accurate and comprehensive reporting. A 
commenter suggested that CMS adopt advanced technologies such as 
artificial intelligence (AI) and machine learning algorithms to reduce 
burden associated with traditional reporting mechanisms. A few 
commenters noted that the current data validation system is burdensome 
on facilities due to compliance requirements and timeframes, which 
commenters observed may detract from the facility's ability to focus 
resources on providing quality care. A few commenters expressed concern 
that smaller facilities faced a disproportionately greater 
administrative burden to comply with the data validation process, and 
therefore recommended that CMS look into mitigating that burden. A 
commenter recommended that CMS mitigate the burden on smaller 
facilities by ensuring that the data validation policy reflect 
variability across facility types. A few commenters recommended that 
CMS extend the submission window because the 60-day compliance 
timeframe is often challenging due to staffing constraints, absences, 
and competing priorities. A few commenters recommended that, to reduce 
administrative burden and encourage comprehensive and accurate 
reporting, CMS establish and distribute a schedule outlining which 
facilities will be included in the validation study and when, to 
provide facilities with adequate notice. A commenter recommended that 
CMS also provide a more predictable schedule for survey requests. A few 
commenters recommended that CMS reduce survey frequency, noting that 
completing surveys twice a year is time-consuming and further 
constrains already limited staff resources. A few commenters observed 
that previous validation study results suggest a level of stability 
that reduces the need for annual re-measurement. A commenter 
recommended that CMS reduce the frequency of data validation surveys to 
every five years or reasonable intervals. A commenter noted that CMS 
has reported consistently high accuracy rates of data reporting by 
participating facilities, which the commenter believes is an indication 
that the current data validation policy is generating accurate, 
comprehensive reporting of QIP data. A commenter noted that reducing 
the frequency of validation studies would provide facilities additional 
time to understand data collection requirements and ensure the accuracy 
of submissions.
    A few commenters suggested that CMS consider providing a bonus for 
facilities that perform above an established reporting or data accuracy 
threshold, but only if the funding for such bonus were not obtained by 
reducing payments to ESRD facilities. A commenter recommended that 
participation in data validation be voluntary and that participating 
facilities receive bonus points awarded to their TPS, rather than 
penalties for non-participation.
    A few commenters requested that CMS share the results of previous 
data validation studies to inform their recommendations regarding the 
establishment of a reporting or data accuracy threshold. A commenter 
expressed concern with updating the data validation policy, noting that 
insufficient data validation information was publicly available to 
provide comment on future updates to the data validation policy at this 
time. A few commenters recommended greater transparency with regard to 
the results of the data validations surveys. A few commenters noted 
that such transparency will help facilities understand their results 
and support targeted education efforts, which will lead to more 
accurate ESRD QIP data submitted for validation. Although a commenter 
expressed support for targeted education, this commenter opposed 
mandatory re-selection of facilities that do not meet an established 
reporting or data accuracy threshold because commenter believes that 
selected facilities need to be chosen at random.
    A few commenters recommended that any updates to the data 
validation system include robust due process protections that are 
similar to those provided through other audit programs operated by CMS. 
A commenter expressed the belief that due process policies will help to 
ensure the accuracy of data submitted by ensuring that there is 
opportunity to address potential issues with data submission and 
interpretation to ensure that facilities are not unfairly penalized.
    Response: We appreciate all of the comments and interest in this 
topic. We believe that this input is very valuable in the continuing 
development of our efforts to encourage accurate, comprehensive 
reporting for data validation purposes. We will continue to take all 
concerns, comments, and

[[Page 89190]]

suggestions into account for future development and expansion of these 
efforts.

V. End-Stage Renal Disease Treatment Choices (ETC) Model

A. Background

    Section 1115A of the Act authorizes the Innovation Center to test 
innovative payment and service delivery models expected to reduce 
Medicare, Medicaid, and Children's Health Insurance Program (CHIP) 
expenditures while preserving or enhancing the quality of care 
furnished to the beneficiaries of these programs. The purpose of the 
ETC Model is to test the effectiveness of adjusting certain Medicare 
payments to ESRD facilities and Managing Clinicians to encourage 
greater utilization of home dialysis and kidney transplantation, 
support ESRD Beneficiary modality choice, reduce Medicare expenditures, 
and preserve or enhance the quality of care. As described in the 
Specialty Care Models final rule (85 FR 61114), beneficiaries with ESRD 
are among the most medically fragile and high-cost populations served 
by the Medicare program. ESRD Beneficiaries require dialysis or kidney 
transplantation to survive, and the majority of ESRD Beneficiaries 
receiving dialysis receive hemodialysis in an ESRD facility. However, 
as described in the Specialty Care Models final rule, alternative renal 
replacement modalities to in-center hemodialysis, including home 
dialysis and kidney transplantation, are associated with improved 
clinical outcomes, better quality of life, and lower costs than in-
center hemodialysis (85 FR 61264).
    The ETC Model is a mandatory payment model. ESRD facilities and 
Managing Clinicians are selected as ETC Participants based on their 
location in Selected Geographic Areas--a set of 30 percent of Hospital 
Referral Regions (HRRs) that have been randomly selected to be included 
in the ETC Model, as well as HRRs with at least 20 percent of ZIP 
codes\TM\ located in Maryland.\117\ CMS excludes all United States 
Territories from the Selected Geographic Areas.
---------------------------------------------------------------------------

    \117\ ZIP code\TM\ is a trademark of the United States Postal 
Service.
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    Under the ETC Model, ETC Participants are subject to two payment 
adjustments. The first is the Home Dialysis Payment Adjustment (HDPA), 
which is an upward adjustment on certain payments made to participating 
ESRD facilities under the ESRD Prospective Payment System (PPS) on home 
dialysis claims, and an upward adjustment to the Monthly Capitation 
Payment (MCP) paid to participating Managing Clinicians on home 
dialysis-related claims. The HDPA applies to claims with claim service 
dates beginning January 1, 2021, and ending December 31, 2023.
    The second payment adjustment under the ETC Model is the 
Performance Payment Adjustment (PPA). For the PPA, we assess ETC 
Participants' home dialysis rates and transplant rates during a 
Measurement Year (MY), which includes 12 months of performance data. 
Each MY has a corresponding PPA Period--a 6-month period that begins 6 
months after the conclusion of the MY. We adjust certain payments for 
ETC Participants during the PPA Period based on the ETC Participant's 
home dialysis rate and transplant rate, calculated as the sum of the 
transplant waitlist rate and the living donor transplant rate, during 
the corresponding MY.
    Based on an ETC Participant's achievement in relation to benchmarks 
based on the home dialysis rate and transplant rate observed in 
Comparison Geographic Areas during the Benchmark Year, and the ETC 
Participant's improvement in relation to their own home dialysis rate 
and transplant rate during the Benchmark Year, we would make an upward 
or downward adjustment to certain payments to the ETC Participant. The 
magnitude of the positive and negative PPAs for ETC Participants 
increases over the course of the Model. These PPAs apply to claims with 
claim service dates beginning July 1, 2022 and ending June 30, 2027.
    CMS has modified the ETC Model several times. In the CY 2022 ESRD 
PPS final rule, we finalized a number of changes to the ETC Model. We 
adjusted the calculation of the home dialysis rate (86 FR 61951 through 
61955) and the transplant rate (86 FR 61955 through 61959) and updated 
the methodology for attributing Pre-emptive LDT Beneficiaries (86 FR 
61950 through 61951). We changed the achievement benchmarking and 
scoring methodology (86 FR 61959 through 61968), as well as the 
improvement benchmarking and scoring methodology (86 FR 61968 through 
61971). We specified the method and requirements for sharing 
performance data with ETC Participants (86 FR 61971 through 61984). We 
also made a number of updates and clarifications to the kidney disease 
patient education services waivers and made certain related 
flexibilities available to ETC Participants (86 FR 61984 through 
61994). In the CY 2023 ESRD PPS final rule (87 FR 67136) we finalized 
further changes to the ETC Model. We updated the PPA achievement 
scoring methodology beginning in the fifth MY of the ETC Model, which 
began on January 1, 2023 (87 FR 67277 through 67278). We also clarified 
requirements for qualified staff to furnish and bill kidney disease 
patient education services under the ETC Model's Medicare program 
waivers (87 FR 67278 through 67280) and finalized our intent to publish 
participant-level model performance information to the public (87 FR 
67280). In the CY 2024 ESRD PPS final rule (88 FR 76344) we finalized a 
policy whereby an ETC Participant may seek administrative review of a 
targeted review determination provided by CMS.

B. Provisions of the Proposed Rule

    We proposed a modification to the definition of ESRD Beneficiary at 
42 CFR 512.310 as that definition is used for the purposes of 
attributing beneficiaries to the ETC Model. As finalized in the 
Specialty Care Models final rule and codified at Sec.  512.360, CMS 
retrospectively, that is, following a MY, attributes ESRD Beneficiaries 
and Pre-emptive Living Donor Transplant (LDT) Beneficiaries to an ETC 
Participant for each month during a MY. An ESRD Beneficiary may be 
attributed to an ETC Participant if the beneficiary has already had a 
kidney transplant and has a non-AKI dialysis or MCP claim less than 12 
months after the beneficiary's transplant date and has a kidney 
transplant failure ICD-10 diagnosis code documented on any Medicare 
claim. Based on feedback from model participants, we became aware that 
the use of the ICD-10 code T86.12 to identify transplant failures may 
be incorrectly identifying beneficiaries for attribution to the ETC 
Model because a claim that is only coded with T86.12 may signify 
delayed graft function rather than a true transplant failure. To ensure 
that we are correctly identifying ESRD beneficiaries for the purposes 
of ETC Model ESRD Beneficiary attribution, we proposed to modify our 
definition of an ESRD Beneficiary at Sec.  512.310. Our regulations 
currently define an ESRD Beneficiary as a beneficiary that meets either 
of the following criteria: (1) is receiving dialysis or other services 
for end-stage renal disease, up to and including the month in which the 
beneficiary receives a kidney transplant up to and including the month 
in which the beneficiary receives a kidney transplant, or (2) has 
already received a kidney transplant and has a non-AKI dialysis or MCP 
claim at least 12-months after the beneficiary's latest transplant 
date; or less than 12-months after the beneficiary's latest transplant 
date and

[[Page 89191]]

has a kidney transplant failure diagnosis code documented on any 
Medicare claim. We proposed to modify the second criterion to specify 
that the beneficiary's latest transplant date must be identified by at 
least one of the following: (1) two or more MCP claims in the 180 days 
following the date on which the kidney transplant was received; (2) 24 
or more maintenance dialysis treatments at any time after 180 days 
following the transplant date; or (3) indication of a transplant 
failure after the beneficiary's date of transplant based on data from 
the Scientific Registry of Transplant Recipients (SRTR). We proposed 
that if a beneficiary meets more than one of these criteria, that CMS 
will consider that beneficiary an ESRD Beneficiary for the purposes of 
ETC model attribution starting with the earliest month in which the 
transplant failure was recorded. In our analysis of the proposed 
methodology for identifying transplant failures, we found that the use 
of all three criterion correctly identified more true transplant 
failures than did the use of T86.12 alone.
    We considered a proposal to modify the language at 42 CFR 512.310 
that an ESRD Beneficiary is a beneficiary that has already received a 
kidney transplant and has a non-AKI or MCP dialysis claim less than 12 
months after the beneficiary's latest transplant date with kidney 
transplant failure diagnosis code documented on any Medicare claim. We 
considered removing the last clause; in other words, removing the 
specification that that the beneficiary must have a kidney transplant 
failure diagnosis code documented on any Medicare claim. We did not 
propose this modification to the definition of an ESRD Beneficiary 
because doing so would preclude the possibility for a beneficiary to be 
attributed to the ETC Model for 12-months after a transplant, 
regardless of if the transplant failed. We were concerned that this 
scenario would reduce the number of attributed beneficiary-months that 
would be available for us to use to calculate the home dialysis and 
transplant rate for ETC Participants. We solicited comment on our 
proposal to modify the definition of an ESRD Beneficiary to more 
accurately identify beneficiaries that may be attributed to the ETC 
Model due to receiving a kidney transplant that fails within 12-months 
of its receipt.
    Comment: We received four comments on this proposed policy and the 
alternative policy put forth for consideration, all expressing 
collective agreement on the methodology modification. Two Patient 
Advocacy Organizations agreed with our plan to modify these definitions 
as described and specifically agreed that if a beneficiary meets more 
than one of the amended criteria, then they should be considered an 
ESRD Beneficiary for the purposes of ETC model attribution starting 
with the earliest month in which the transplant failure was recorded. 
One commenter agreed with our decision to forgo the alternative policy 
to remove the specification that that the beneficiary must have a 
kidney transplant failure diagnosis code documented on any Medicare 
claim. One dialysis organization stated that they commend CMS' 
dedication to correctly identifying ESRD beneficiaries for attribution 
to the ETC Model. They believe the proposed clarification will help 
prevent beneficiaries with delayed graft function who have a claim 
coded with T86.12 from being incorrectly attributed to the ETC Model. 
The organization further encourages CMS to make needed refinements for 
the ETC Model's remaining duration and utilize its regulatory authority 
to mitigate penalties to physicians and dialysis providers.
    Response: We appreciate the commenters' dedicated engagement with 
the design of the ETC Model and the methodology by which we assess 
transplant beneficiary attributions. However, we uncovered an 
inconsistency in the rule text between Paragraph 3 and Paragraph 4 of 
the proposed definition of an ESRD beneficiary. Paragraph 3 suggests 
that a kidney transplant failure would be identified from a beneficiary 
who has ``at least'' one of the following three criteria, whereas 
Paragraph 4 in the proposed rule states that if a beneficiary meets 
``more than one'' of the criteria described in paragraphs (3)(i) 
through (iii) that they would then be considered an ESRD beneficiary. 
Given the specific comment from one interested party that expressed 
support for a beneficiary meeting more than one of the following 
criteria to be considered an ESRD Beneficiary for the purposes of ETC 
model attribution: (1) two or more MCP claims in the 180 days following 
the date on which the kidney transplant was received; (2) 24 or more 
maintenance dialysis treatments at any time after 180 days following 
the transplant date; or (3) indication of a transplant failure after 
the beneficiary's date of transplant based on data from the Scientific 
Registry of Transplant Recipients (SRTR), we plan to update the 
definition in paragraph three to resolve the inconsistency and delete 
the phrase ``at least one of the following''.
    Final Decision: In consideration of the comments received, we are 
finalizing our proposed modification to the definition of ESRD 
Beneficiary at 42 CFR 512.310 as that definition is used for the 
purposes of attributing beneficiaries to the ETC Model with one 
modification. We will delete the phrase ``at least one of the 
following'' from the definition of kidney transplant failure in 
paragraph 3 so it reads, ``Has a kidney transplant failure less than 12 
months after the beneficiary's latest transplant date as identified 
by''. Per paragraph 4 of the definition then, a beneficiary must meet 
more than one of the criteria laid out in paragraph 3 to qualify as 
having a kidney transplant failure.

C. Request for Information

1. Request for Information
    In the Specialty Care Models final rule, we referenced a report 
from the Public Policy/Advocacy Committee of the North American Chapter 
of the International Society for Peritoneal Dialysis that describes 
barriers to increased adoption of home dialysis including educational 
barriers, the need for home care partner support, the monthly visit 
requirement for the Monthly Capitation Payment (MCP) under the 
Physician Fee Schedule, variations in dialysis business practices in 
staffing allocation, lack of home clinic independence, and other 
restrictions resulting in the inefficient distribution of home dialysis 
supplies (85 FR 61265).\118\ The National Kidney Foundation (NKF) 
Kidney Disease Outcomes Quality Initiative (KDOQI) controversies 
conference report, ``Overcoming Barriers for Uptake and Continued Use 
of Home Dialysis: An NKF-KDOQI Conference Report,'' describes clinical, 
operational, policy, and societal barriers to increased prescribing of 
and retention on home modalities. For example, lack of clinical 
confidence in prescribing home dialysis, lack of infrastructure, 
financial costs to patients associated with home modifications, the 
need for space to store home dialysis supplies, lack of housing, lack 
of appropriate education, care partner burnout, and patient fear of 
self-cannulation.\119\
---------------------------------------------------------------------------

    \118\ Golper TA, Saxena AB, Piraino B, Teitelbaum, I, Burkart, 
J, Finkelstein FO, Abu-Alfa A. Systematic Barriers to the Effective 
Delivery of Home Dialysis in the United States: A Report from the 
Public Policy/Advocacy Committee of the North American Chapter of 
the International Society for Peritoneal Dialysis. American Journal 
of Kidney Diseases. 2011; 58(6): 879-885.doi:10.1053/
j.ajkd.2011.06.028.
    \119\ Chan, C.T., Collins, K., Ditschman, E.P., Koester-
Wiedemann, L., Saffer, T.L., Wallace, E., & Rocco, M.V. (2020). 
Overcoming barriers for uptake and continued use of home dialysis: 
An NKF-Kdoqi Conference Report. American Journal of Kidney Diseases, 
75(6), 926-934. https://doi.org/10.1053/j.ajkd.2019.11.007.

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[[Page 89192]]

    Since the Specialty Care Models final rule was published, 
interested parties have spoken to us about challenges associated with 
increasing access to home dialysis, particularly among beneficiaries 
with lower socioeconomic status, who have lower rates of home dialysis 
and kidney transplantation than people with higher socioeconomic 
status. The ETC Model was designed to address these barriers; for 
example, CMS applied the Home Dialysis Payment Adjustment (HDPA) to 
assist dialysis organizations with overcoming market realities that 
impose substantial barriers to opening and sustaining home dialysis 
programs. The upside and downside risk associated with the Performance 
Payment Adjustment (PPA) are designed to be strong incentives for 
behavioral change towards increasing beneficiary access to home 
dialysis. In the CY 2022 ESRD PPS final rule, we finalized a policy 
whereby we stratify achievement benchmarks based on the proportion of 
attributed beneficiaries who are dual eligible for both Medicare and 
Medicaid or who receive the Low-Income Subsidy (LIS) (86 FR 61968). We 
also finalized the Health Equity Incentive (HEI), which rewards ETC 
Participant aggregation groups that demonstrate greater than 2.5 
percentage points improvement on the home dialysis and transplant rate 
among dual eligible and LIS recipient beneficiaries from the Benchmark 
Year (BY) to the MY with a .5 increase in their improvement score (86 
FR 61971).
    Performance accountability in the ETC Model is scheduled to end on 
June 30, 2026. We are concerned that the end of performance 
accountability may reduce incentives for dialysis organizations to 
invest in access to home dialysis and address the challenges of the 
type we describe previously in this section. We were interested in 
hearing from interested parties regarding policies that the Innovation 
Center may consider specifically incorporating into any successor model 
to the ETC Model or that CMS may consider generally. Given the growth 
in ESRD beneficiaries choosing Medicare Advantage plans,\120\ we were 
particularly interested in approaches CMS could take to improve 
beneficiary access to home dialysis modalities in Medicare Advantage.
---------------------------------------------------------------------------

    \120\ Nguyen, K.H., Oh, E.G., Meyers, D.J., Kim, D., Mehrotra, 
R., & Trivedi, A.N. (2023). Medicare advantage enrollment among 
beneficiaries with end-stage renal disease in the first year of the 
21st Century Cures Act. JAMA, 329(10), 810. https://doi.org/10.1001/jama.2023.1426.
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    We sought input on the following topics that may improve our 
understanding of other policy interventions that may increase access to 
high quality home dialysis within the context of Innovation Center 
models and across CMS.
    1. How should any future Innovation Center model that incorporates 
home dialysis incorporate what the community has learned from the ETC 
Model?
    2. What barriers to home dialysis could be addressed through the 
ESRD Prospective Payment System (PPS)? We request that commenters be as 
specific as possible.
    3. What approaches could CMS consider to increase beneficiary 
access to home dialysis modalities in Medicare Advantage?
    4. How should nephrologist payment from traditional, fee-for-
service Medicare and from MAOs account for clinician-level barriers to 
prescribing and retaining patients on home modalities?
    We received comments in response to this request for information 
and have summarized them here.
    Comment: Inclusion of the Kidney Disease Education (KDE) Benefit. 
Several commenters expressed their belief in the usefulness of KDE as a 
tool for individuals with kidney failure to learn about their disease 
state and options for treatment. The commenters mentioned it is also 
well known that patients who receive early and accurate modality 
education, such as what is provided through KDE, are more likely to 
choose a home modality should their disease progress to ESRD. 
Commenters urge CMS to maintain the ETC's changes to the KDE program in 
any future models related to increasing home dialysis and waiving the 
20 percent coinsurance.
    Consideration of Pediatric Patients in Future Models. A 
professional society for pediatric nephrologists expressed appreciation 
for the exclusion of children under 18 from participation in the ETC 
Model. The commenter reiterated their belief of current model goals and 
further highlighted that young adults who continue to be treated by 
pediatric nephrologists once they turn 18 years old are a particularly 
complex group of patients. Of note, the commenter urged CMS to consider 
collaboration with representatives of the pediatric nephrology 
community on future models to incentivize home dialysis and 
transplantation.
    Increased Access to New and Innovative Drugs. A non-provider 
industry-associated interested party noted that within various CMS 
hospital inpatient and outpatient models advanced by the Innovation 
Center, add-on payments for innovative new technologies and therapies 
are purposely excluded from episode expenditures to ensure that 
Medicare beneficiaries have consistent access to innovations that 
improve their care. The interested party encourages the Innovation 
Center to apply the same reasoning and approach under future kidney 
models.
    Data and Quality Metrics. A dialysis organization encouraged CMS to 
reconsider the concept of comparing geographic areas in potential 
successor models. Additionally, the commenter and several patient 
advocacy organizations encouraged the inclusion of home dialysis 
measures with greater specificity, such as a home retention metric or 
optimal starts, and the development of a home dialysis patient 
satisfaction and experience measure. Similarly, for transplant, CMS was 
encouraged to consider removing metrics that run counter to 
beneficiaries' waitlisting, such as waitlist mortality, and consider 
adding metrics, such as referral to waitlist percentage and time from 
referral to waitlist. A commenter further highlighted future models 
with more efficient data sharing capabilities to access performance 
data would be a strength.
    Increased Efforts Towards Transplantation. Several commenters 
provided recommendations on ways to effectively increase 
transplantation, such as the creation of a patient navigator program to 
improve patient experience of care in seeking transplants.
    Social Drivers of Health. Several commenters expressed support of 
future models that test how additional resources and/or direct patient 
incentives aimed at addressing social drivers of health would impact 
the uptake of home modalities and ultimately whether quality of life is 
improved. Commenters reiterated previous recommendations that CMS work 
with HHS and the states to revise federal, state, and local fraud and 
abuse laws to support dialysis facilities and physicians in their 
efforts to help individuals with kidney failure address socio-economic 
barriers to home dialysis. A commenter also suggested some barriers 
contributing to the lower uptake of home dialysis in communities of 
color and underserved communities could be addressed by encouraging 
Medicare Advantage (MA) plans to apply the Special Supplemental 
Benefits for the Chronically Ill (SSBCI). The commenter suggested these 
benefits could be used to reduce barriers to

[[Page 89193]]

home dialysis, such as copay assistance programs for necessary dialysis 
related medications, stipends for utility costs and necessary home 
modifications, assistance for care partners or respite when needed, and 
assistance in installing and paying for broadband internet.
    Model Structure. Several commenters expressed their support for 
future models being voluntary and including more flexibilities for 
smaller providers, like the Comprehensive ESRD Choices (CEC) model. 
Additionally, stakeholders believe future models should have a 
financial structure based on anticipated savings to increase incentives 
and should include Medicare Advantage (MA) beneficiaries. Other 
commenters recommend a model that tests the impact of additional 
Medicare payments for a package of comprehensive care services to aid 
in investments in infrastructure and care management capabilities for 
dialysis providers.
    Recurring Barriers Elevated by Patients and Caregivers. Commenters 
elevated recurring barriers shared by patients and caregivers that 
dialysis providers noted being limited in their capacity to address, 
such as the fear of abandonment and/or lack of real time support in the 
home, inadequate space in the home for equipment and supplies, and the 
lack of available in-home support staff. A commenter suggested the 
development of a Technical Expert Panel (TEP) to evaluate evidence from 
the IM-HOME1 framework for resolving the barriers that exist for home 
dialysis.
    Incentivizing Peritoneal Dialysis (PD) Catheter Placement. 
Commenters elevated several barriers impacting timely PD catheter 
placement previously identified by CMS: (1) challenges scheduling 
operating room time in the hospital setting for PD catheter placement, 
(2) the need for additional training on PD catheter placement for both 
surgeons and interventional nephrologists, and (3) the lack of 
dedicated PD catheter insertion teams in the hospital setting who can 
immediately place catheters for patients who ``crash'' into dialysis 
and would benefit from urgent start PD. Commenters encourage CMS to 
develop a demonstration to test the impact of policy changes for equal 
reimbursement rates between PD catheter placement procedures and 
vascular access placement procedures. A patient advocacy organization 
recommended a bonus incentive payment for vascular surgeons, hospitals, 
and surgical centers, that would increase reimbursement for PD catheter 
placements and become equal with the reimbursements provided for 
Arteriovenous (AV) Fistula reimbursement.
    Fraud and Abuse Laws. Two commenters recommended we remove certain 
barriers that they believe are created by the physician self-referral 
law, Anti-Kickback Statute (AKS), and beneficiary inducement laws. The 
commenters described various arrangements they believe may be 
prohibited by such laws but would be beneficial to care coordination, 
management of patient care and disease progression, and patient 
education.
    Increased Data Transparency. Commenters strongly suggested that 
publicly accessible data is needed to ensure that beneficiaries with 
kidney failure who elect an MA plan maintain access to the care they 
need. CMS is encouraged to update MA data collection and reporting 
efforts to match other Medicare programs and better align incentives 
across the health care continuum.
    Time and Distance Standards and Network Adequacy. Commenters urge 
CMS to reconsider requiring time and distance standards in MA, as 
described in regulations at 42 CFR 422.116, for dialysis facilities 
that were removed in 2020. Interested parties across the kidney 
community have noticed unintended consequences on patients-including 
home dialysis patients-as a result of this amended policy. Patients and 
interested parties report that some plans have such narrow networks 
that patients have difficulty accessing vascular access surgeons, 
nephrologists, or even a dialysis facility near their homes. Commenters 
further note other patients have been listed as inactive on transplant 
waitlists because MA plans have removed their center from the network.
    Expanded Staff Training Requirements. A commenter noted that a big 
obstacle to home dialysis is the current training requirements that 
limit training to one patient at a time, and for that trainer be a 
Registered Nurse (RN). This leads to significant backlogs for training 
and deters potential patients. The national shortage of RNs limits the 
availability of trainers, and a core curriculum could be developed to 
train other professionals who could provide home dialysis training. CMS 
is further encouraged to create incentives to support new technologies 
that support mobile dialysis such that patients living in rural or 
remote parts of our country may have access to same standard of care as 
those that reside in a large urban area.
    Medicare Advantage (MA) Benchmarks and Plan Finder Tools. 
Commenters note that CMS should ensure that corresponding adjustments 
in MA benchmarks for ESRD are made to reflect any adjustments in FFS 
ESRD payments. Additionally, commenters stated that CMS should 
reinforce statutory requirements that MA patients maintain access to 
the same services as Medicare FFS patients, including home dialysis. 
Despite statutory requirements, commenters reported that many MA 
organizations (MAOs) limit beneficiary access to in-network home 
dialysis, a treatment modality to which all Medicare beneficiaries 
should maintain equitable access. Commenters further highlight that the 
Medicare.gov Plan Finder is a useful tool from CMS that helps people 
find MA and Medicare Part D plans available in their area and should 
include information regarding the availability of home dialysis 
programs by MA plan. In doing so, CMS can shift the responsibility away 
from patients and onto MAOs to ensure they are communicating clearly 
their plans' offerings and whether enrollees will have access to a home 
dialysis program. Commenters also believe MA plans would be 
incentivized to prioritize home dialysis uptake if home dialysis 
penetration was included as a new quality marker, in addition to 
established standards that measure their performance against a set of 
quality measures determined by CMS.
    Changes to Physician Payments for Referrals and Training. 
Interested parties believe that upstream incentive payments could serve 
as a benefit for those physicians doing particular work with patients 
in later CKD stages. CMS is also urged to consider providing a one-time 
incentive payment for referral to home dialysis--either PD or Home 
Hemodialysis (HHD). A complimentary policy change to the 
recommendations earlier, is the increased payment for HCPCS codes G0420 
and G0421, which are used for individual face-to-face education 
services and group face-to-face education services related to CKD. 
Commenters note that the codes have not been meaningfully updated.
    Commenters highlighted the payment system is currently underfunded 
by approximately 6.9 percent due to inadequate adjustments for 
inflation and may be insufficient to achieve the goal of 20 to 25 
percent of patients receiving dialysis at home. Minor inflationary 
updates have not accounted for the increased demand for home training 
nurses and staffing intensive TCU programs. Technological advances, 
like remote patient monitoring and other digital tools could help to 
fill the gap. A commenter noted that a TEP convened in May 2020 
concluded that

[[Page 89194]]

facilities spent between 7.5 and 8 hours training patients on home 
hemodialysis. CMS is encouraged to conduct an analysis to determine a 
more accurate number of hours per session needed for successful home 
dialysis training and subsequently revise the home dialysis training 
add-on payment amount to capture growing costs.
    Interested parties have reported barriers to physician training in 
home dialysis modalities has led to a reluctance to prescribe these 
therapies in practice. Additionally, the home dialysis training service 
codes, CPT codes 90989 (for a completed course of home dialysis 
training) and 90993 (for a single training session when the course is 
not completed) have not been updated. These are unique service codes in 
that they do not have relative value units (RVUs) assigned to them but 
rather flat rates of $500 for 90989 and $20 per session for 90993. 
Stakeholders believe an adjustment of this fee to $1,500 to $2000 would 
be a step in the right direction for incentivizing the nephrologists to 
offer home modality to their patients. Additionally, stakeholders 
recommend that CMS issue a transmittal for Medicare Administrative 
Contractors (MACs) clarifying that home dialysis training via CPT codes 
90989 and 90993 are covered services in the Medicare physician fee 
schedule.
    Response: We appreciate all the comments on and interest in the 
topics. We note that several of the suggestions made by commenters are 
beyond the scope of CMS' rulemaking authority. Nonetheless, we highly 
value this input, as it is essential to deliberations on future model 
successors and ESRD policy development as we work to advance 
administration initiatives to expand access to home dialysis and 
increase transplantation efforts.
    With respect to comments on fraud and abuse laws, thank you for the 
comments related to certain arrangements that facilitate value-based 
health care delivery and payment. We note that to the extent such 
arrangements create financial relationships for purposes of the 
physician self-referral law, we see no reason why the parties to the 
arrangements described by the commenters could not use existing 
exceptions to the physician self-referral law, including those for 
value-based arrangements, and why the financial relationships could not 
be structured to satisfy the requirements of an existing applicable 
exception. Also, CMS may determine that the AKS safe harbor for CMS-
sponsored model arrangements and CMS-sponsored model patient incentives 
(42 CFR 1001.952(ii)) is available to protect remuneration exchanged 
pursuant to certain financial arrangements or patient incentives 
permitted under future models. Such determination, if any, would be set 
forth in documentation separately issued by CMS.
    Final Decision: We intend to use comments received in response to 
this RFI to inform future policy development. CMS would propose any 
potential changes to payment policies through a separate notice and 
comment rulemaking.
2. Exemption of the RFI From the Paperwork Reduction Act Implementing 
Regulations
    Please note, this is a RFI only. In accordance with the 
implementing regulations of the Paperwork Reduction Act of 1995 (PRA), 
specifically 5 CFR 1320.3(h)(4), this general solicitation is exempt 
from the PRA. Facts or opinions submitted in response to general 
solicitations of comments from the public, published in the Federal 
Register or other publications, regardless of the form or format 
thereof, provided that no person is required to supply specific 
information pertaining to the commenter, other than that necessary for 
self-identification, as a condition of the agency's full consideration, 
are not generally considered information collections and therefore not 
subject to the PRA.
    Respondents are encouraged to provide complete but concise 
responses. This RFI is issued solely for information and planning 
purposes; it does not constitute a Request for Proposal (RFP), 
applications, proposal abstracts, or quotations. This RFI does not 
commit the United States Government to contract for any supplies or 
services or make a grant award. Further, we did not seek proposals 
through this RFI and will not accept unsolicited proposals. Responders 
are advised that the United States Government will not pay for any 
information or administrative costs incurred in response to this RFI; 
all costs associated with responding to this RFI will be solely at the 
interested party's expense. Not responding to this RFI does not 
preclude participation in any future procurement, if conducted. It is 
the responsibility of the potential responders to monitor this RFI 
announcement for additional information pertaining to this request. 
Please note that we will not respond to questions about the policy 
issues raised in this RFI. We may or may not choose to contact 
individual responders. Such communications would only serve to further 
clarify written responses. Contractor support personnel may be used to 
review RFI responses. Responses to this notice are not offers and 
cannot be accepted by the United States Government to form a binding 
contract or issue a grant. Information obtained as a result of this RFI 
may be used by the United States Government for program planning on a 
non-attribution basis. Respondents should not include any information 
that might be considered proprietary or confidential. This RFI should 
not be construed as a commitment or authorization to incur cost for 
which reimbursement would be required or sought. All submissions become 
United States Government property and will not be returned. We may 
publicly post the comments received, or a summary thereof.

VI. Collection of Information Requirements

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

A. ESRD QIP--Wage Estimates (OMB Control Numbers 0938-1289 and 0938-
1340)

    We refer readers to the CY 2024 ESRD PPS final rule for information 
regarding wage estimates and resulting information collection burden 
calculations used in this final rule (88 FR 76484 through 76485). To 
derive wage estimates in the CY 2025 ESRD PPS proposed rule, we used 
data from the United States Bureau of Labor Statistics' May 2022 
National Occupational Employment and Wage Estimates for Medical Records

[[Page 89195]]

Specialists, who are responsible for organizing and managing health 
information data, are the individuals tasked with submitting measure 
data to the ESRD Quality Reporting System (EQRS) (formerly, CROWNWeb) 
and the Centers for Disease Control and Prevention's (CDC's) NHSN, as 
well as compiling and submitting patient records for the purpose of 
data validation (89 FR 55825). In the proposed rule, we noted that when 
this analysis was conducted, the most recently available median hourly 
wage of a Medical Records Specialist was $22.69 per hour.\121\ In this 
final rule, we are updating the median hourly wage to $23.45 per hour, 
which reflects the most recently available data from the United States 
Bureau of Labor Statistics' May 2023 National Occupational Employment 
and Wage Estimates.\122\ We also calculate fringe benefit and overhead 
at 100 percent. We adjusted these employee hourly wage estimates by a 
factor of 100 percent to reflect current HHS department-wide guidance 
on estimating the cost of fringe benefits and overhead. Using these 
assumptions, in the proposed rule we estimated an hourly labor cost of 
$45.38 as the basis of the wage estimates for all collections of 
information calculations in the ESRD QIP (89 FR 55825). In this final 
rule, we are updating our previously estimated hourly labor cost to 
$46.90 as the basis of the wage estimates for all collections of 
information calculations in the ESRD QIP.
---------------------------------------------------------------------------

    \121\ https://www.bls.gov/oes/2022/may/oes292072.htm.
    \122\ https://www.bls.gov/oes/current/oes292072.htm.
---------------------------------------------------------------------------

    We used this wage estimate, along with updated facility and patient 
counts, to update our estimate for the total information collection 
burden in the ESRD QIP for PY 2027. We provide the re-estimated 
information collection burden associated with the PY 2027 ESRD QIP in 
section VI.C of this final rule.

B. Estimated Burden Associated With the Data Validation Requirements 
for PY 2027 (OMB Control Numbers 0938-1289 and 0938-1340)

    We refer readers to the CY 2024 ESRD PPS final rule for information 
regarding the estimated burden associated with data validation 
requirements for PY 2027 (88 FR 76485 through 76486). In the CY 2024 
ESRD PPS final rule, we estimated that the aggregate cost of the EQRS 
data validation for PY 2027 would be approximately $34,035 (750 hours x 
$45.38), or an annual total of approximately $113.45 ($34,035/300 
facilities) per facility in the sample. In this final rule, we are 
updating the aggregate cost of EQRS data validation for PY 2027 to 
reflect updated wage estimates. Using the most recently available data, 
we estimate that the aggregate cost of the EQRS data validation for PY 
2027 would be approximately $35,175 (750 hours x $46.90), or an annual 
total of approximately $117.25 ($35,175/300 facilities) per facility in 
the sample. The burden cost increase associated with these requirements 
will be submitted to OMB in the revised information collection request 
(OMB control number 0938-1289; Expiration date: November 30, 2025). In 
the CY 2024 ESRD PPS final rule and re-stated in the CY 2025 ESRD PPS 
proposed rule, we estimated that the aggregate cost of the NHSN data 
validation for PY 2027 would be approximately $68,070 (1,500 hours x 
$45.38), or a total of approximately $226.90 ($68,070/300 facilities) 
per facility in the sample (89 FR 55826). We are updating the aggregate 
cost of NHSN data validation to reflect updated wage estimates in this 
final rule. Based on the updated wage data, we estimate that the 
aggregate cost of the NHSN data validation for PY 2027 would be 
approximately $70,350 (1,500 hours x $46.90), or a total of 
approximately $234.50 ($70,350/300 facilities) per facility in the 
sample. While the burden hours estimate would not change, the burden 
cost updates associated with these requirements will be submitted to 
OMB in the revised information collection request (OMB control number 
0938-1340; Expiration date: November 30, 2025).

C. Estimated EQRS Reporting Requirements for PY 2027 (OMB Control 
Number 0938-1289)

    To estimate the burden associated with the EQRS reporting 
requirements (previously known as the CROWNWeb reporting requirements), 
we look at the total number of patients nationally, the number of data 
elements per patient-year that the facility would be required to submit 
to EQRS for each measure, the amount of time required for data entry, 
the estimated wage plus benefits applicable to the individuals within 
facilities who are most likely to be entering data into EQRS, and the 
number of facilities submitting data to EQRS. In the CY 2024 ESRD PPS 
final rule, we estimated that the burden associated with EQRS reporting 
requirements for the PY 2027 ESRD QIP was approximately $130.5 million 
for approximately 2,877,743 total burden hours (88 FR 76486).
    We are finalizing changes to the ESRD QIP measure set in this final 
rule, but do not anticipate that any of these policies would affect the 
burden we have previously estimated for EQRS reporting requirements for 
PY 2027. Beginning with PY 2027, we are finalizing our proposal to 
replace the Kt/V Dialysis Adequacy Comprehensive measure with a Kt/V 
Dialysis Adequacy Measure Topic. However, we are not updating facility 
reporting requirements as part of that finalized policy. Additionally, 
although we are finalizing our proposal to remove one measure from the 
ESRD QIP measure set beginning with PY 2027, the measure removal would 
not impact EQRS reporting requirements on facilities. We provided the 
burden estimate for PY 2027 in the CY 2025 ESRD PPS proposed rule (89 
FR 55826) and are updating the information collection burden to reflect 
updated wage estimates, along with updated facility and patient counts, 
in this final rule. In the CY 2025 ESRD PPS proposed rule, we estimated 
that the amount of time required to submit measure data to EQRS would 
be 2.5 minutes per element and did not use a rounded estimate of the 
time needed to complete data entry for EQRS reporting. We are further 
updating these estimates in this final rule. There are 136 data 
elements for 511,957 patients across 7,695 facilities, for a total of 
69,626,152 elements (136 data elements x 511,957 patients). At 2.5 
minutes per element, this would yield approximately 377.01 hours per 
facility. Therefore, the PY 2027 burden would be 2,901,090 hours 
(377.01 hours x 7,695 facilities). Using the updated wage estimate for 
a Medical Records Specialist, we estimate that the PY 2027 total burden 
cost would be approximately $136.1 million (2,901,090 hours x $46.90). 
The information collection request under the OMB Control Number: 0938-
1289 will be revised and sent to OMB.

D. ESRD Treatment Choices Model

    Section 1115A(d)(3) of the Act exempts Innovation Center model 
tests and expansions, which include the ETC Model, from the provisions 
of the PRA. Specifically, this section provides that the provisions of 
the PRA do not apply to the testing and evaluation of Innovation Center 
models or to the expansion of such models.

VII. Regulatory Impact Analysis

A. Statement of Need

1. ESRD PPS
    On January 1, 2011, we implemented the ESRD PPS, a case-mix 
adjusted, bundled PPS for renal dialysis services

[[Page 89196]]

furnished by ESRD facilities as required by section 1881(b)(14) of the 
Act, as added by section 153(b) of MIPPA (Pub. L. 110-275). Section 
1881(b)(14)(F) of the Act, as added by section 153(b) of MIPPA, and 
amended by section 3401(h) of the Affordable Care Act (Pub. L. 111-
148), established that beginning CY 2012, and each subsequent year, the 
Secretary shall annually increase payment amounts by an ESRD market 
basket percentage increase, reduced by the productivity adjustment 
described in section 1886(b)(3)(B)(xi)(II) of the Act. This final rule 
includes updates and policy changes to the ESRD PPS for CY 2025. These 
changes include a new wage index methodology which utilizes BLS data 
and reflects revised OMB CBSA delineations, a wage index budget-
neutrality adjustment factor, an expansion to the ESRD PPS outlier 
list, methodological changes to the outlier calculation, updates to the 
TPNIES offset amount, updates to the post-TDAPA add-on payment 
adjustment amounts for Korsuva[supreg] and Jesduvroq, changes to the 
LVPA payment structure, and an increase to the calculation of the TDAPA 
for phosphate binders. Failure to publish this final rule would result 
in ESRD facilities not receiving appropriate payments in CY 2025 for 
renal dialysis services furnished to ESRD beneficiaries.
    This final rule also has several policy changes to improve payment 
stability and adequacy under the ESRD PPS. These include updates to the 
LVPA and payments for ESRD outlier services. We believe that each of 
these changes will improve payment stability and adequacy under the 
ESRD PPS.
2. AKI
    This rule finalizes updates to the payment rate for renal dialysis 
services furnished by ESRD facilities to individuals with AKI. 
Additionally, we are extending Medicare payment for home dialysis to 
beneficiaries with AKI. As discussed in section III.C of this final 
rule, we also are applying the updates to the ESRD PPS base rate, wage 
index, and training add-on payment adjustment for home dialysis to the 
AKI dialysis payment rate. Failure to publish this final rule would 
result in ESRD facilities not receiving appropriate payments in CY 2025 
for renal dialysis services furnished to patients with AKI in 
accordance with section 1834(r) of the Act.
3. ESRD QIP
    Section 1881(h)(1) of the Act requires CMS to reduce the payments 
otherwise made to a facility under the ESRD PPS for a year by up to two 
percent if the facility does not satisfy the requirements of the ESRD 
QIP for that year. This rule finalizes updates for the ESRD QIP, which 
would remove the NHSN Dialysis Event reporting measure from the ESRD 
QIP measure set beginning with PY 2027 and replace the Kt/V Dialysis 
Adequacy Comprehensive clinical measure with a Kt/V Dialysis Adequacy 
Measure Topic beginning with PY 2027.
4. ETC Model
    The ETC Model is a mandatory Medicare payment model tested under 
the authority of section 1115A of the Act, which authorizes the 
Innovation Center to test innovative payment and service delivery 
models expected to reduce Medicare, Medicaid, and CHIP expenditures 
while preserving or enhancing the quality of care furnished to the 
beneficiaries of such programs.
    This final rule finalizes a change to the ETC Model, specifically 
to the methodology CMS uses to identify transplant failures for the 
purposes of defining an ESRD beneficiary and attributing an ESRD 
beneficiary to the ETC Model. As described in detail in section V.B of 
this final rule, we believe it is necessary, for the purposes of 
accuracy, to adopt this change to the ETC Model.

B. Overall Impact Analysis

    We have examined the impacts of this final rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), Executive Order 14094, entitled 
``Modernizing Regulatory Review'' (April 6, 2023), the Regulatory 
Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 
1102(b) of the Act, section 202 of the Unfunded Mandates Reform Act of 
1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on 
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 
804(2)).
    Executive 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 14094 amends section 3(f) of Executive Order 12866 (Regulatory 
Planning and Review). The amended section 3(f) of Executive Order 12866 
defines a ``significant regulatory action'' as an action that is likely 
to result in a rule: (1) having an annual effect on the economy of $200 
million or more in any 1 year, or adversely affect in a material way 
the economy, a sector of the economy, productivity, competition, jobs, 
the environment, public health or safety, or State, local, territorial, 
or Tribal governments or communities; (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising legal or policy 
issues for which centralized review would meaningfully further the 
President's priorities.
    A regulatory impact analysis (RIA) must be prepared for a 
regulatory action that is significant under section 3(f)(1). Based on 
our estimates of the combined impact of the ESRD PPS, ESRD QIP, and ETC 
provisions in this final rule, OIRA has determined this rulemaking is 
significant under section 3(f)(1) of E.O. 12866. Accordingly, we have 
prepared a Regulatory Impact Analysis that presents the costs and 
benefits of the rulemaking to the best of our ability. Pursuant to 
Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 
1996 (also known as the Congressional Review Act), OIRA has determined 
that this rule meets the criteria set forth in 5 U.S.C. 804(2). 
Therefore, OMB has reviewed this final regulation, and the Department 
has provided the following assessment of their impact.
1. ESRD PPS
    We estimate that the final revisions to the ESRD PPS would result 
in an increase of approximately $260 million in Medicare payments to 
ESRD facilities in CY 2025. This includes $220 million associated with 
the payment rate update, the updated post-TDAPA add-on payment 
adjustment amounts, and continuation of the approved TDAPA as 
identified in Table 19. This also includes approximately $40 million 
for the additional TDAPA payment for operational costs in excess of 100 
percent of ASP for phosphate binders, which is derived from 6 percent 
of per-patient phosphate binder spending based on utilization and cost 
data as discussed in section II.B.7.c. of this final rule. In addition, 
this amount includes, but is not impacted by, the following budget 
neutral changes to the ESRD PPS: updates to the outlier list, updates 
to the outlier methodology and thresholds, updates to the wage index 
methodology, updates to the OMB CBSA delineations, and changes to the 
LVPA.

[[Page 89197]]

    Although the incorporation of oral-only renal dialysis drugs and 
biological products into the ESRD PPS in CY 2025 is provided for by 
existing regulations and is not impacted by this final rule, we 
estimate for reference that total ESRD PPS spending for phosphate 
binders will be approximately $870 million ($220 million in beneficiary 
coinsurance payments and $650 million in Medicare Part B spending) in 
CY 2025 for the original phosphate binder TDAPA payment at 100 percent 
of ASP; however we note that these drugs are currently being paid for 
under Medicare Part D, which we estimate will lead to a decrease in 
spending of approximately $690 million ($0 million in beneficiary 
premium offset and $690 million in Medicare Part D spending), for a net 
payment increase of approximately $180 million.
2. AKI
    We estimate that the final updates to the AKI payment rate will 
result in an increase of approximately $2 million in Medicare payments 
to ESRD facilities in CY 2025.
3. ESRD QIP
    We estimate that, as a result of our previously finalized policies 
and the policies we are finalizing in this final rule, the updated ESRD 
QIP will result in $17.9 million in estimated payment reductions across 
all facilities for PY 2027.
4. ETC Model
    The change we are finalizing is the definition of an ESRD 
Beneficiary for the purposes of attribution in the ETC Model. This 
policy change is not expected to change the model's projected economic 
impact.
5. Summary of Impacts
    We estimate that the combined impact of the policies finalized in 
this rule on payments for CY 2025 is $260 million based on the 
estimates of the updated ESRD PPS and the AKI payment rates. We 
estimate the impacts of the ESRD QIP for PY 2027 to be $136.1 million 
in information collection burden and $17.9 million in estimated payment 
reductions across all facilities. Finally, we estimate that the final 
methodology change to the ETC Model will not affect the model's 
projected economic impact described in the Specialty Care Models final 
rule (85 FR 61114) and in the CY2022 ESRD PPS final rule (86 FR 61874).

C. Detailed Economic Analysis

    In this section, we discuss the anticipated benefits, costs, and 
transfers associated with the changes in this final rule. Additionally, 
we estimate the total regulatory review costs associated with reading 
and interpreting this final rule.
1. Benefits
    Under the CY 2025 ESRD PPS and AKI payment, ESRD facilities will 
continue to receive payment for renal dialysis services furnished to 
Medicare beneficiaries under a case-mix adjusted PPS. We continue to 
expect that making prospective Medicare payments to ESRD facilities 
will enhance the efficiency of the Medicare program. Additionally, we 
expect that updating the Medicare ESRD PPS base rate and rate for AKI 
treatments furnished by ESRD facilities by 2.2 percent based on the 
final CY 2025 ESRDB market basket percentage increase of 2.7 percent 
reduced by the final CY 2025 productivity adjustment of 0.5 percentage 
point will improve or maintain beneficiary access to high quality care 
by ensuring that payment rates reflect the best available data on the 
resources involved in delivering renal dialysis services. We estimate 
that overall payments under the ESRD PPS will increase by 2.7 percent 
as a result of the finalized policies in this rule.
2. Costs
a. ESRD PPS and AKI
    We do not anticipate the provisions of this final rule regarding 
ESRD PPS and AKI rates-setting will create additional cost or burden to 
ESRD facilities.
b. ESRD QIP
    We have made no changes to our methodology for calculating the 
annual burden associated with the information collection requirements 
for EQRS data validation (previously known as the CROWNWeb validation 
study) or NHSN data validation. Although we do not anticipate that the 
policies finalized in this final rule regarding ESRD QIP will create 
additional cost or burden to ESRD facilities for PY 2027, we are 
updating the estimated costs associated with the information collection 
requirements under the ESRD QIP, with updated estimates of the total 
number of ESRD facilities, the total number of patients nationally, 
wages for Medical Records Specialists or similar staff, and a refined 
estimate of the number of hours needed to complete data entry for EQRS 
reporting.
3. Transfers
    We estimate that the updates to the ESRD PPS and AKI payment rates 
will result in a total increase of approximately $220 million in 
Medicare payments to ESRD facilities in CY 2025, which includes the 
amount associated with final updates to the outlier thresholds, and 
final updates to the wage index. This estimate includes an increase of 
approximately $2 million in Medicare payments to ESRD facilities in CY 
2025 due to the updates to the AKI payment rate, of which approximately 
20 percent is increased beneficiary coinsurance payments. We estimate 
approximately $180 million in transfers from the Federal Government to 
ESRD facilities due to increased Medicare program payments and 
approximately $40 million in transfers from beneficiaries to ESRD 
facilities due to increased beneficiary coinsurance payments because of 
this final rule.
    We also estimate that the updates to the TDAPA payment policy for 
phosphate binders will result in an increase of approximately $40 
million in Medicare payments to ESRD facilities in CY 2025, which 
includes approximately $30 million in transfers from the Federal 
Government to ESRD facilities due to increased Medicare program 
payments and approximately $10 million in transfers from beneficiaries 
to ESRD facilities due to increased beneficiary coinsurance payments.
4. Regulatory Review Cost Estimation
    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this ESRD PPS final rule, 
we should estimate the cost associated with regulatory review. Due to 
the uncertainty involved with accurately quantifying the number of 
entities that will review the ESRD PPS final rule, we assume that the 
total number of unique commenters on this year's ESRD PPS proposed 
rule, which was 191 for the CY 2025 ESRD PPS proposed rule, is equal to 
the number of individual reviewers of this final rule. We acknowledge 
that this assumption may understate or overstate the costs of reviewing 
this final rule. It is possible that not all commenters reviewed this 
year's proposed rule in detail, and it is also possible that some 
reviewers chose not to comment on the CY 2025 ESRD PPS proposed rule. 
For these reasons we determined that the number of past commenters 
would be a fair estimate of the number of reviewers of this final rule. 
We used a similar methodology for calculating the regulatory review 
costs in the CY 2025 ESRD PPS proposed rule; in that proposed rule we 
welcomed any comments on the approach in estimating the number of 
entities which would review that proposed rule and did not receive any 
direct responses.
    We also recognize that different types of entities are in many 
cases affected by mutually exclusive sections of this final

[[Page 89198]]

rule, and therefore for the purposes of our estimate we assume that 
each reviewer reads approximately 50 percent of this proposal. We 
sought comments on this assumption.
    Using the May 2023 wage information from the BLS for medical and 
health service managers (Code 11-9111), we estimate that the cost of 
reviewing this rule is $129.28 per hour, including overhead and fringe 
benefits \123\ (https://www.bls.gov/oes/current/oes_nat.htm). Assuming 
an average reading speed of 250 words per minute, we estimate that it 
will take approximately 260 minutes (4.33 hours) for the staff to 
review half of this final rule, which has a total of approximately 
130,000 words. For each entity that reviews the rule, the estimated 
cost is $559.78 (4.33 hours x $129.28). Therefore, we estimate that the 
total cost of reviewing this regulation is $106,917.98 ($559.78 x 191).
---------------------------------------------------------------------------

    \123\ Calculated by multiplying the mean wage for medical and 
health service managers by 2 to account for overhead and fringe 
benefits.
---------------------------------------------------------------------------

5. Impact Statement and Table
a. CY 2025 End-Stage Renal Disease Prospective Payment System
(1) Effects on ESRD Facilities
    To understand the impact of the changes affecting Medicare payments 
to different categories of ESRD facilities, it is necessary to compare 
estimated payments in CY 2024 to estimated payments in CY 2025. To 
estimate the impact among various types of ESRD facilities, it is 
imperative that the estimates of Medicare payments in CY 2024 and CY 
2025 contain similar inputs. Therefore, we simulated Medicare payments 
only for those ESRD facilities for which we can calculate both current 
Medicare payments and new Medicare payments.
    For this final rule, we used CY 2023 data from the Medicare Part A 
and Part B Common Working Files as of August 02, 2024, as a basis for 
Medicare dialysis treatments and payments under the ESRD PPS. We 
updated the 2023 claims to 2024 and 2025 using various updates. The 
final updates to the ESRD PPS base rate are described in section II.B.4 
of this final rule. Table 19 shows the impact of the estimated CY 2025 
ESRD PPS payments compared to estimated Medicare payments to ESRD 
facilities in CY 2024.
BILLING CODE 4120-01-P

[[Page 89199]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.022


[[Page 89200]]


[GRAPHIC] [TIFF OMITTED] TR12NO24.023

BILLING CODE 4120-01-C
    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 final 
routine updates to the outlier payment policy, including final changes 
to the inflation factors used for calculating MAP and FDL amounts 
described in section II.B.3 of this final rule, is shown in column C. 
For CY 2025, the impact on all ESRD facilities because of the final 
changes to the outlier payment policy would be an increase in estimated 
Medicare payments of approximately 0.4 percent.
    Column D shows the effect of the final 2-tiered LVPA as described 
in section II.B.8 of this final rule. This adjustment is implemented in 
a budget neutral manner, so the total impact of this change will be 0.0 
percent. However, there will be distributional impacts of this change, 
primarily increasing payments to facilities that furnish fewer than 
3,000 treatments by 0.8 percent and lowering payments to ESRD 
facilities that furnish between 3,000 and 4,000 treatments by 0.5 
percent. Because we are finalizing our proposal to use the scaled 
adjustment factors, the only impact of this policy is among ESRD 
facilities that are eligible for the LVPA.
    Column E shows the effect of year-over-year payment changes related 
to the post-TDAPA add-on payment adjustment amounts as described in 
section II.B.6 of this final rule and current TDAPA payments. The post-
TDAPA add-on payment adjustment will not be budget neutral, but the 
total impact on payment is 0.1 percent due to relatively low 
utilization of drugs for which we will pay this adjustment in CY 2025.
    Column F reflects the impact of the expansion of outlier 
eligibility to formerly composite rate drugs. Overall, the changes to 
the outlier policy, including those reflected in column C of this 
table, are budget neutral insofar as we estimate that we will better 
hit the 1 percent target for outlier payments. These changes will 
increase payments for facilities that treat a higher proportion of 
exceptionally costly cases.
    Column G reflects the effect of the finalized changes to the ESRD 
PPS wage index methodology, the adoption of the new OMB CBSA 
delineations, the continued application of the 5 percent cap on wage 
index decreases, and the rural transition policy as described in 
section II.B.2 of this final rule. This update will be budget neutral, 
so the total impact of this policy change is 0.0 percent. However, 
there will be distributional impacts of this change. The largest 
increase will be to ESRD facilities in Puerto Rico and the Virgin 
Islands, which would receive 2.6 percent higher payments because of the 
updated ESRD PPS wage index. The largest decrease would be for ESRD 
facilities in the Pacific Census region, which will receive 2.4 percent 
lower payments because of the updated ESRD PPS wage index and 
methodological changes.
    Column H reflects the overall impact, that is, the effects of the 
outlier policy changes, LVPA changes, the post-TDAPA add-on payment 
adjustment amounts, the new wage index methodology, the new CBSA 
delineations, the rural transition policy, and the payment rate update 
as described in section II.B.4 of this final rule. The final ESRD PPS 
payment rate update for CY 2025 is 2.2 percent, which reflects the 
final ESRDB market basket percentage increase for CY 2025 of 2.7 
percent and the productivity adjustment of 0.5 percentage point. We 
expect that overall ESRD facilities will experience a 2.7 percent 
increase in estimated Medicare payments in CY 2025. The categories of 
types of ESRD facilities in the impact table show impacts ranging from 
a 0.2 percent increase to a 5.2 percent increase in their CY 2025 
estimated Medicare payments.
    This table does not include the impact of the inclusion of oral-
only drugs to the ESRD PPS as we are unable to calculate facility level 
estimates at this time, nor does it include the impacts of the increase 
to the TDAPA amount for phosphate binders as finalized in section 
II.B.7.c of this final rule. We cannot include the impact of this final 
change in Table 19 because we do not have the patient-level utilization 
data required to model facility-level uptake. As noted previously, the 
overall impact of this TDAPA increase is approximately $40 million. 
Furthermore, we note that the incorporation of oral-only renal dialysis 
drugs and biological products into the ESRD PPS beginning in CY 2025 is 
provided for by existing regulations and is not impacted by this final 
rule, other than the change in the TDAPA amount for phosphate binders. 
For public awareness, we estimate an increase in Medicare Part B 
spending of approximately $870 million in CY 2025, and a corresponding 
decrease in Medicare Part D spending of approximately $690 million in 
CY 2025, associated with payment for phosphate binders under the ESRD 
PPS.
(2) Effects on Other Providers
    Under the ESRD PPS, Medicare pays ESRD facilities a single bundled 
payment for renal dialysis services,

[[Page 89201]]

which may have been separately paid to other providers (for example, 
laboratories, durable medical equipment suppliers, and pharmacies) by 
Medicare prior to the implementation of the ESRD PPS. Therefore, in CY 
2025, we estimate that the ESRD PPS would have zero impact on these 
other providers.
(3) Effects on the Medicare Program
    We estimate that Medicare spending (total Medicare program 
payments) for ESRD facilities in CY 2025 would be approximately $6.2 
billion. This estimate considers a projected decrease in fee-for-
service Medicare ESRD beneficiary enrollment of 2.1 percent in CY 2025.
(4) 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 
2.7 percent overall increase in the CY 2025 ESRD PPS payment amounts, 
we estimate that there would be an increase in beneficiary coinsurance 
payments of 2.7 percent in CY 2025, which translates to approximately 
$40 million.
    As we have previously noted, the incorporation of oral-only renal 
dialysis drugs and biological products into the ESRD PPS in CY 2025 is 
provided for by existing regulations and is not impacted by this final 
rule. For public awareness, we estimate an increase in beneficiary 
coinsurance payments of $230 million. As noted in section II.B.7 of 
this final rule, we anticipate that the inclusion of oral-only drugs in 
the ESRD PPS will increase access to these drugs for beneficiaries, 
particularly disadvantaged populations who currently do not have Part D 
coverage.
(5) Alternatives Considered
(a) Wage Index Changes
    We considered, but did not finalize, a one-year delay to the 
implementation date for the new ESRD PPS wage index methodology. This 
delay would have allowed us further time to consider several potential 
methodological suggestions, including MedPAC's suggestions for 
smoothing across and variation within CBSAs. However, we have decided 
that such a delay is not appropriate, because we believe the new ESRD 
PPS wage index methodology is the best estimation available for the 
geographic variation in wages ESRD facilities face. We considered 
MedPAC's suggestions for the proposed rule and decided that they would 
introduce additional complexity and would involve parameters which 
could be seen as arbitrary for purposes of estimating wages for 
occupations related to furnishing renal dialysis services and involve 
lower-quality data sources. These alternatives would not have any 
specific impact on small entities as discussed in section VII.E of this 
final rule.
(b) Expansion of Outlier Eligibility
    We considered only expanding outlier eligibility to drugs and 
biological products previously paid for under the TDAPA after the end 
of the TDAPA period. As discussed in section II.B.3.b of this final 
rule, we have instead decided to finalize to expand outlier eligibility 
to all drugs and biological products that were or would have been 
composite rate services prior to the inception of the ESRD PPS. We 
believe that this is appropriate because formerly composite rate drugs 
represent potentially significant costs which are not currently 
accounted for by the outlier adjustment. Furthermore, most of the 
commenters' concerns with the inclusion of composite rate drugs 
revolved around concerns that should we overestimate outliers in one 
year we would reduce the ESRD PPS base rate in future years, which is 
with a misinterpretation of our outlier policy. These alternatives 
would not have any specific impact on small entities as discussed in 
section VII.E of this final rule.
(c) TDAPA Amount for Phosphate Binders
    We considered, but are not finalizing, paying the TDAPA for 
phosphate binders based on 106 percent of ASP, rather than the fixed 
addition to the TDAPA amount which we have finalized. Paying the TDAPA 
for phosphate binders at 106 percent of ASP for at least 2 years to 
mirror our TDAPA payment approach for the first 2 years for 
calcimimetics would have many of the same effects of the flat TDAPA 
increase we finalized, as we based the size of the flat increase off of 
6 percent of TDAPA expenditures. However, as discussed in section 
II.B.7.c of this final rule, we believe that paying 106 percent of ASP 
could potentially incentivize ESRD facilities to prescribe higher-cost 
phosphate binders to receive additional payment. We note that our final 
policy, with respect to TDAPA payment for phosphate binders, would best 
support small entities, as discussed in section VII.E of this final 
rule, as we expect small entities would have less bargaining power than 
large entities in negotiating prices for phosphate binders.
(d) Changes to the LVPA
    We considered, but did not finalize, a three tier LVPA which would 
be funded by eliminating the rural facility adjustment. This was a 
suggestion of several commenters who recommended the LVPA be expanded 
beyond the current 4,000 treatment volume threshold. However, our 
analysis found that the elimination of the rural facility adjustment 
would not provide nearly enough funds to establish a third LVPA tier, 
even if we were to lower the treatment volume threshold to 5,000 from 
the 6,000 suggested by commenters. As discussed in section II.B.8.c of 
this final rule, we are finalizing a two-tiered scaled LVPA in part 
because it would not lead to any budget neutrality reduction to the 
ESRD PPS base rate. In the proposed rule, we presented an alternative 
three-tiered LVPA which could be implemented by reducing the base rate, 
but commenters were generally not supportive of the idea. Although our 
proposal did not involve the elimination of the rural facility 
adjustment and the reallocation of those funds, we did not believe that 
commenters would support the proposal. Additionally, we believe that 
the rural facility adjustment is a useful tool which protects ESRD 
facilities in potentially vulnerable areas. The continued use of the 
rural facility adjustment likely benefits small entities, as discussed 
in section VII.E of this final rule, operating in rural areas. As 
discussed previously, eliminating the rural facility adjustment would 
not provide enough funds to fully cover the suggested approach, so such 
a policy would require budget neutrality reduction which would reduce 
payment to small entities that receive the LVPA.
b. Continuation of Approved Transitional Drug Add-On Payment 
Adjustments (TDAPA) for New Renal Dialysis Drugs or Biological Products 
for CY 2025
    Two renal dialysis drugs for which the TDAPA was paid in CY 2024 
will continue to be eligible for the TDAPA in CY 2025.
(1) Jesduvroq (Daprodustat)
    On July 27, 2023, CMS Transmittal 12157 \124\ implemented the 2-
year TDAPA period specified in Sec.  413.234(c)(1) for Jesduvroq 
(daprodustat). The TDAPA payment period began on October 1, 2023, and 
will continue through September 30, 2025. As stated previously, TDAPA

[[Page 89202]]

payment is based on 100 percent of ASP. If ASP is not available, then 
the TDAPA is based on 100 percent of WAC and, when WAC is not 
available, the payment is based on the drug manufacturer's invoice.
---------------------------------------------------------------------------

    \124\ CMS Transmittal 12157, dated July 27, 2023, is available 
at: https://www.cms.gov/files/document/r12157cp.pdf.
---------------------------------------------------------------------------

    In the proposed rule, we based our impact analysis on the most 
current 72x claims data from November 2023, when utilization first 
appeared on the claims, through February 2024. During that timeframe, 
the average monthly TDAPA payment amount for Jesduvroq (daprodustat) 
was $23,075. In applying that average to each of the 9 remaining months 
of the TDAPA payment period in CY 2025, we estimated $207,675 in 
spending ($23,075 * 9 = $207,675) of which, approximately $41,535 
($207,675 * 0.20 = $41,535) would have been attributed to beneficiary 
coinsurance amounts.
    Several commenters indicated that GlaxoSmithKline (GSK), 
Jesduvroq's manufacturer, is removing the drug from the market. The 
FDA's Orange Book \125\ identifies Jesduvroq's marketing status as 
discontinued. GSK indicated that the change in marketing status does 
not reflect a change in availability or in FDA's approval of the 
product. GSK could not state definitively that there will be no TDAPA 
claims in CY 2025. Because we have no way of estimating how the change 
in Jesduvroq's marketing status will affect utilization, we have 
carried the proposed rule estimates forward unchanged. That is, we 
estimate $207,675 in spending, of which, approximately $41,535 will be 
attributed to beneficiary coinsurance amounts.
---------------------------------------------------------------------------

    \125\ FDA's Orange Book: Approved Drug Products with Therapeutic 
Equivalence Evaluations. Accessed September 26, 2024. Available at: 
https://www.accessdata.fda.gov/scripts/cder/ob/results_product.cfm?Appl_Type=N&Appl_No=216951.
---------------------------------------------------------------------------

(2) DefenCath[supreg] (Taurolidine and Heparin Sodium)
    On May 9, 2024, CMS Transmittal 12628 \126\ implemented the 2-year 
TDAPA period specified in Sec.  413.234(c)(1) for DefenCath[supreg] 
(taurolidine and heparin sodium). The TDAPA payment period began on 
July 1, 2024, and will continue through June 30, 2026. As stated 
previously, TDAPA payment is based on 100 percent of ASP. If ASP is not 
available, then the TDAPA is based on 100 percent of WAC and, when WAC 
is not available, the payment is based on the drug manufacturer's 
invoice.
---------------------------------------------------------------------------

    \126\ CMS Transmittal 12628, dated May 9, 2024, is available at: 
https://www.cms.gov/files/document/r12628CP.pdf.
---------------------------------------------------------------------------

    As of the drafting of this final rule, DefenCath[supreg] was in the 
first few months of the TDAPA payment period. Complete claims data, 
upon which we could base CY 2025 Medicare impact estimates, was limited 
to the month of July 2024. Due to the limited timeframe of complete and 
available claims data, we believe that it would have been more 
appropriate to base Medicare impacts on cost and utilization volume 
estimates furnished by the manufacturer, recognizing that the 
manufacturer is most familiar with the market conditions affecting its 
products. We requested but did not receive utilization volume estimates 
from the manufacturer. Therefore, we based our impact analysis on the 
most current 72x claims data for the month of July 2024, when 
utilization first appeared on the claims. In July 2024, the average 
monthly TDAPA payment amount for DefenCath[supreg] was $2,118,827. In 
applying that average to each of the 12 months of the TDAPA payment 
period in CY 2025, we estimate $25,425,924 in spending ($2,118,827 * 12 
= $25,425,924) of which, approximately $5,085,184 ($25,425,924 * 0.20 = 
$5,085,184) will be attributed to beneficiary coinsurance amounts.
c. Payment for Renal Dialysis Services Furnished to Individuals With 
AKI
(1) Effects on ESRD Facilities
    To understand the impact of the finalized changes affecting 
Medicare payments to different categories of ESRD facilities for renal 
dialysis services furnished to individuals with AKI, it is necessary to 
compare estimated Medicare payments in CY 2024 to estimated Medicare 
payments in CY 2025. To estimate the impact among various types of ESRD 
facilities for renal dialysis services furnished to individuals with 
AKI, it is imperative that the Medicare payment estimates in CY 2024 
and CY 2025 contain similar inputs. Therefore, we simulated Medicare 
payments only for those ESRD facilities for which we can calculate both 
current Medicare payments and new Medicare payments.
    For this final rule, we used CY 2023 data from the Medicare Part A 
and Part B Common Working Files as of August 02, 2024, as a basis for 
Medicare for renal dialysis services furnished to individuals with AKI. 
We updated the 2023 claims to 2024 and 2025 using various updates. The 
updates to the AKI payment amount are described in section III.C of 
this final rule. Table 20 shows the impact of the estimated CY 2025 
Medicare payments for renal dialysis services furnished to individuals 
with AKI compared to estimated Medicare payments for renal dialysis 
services furnished to individuals with AKI in CY 2024.
BILLING CODE 4120-01-P

[[Page 89203]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.024


[[Page 89204]]


[GRAPHIC] [TIFF OMITTED] TR12NO24.025

BILLING CODE 4120-01-C
    Column A of the impact table indicates the number of ESRD 
facilities for each impact category, and column B indicates the number 
of AKI dialysis treatments (in thousands). Column C shows the effect of 
the final CY 2025 wage index changes, including the changes to the ESRD 
PPS wage index methodology, the adoption of the new OMB CBSA 
delineations, the continued application of the 5 percent cap on wage 
index decreases, and the rural transition policy as described in 
section II.B.2.f.(2) of this final rule. We note the rural adjustment 
does not apply to beneficiaries with AKI, so this column only 
incorporates the budget neutrality factor associated with that policy.
    Column D shows the overall impact, that is, the effects of the 
final wage index budget-neutrality adjustment factor, wage index 
updates, and the payment rate update of 2.2 percent, which reflects the 
final ESRDB market basket percentage increase for CY 2025 of 2.7 
percent and the final productivity adjustment of 0.5 percentage point, 
as well as the training add-on budget neutrality reduction of $0.00. We 
expect that overall ESRD facilities will experience a 2.3 percent 
increase in estimated Medicare payments in CY 2025 for treatment of AKI 
beneficiaries. This table does not include any distributional impacts 
of payments to ESRD facilities associated with the extension of payment 
for AKI home dialysis or extension of the add-on payment adjustment for 
training for home and self-dialysis (outside of the budget-neutrality 
reduction, as discussed), as we are unable to estimate potential uptake 
at a facility level at this time. The categories of types of ESRD 
facilities in the impact table show impacts ranging from an increase of 
0.0 percent to an increase of 3.8 percent in their CY 2025 estimated 
Medicare payments for renal dialysis services provided by ESRD 
facilities to individuals with AKI.
(2) Effects on Other Providers
    Under section 1834(r) of the Act, as added by section 808(b) of 
TPEA, we are finalizing to update the payment rate for renal dialysis 
services furnished by ESRD facilities to beneficiaries with AKI. The 
only two Medicare providers and suppliers authorized to provide these 
outpatient renal dialysis services are hospital outpatient departments 
and ESRD facilities. The patient and his or her physician make the 
decision about where the renal dialysis services are furnished. 
Therefore, this change would have zero impact on other Medicare 
providers.
(3) Effects on the Medicare Program
    We estimate approximately $70 million would be paid to ESRD 
facilities in CY 2025 because of patients with AKI receiving renal 
dialysis services in an ESRD facility at the lower ESRD PPS base rate 
versus receiving those services only in the hospital outpatient setting 
and paid under the outpatient prospective payment system, where 
services were required to be administered prior to the TPEA.
(4) Effects on Medicare Beneficiaries
    Currently, beneficiaries have a 20 percent coinsurance obligation 
when they receive AKI dialysis in the hospital outpatient setting. When 
these services are furnished in an ESRD facility, the patients will 
continue to be responsible for a 20 percent coinsurance. Because the 
AKI dialysis payment rate paid to ESRD facilities is lower than the 
outpatient hospital PPS's payment amount, we expect beneficiaries to 
pay less coinsurance when AKI dialysis is furnished by ESRD facilities.
(5) Alternatives Considered
    As we discussed in the CY 2017 ESRD PPS proposed rule (81 FR 
42870), we considered adjusting the AKI payment rate by including the 
ESRD PPS case-mix adjustments, and other adjustments at section 
1881(b)(14)(D) of the Act, as well as not paying separately for AKI 
specific drugs and laboratory tests. We ultimately determined that 
treatment for AKI is substantially different from treatment for ESRD, 
and the case-mix adjustments applied to ESRD patients may not be 
applicable to AKI patients, and as such, including those policies and 
adjustments is inappropriate. We

[[Page 89205]]

continue to monitor utilization and trends of items and services 
furnished to individuals with AKI for purposes of refining the payment 
rate in the future. This monitoring will assist us in developing 
knowledgeable, data-driven proposals.
    As discussed in section III.B of this final rule, we are finalizing 
payment for AKI dialysis in the home setting, and as discussed in 
section III.C.3 of this final rule we will apply the home and self-
dialysis training add-on payment adjustment for such services provided 
to AKI patients. We considered paying for AKI home dialysis without the 
training add-on adjustment; however, we were concerned that access to 
home dialysis for AKI beneficiaries could be negatively impacted in the 
absence of an add-on payment adjustment to support home dialysis 
training. These alternatives would not have any specific impact on 
small entities as discussed in section VII.E of this final rule.
d. ESRD QIP
(1) Effects of the PY 2027 ESRD QIP on ESRD Facilities
    The ESRD QIP is intended to promote improvements in the quality of 
ESRD dialysis facility services provided to beneficiaries. The general 
methodology that we use to calculate a facility's TPS is described in 
our regulations at Sec.  413.178(e).
    Any reductions in the ESRD PPS payments as a result of a facility's 
performance under the PY 2027 ESRD QIP will apply to the ESRD PPS 
payments made to the facility for services furnished in CY 2027, 
consistent with our regulations at Sec.  413.177.
    For the PY 2027 ESRD QIP, we estimate that, of the 7,695 facilities 
(including those not receiving a TPS) enrolled in Medicare, 
approximately 36.9 percent or 2,750 of the facilities that have 
sufficient data to calculate a TPS would receive a payment reduction 
for PY 2027. Among an estimated 2,750 facilities that would receive a 
payment reduction, approximately 63 percent or 1,730 facilities would 
receive the smallest payment reduction of 0.5 percent. We are updating 
the estimated impact of the PY 2027 ESRD QIP that we provided in the CY 
2024 ESRD PPS final rule (88 FR 76495 through 76497). Based on the 
policies finalized in this rule, the total estimated payment reductions 
for all the 2,750 facilities expected to receive a payment reduction in 
PY 2027 would be approximately $17,887,355. Facilities that do not 
receive a TPS do not receive a payment reduction.
    Table 21 shows the updated overall estimated distribution of 
payment reductions resulting from the PY 2027 ESRD QIP.
[GRAPHIC] [TIFF OMITTED] TR12NO24.026

    To estimate whether a facility would receive a payment reduction 
for PY 2027, we scored each facility on achievement and improvement on 
several clinical measures for which there were available data from EQRS 
and Medicare claims. Payment reduction estimates were calculated using 
the most recent data available (specified in Table 22) in accordance 
with the policies finalized in this final rule. Measures used for the 
simulation are shown in Table 22.

[[Page 89206]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.027

    For all measures except the SHR clinical measure, the SRR clinical 
measure, the STrR measure, and the ICH CAHPS measure, measures with 
less than 11 eligible patients for a facility were not included in that 
facility's TPS. For the SHR clinical measure and the SRR clinical 
measure, facilities were required to have at least 5 patient-years at 
risk and 11 index discharges, respectively, to be included in the 
facility's TPS. For the STrR clinical measure, facilities were required 
to have at least 10 patient-years at risk to be included in the 
facility's TPS. For the ICH CAHPS measure, facilities were required to 
have at least 30 survey-eligible patients to be included in the 
facility's TPS. Each facility's TPS was compared to an estimated mTPS 
and an estimated payment reduction table consistent with the final 
policies outlined in section IV.B of this final rule. Facility 
reporting measure scores were estimated using available data from CY 
2023. Facilities were required to have at least one measure in at least 
two domains to receive a TPS.
    To estimate the total payment reductions in PY 2027 for each 
facility resulting from this final rule, we multiplied the total 
Medicare payments to the facility during the 1-year period between 
January 2023 and December 2023 by the facility's estimated payment 
reduction percentage expected under the ESRD QIP, yielding a total 
payment reduction amount for each facility.
    Table 23 shows the updated estimated impact of the ESRD QIP payment 
reductions to all ESRD facilities for PY 2027. The table also details 
the distribution of ESRD facilities by size (both among facilities 
considered to be small entities and by number of treatments per 
facility), geography (both rural and urban and by region), and facility 
type (hospital based and freestanding facilities). Given that the 
performance period used for these calculations differs from the 
performance period we are using for the PY 2027 ESRD QIP, the actual 
impact of the PY 2027 ESRD QIP may vary significantly from the values 
provided here.

[[Page 89207]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.028


[[Page 89208]]


[GRAPHIC] [TIFF OMITTED] TR12NO24.029

(3) Effects on Medicare Beneficiaries
    The ESRD QIP is applicable to ESRD facilities. Since the Program's 
inception, there is evidence of improved performance on ESRD QIP 
measures. As we stated in the CY 2018 ESRD PPS final rule, one 
objective measure we can examine to demonstrate the improved quality of 
care over time is the improvement of performance standards (82 FR 
50795). As the ESRD QIP has refined its measure set and as facilities 
have gained experience with the measures included in the Program, 
performance standards have generally continued to rise. We view this as 
evidence that facility performance (and therefore the quality of care 
provided to Medicare beneficiaries) is objectively improving. We 
continue to monitor and evaluate trends in the quality and cost of care 
for patients under the ESRD QIP, incorporating both existing measures 
and new measures as they are implemented in the Program. We will 
provide additional information about the impact of the ESRD QIP on 
beneficiaries as we learn more by examining these impacts through the 
analysis of available data from our existing measures.
(4) Alternatives Considered
    In section IV.B.2 of this final rule, we are finalizing the 
replacement of the Kt/V Dialysis Adequacy Comprehensive clinical 
measure with a Kt/V Dialysis Adequacy Measure Topic beginning with PY 
2027. We considered not adopting this change. However, we concluded 
that replacing this measure was appropriate to ensure that facilities 
are scored on Kt/V measure data according to the individual facility's 
ESRD patient population and treatment modalities.
e. ETC Model
(1) Overview
    The ETC Model is a mandatory payment model designed to test payment 
adjustments to certain dialysis and dialysis-related payments, as 
discussed in the Specialty Care Models final rule (85 FR 61114), the CY 
2022 ESRD PPS final rule (86 FR 61874), the CY 2023 ESRD PPS final rule 
(87 FR 67136), and the CY 2024 ESRD PPS final rule (88 FR 76344) for 
ESRD facilities and for Managing Clinicians for claims with dates of 
service from January 1, 2021, to June 30, 2027. The requirements for 
the ETC Model are set forth in 42 CFR part 512, subpart C. For the 
results of the detailed economic analysis of the ETC Model and a 
description of the methodology used to perform the analysis, see the 
Specialty Care Models final rule (85 FR 61114).
(2) Data and Methods
    A stochastic simulation was created to estimate the financial 
impacts of the ETC Model relative to baseline expenditures, where 
baseline expenditures were defined as data from CYs 2018 and 2019 
without the changes applied. The simulation relied upon statistical 
assumptions derived from retrospectively constructed ESRD facilities' 
and Managing Clinicians' Medicare dialysis claims, transplant claims, 
and transplant waitlist data reported during 2018 and 2019, the most 
recent years of complete data available before the start of the ETC 
Model. Both datasets and the risk-adjustment methodologies for the ETC 
Model were developed by the CMS Office of the Actuary (OACT).
    Table 25 summarizes the estimated impact of the ETC Model when the 
achievement benchmarks for each year are set using the average of the 
home dialysis rates for year t-1 and year t-2 for the HRRs randomly 
selected for participation in the ETC Model. We estimate that the 
Medicare program would save a net total of $43 million from the PPA and 
HDPA between January 1, 2021, and June 30, 2027, less $15 million in 
increased training and education expenditures. Therefore, the net 
impact to Medicare spending is estimated to be $28 million in savings. 
This is consistent with the net impact to Medicare spending estimated 
for the CY 2022 ESRD PPS final rule, in which the net impact to 
Medicare spending was also estimated to be $28 million in savings (86 
FR 62014 through 62016). The minor methodological change to the 
definition of an ESRD Beneficiary is not expected to change this 
estimate.
(3) Medicare Estimate--Primary Specification, Assume Rolling Benchmark

[[Page 89209]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.030

    In Table 25, negative spending reflects a reduction in Medicare 
spending, while positive spending reflects an increase. The results for 
this table were generated from an average of 400 simulations under the 
assumption that benchmarks are rolled forward with a 1.5-year lag. For 
a detailed description of the key assumptions underlying the impact 
estimate, see the Specialty Care Models final rule (85 FR 61353) and 
the CY 2022 ESRD PPS final rule (86 FR 60214 through 60216).
(4) Effects on the Home Dialysis Rate, the Transplant Rate, and Kidney 
Transplantation
    The change finalized in this rule is not expected to impact the 
findings reported for the effects of the ETC Model on the home dialysis 
rate or the transplant rate described in the Specialty Care Models 
final rule (85 FR 61355) and the CY 2022 ESRD PPS final rule (86 FR 
62017).
(5) Effects on Kidney Disease Patient Education Services and HD 
Training Add-Ons
    The change finalized in this rule is not expected to impact the 
findings reported for the effects of the ETC Model on kidney disease 
patient education services and HD training add-ons described in the 
Specialty Care Models final rule (85 FR 61355) and the CY 2022 ESRD PPS 
final rule (86 FR 62017).
(6) Effects on Medicare Beneficiaries
    Our decision to finalize changes to the definition of an ESRD 
Beneficiary for the purposes of attribution is not expected to impact 
the findings reported for the effects of ETC Model on Medicare 
beneficiaries. Further details on the impact of the ETC Model on ESRD 
Beneficiaries may be found in the Specialty Care Models final rule (85 
FR 61357) and the CY 2022 ESRD PPS final rule (86 FR 61874).
(7) Alternatives Considered
    Throughout this final rule, we have identified finalized changes to 
our policy and alternatives considered and provided information as to 
the likely effects of these alternatives and rationale for our changed 
policy.
    The Specialty Care Models final rule (85 FR 61114), the CY 2022 
ESRD PPS final rule (86 FR 61874), the CY 2023 ESRD PPS final rule (87 
FR 67136), the CY 2024 ESRD PPS final rule (88 FR 76344), and the 
finalized policy herein address a model specific to ESRD. These rules 
provide descriptions of the requirements that we waive, identify the 
performance metrics and payment adjustments to be tested, and presents 
rationales for our changes, and where relevant, alternatives 
considered. For context related to alternatives previously considered 
when establishing and modifying the ETC Model we refer readers to 
section V.B. and to the previous citations.

D. Accounting Statement

    As required by OMB Circular A-4 (available at https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf), we have prepared an accounting statement in 
Table 26 showing the classification of the impact associated with the 
provisions of this final rule.

[[Page 89210]]

[GRAPHIC] [TIFF OMITTED] TR12NO24.031

E. Regulatory Flexibility Act (RFA)

    The 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. 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. Therefore, the number 
of small entities estimated in this RFA analysis includes the number of 
ESRD facilities that are either considered small businesses or 
nonprofit organizations.
    According to the Small Business Administration's (SBA) size 
standards, an ESRD facility is classified as a small business if it has 
total revenues of less than $47 million in any 1 year.\128\ For the 
purposes of this analysis, we exclude the ESRD facilities that are 
owned and operated by LDOs and regional chains, which would have total 
revenues of more than $6.5 billion in any year when the total revenues 
for all locations are combined for each business (LDO or regional 
chain), and are not, therefore, considered small businesses. Because we 
lack data on individual ESRD facilities' receipts, we cannot determine 
the number of small proprietary ESRD facilities or the proportion of 
ESRD facilities' revenue derived from Medicare FFS payments. Therefore, 
we assume that all ESRD facilities that are not owned by LDOs or 
regional chains are considered small businesses. Accordingly, we 
consider the 485 ESRD facilities that are independent and 351 ESRD 
facilities that are hospital-based, as shown in the ownership category 
in Table 19, to be small businesses. These ESRD facilities represent 
approximately 11 percent of all ESRD facilities in our data set.
---------------------------------------------------------------------------

    \128\ http://www.sba.gov/content/small-business-size-standards.
---------------------------------------------------------------------------

    Additionally, we identified in our analytic file that there are 792 
ESRD facilities that are considered nonprofit organizations, which is 
approximately 10 percent of all ESRD facilities in our data set. In 
total, accounting for the 369 nonprofit ESRD facilities that are also 
considered small businesses, there are 1,259 ESRD facilities that are 
either small businesses or nonprofit organizations, which is 
approximately 16 percent of all ESRD facilities in our data set.
    As its measure of significant economic impact on a substantial 
number of small entities, HHS's practice in interpreting the RFA is to 
consider effects economically ``significant'' on a ``substantial'' 
number of small entities only if greater than 5 percent of providers 
reach a threshold of 3 to 5 percent or more of total revenue or total 
costs. We did not receive any public comments on our regulatory impact 
analysis for small entities. As shown in Table 19, we estimate that the 
overall revenue impact of this final rule on all ESRD facilities is a 
positive increase to Medicare FFS payments by approximately 2.7 
percent. For the ESRD PPS updates in this final rule, a hospital-based 
ESRD facility (as defined by type of ownership, not by type of ESRD 
facility) is estimated to receive a 4.5 percent increase in Medicare 
FFS payments for CY 2025. An independent facility (as defined by 
ownership type) is likewise estimated to receive a 0.8 percent increase 
in Medicare FFS payments for CY 2025. Among hospital-based and 
independent ESRD facilities, those furnishing fewer than 3,000 
treatments per year are estimated to receive a 5.3 percent increase in 
Medicare FFS payments, and those furnishing 3,000 or more treatments 
per year are estimated to receive a 2.1 percent increase in Medicare 
FFS payments. Among nonprofit ESRD facilities, those furnishing fewer 
than 3,000 treatments per year are estimated to receive a 6.0 percent 
increase in Medicare FFS payments, and those furnishing 3,000 or more 
treatments per year are estimated to receive a 2.8 percent increase in 
Medicare FFS payments.
    For AKI dialysis, we are unable to estimate whether patients would 
go to ESRD facilities, however, we have estimated there is a potential 
for $70 million in payment for AKI dialysis treatments that could 
potentially be furnished in ESRD facilities.
    Based on the estimated Medicare payment impacts described 
previously, we believe that the change in revenue threshold will be 
reached by some categories of small entities as a result of the 
policies in this final rule. This analysis is based on the assumptions 
described earlier in this section of this final rule as well as the 
detailed impact analysis discussed in section VII.C of this final rule, 
which includes a discussion of data sources, general

[[Page 89211]]

assumptions, and alternatives considered.
    For the ESRD QIP, we estimate that of the 2,750 ESRD facilities 
expected to receive a payment reduction as a result of their 
performance on the PY 2027 ESRD QIP, 468 are ESRD small entity 
facilities. We present these findings in Table 21 (``Updated Estimated 
Distribution of PY 2027 ESRD QIP Payment Reductions'') and Table 23 
(``Updated Estimated Impact of ESRD QIP Payment Reductions to ESRD 
Facilities for PY 2027''). Table 21 shows the updated overall estimated 
distribution of payment reductions resulting from the PY 2027 ESRD QIP. 
Table 23 shows the updated estimated impact of the ESRD QIP payment 
reductions to all ESRD facilities for PY 2027, and also details the 
distribution of ESRD facilities by size, geography, and facility type.
    For the ETC Model, we do not anticipate any impact on ESRD 
facilities from our decision to finalize a change to the definition of 
an ESRD Beneficiary for the purposes of beneficiary attribution in the 
model. As previously stated, we estimate that the Medicare program 
would save a net total of $43 million from the ETC PPA and HDPA between 
January 1, 2021, and June 30, 2027, less $15 million in increased 
training and education expenditures. Therefore, the net impact to 
Medicare spending is estimated to be $28 million in savings.
    Therefore, the Secretary has determined that this final rule will 
have a significant economic impact, reflecting a positive revenue 
increase, on a substantial number of small entities. This RFA section 
along with the RIA constitutes our final regulatory flexibility 
analysis.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. We do not believe this 
final rule would have a significant impact on operations of a 
substantial number of small rural hospitals because most dialysis 
facilities are freestanding. While there are 108 rural hospital-based 
ESRD facilities, we do not know how many of them are based at hospitals 
with fewer than 100 beds. However, overall, the 108 rural hospital-
based ESRD facilities would experience an estimated 5.9 percent 
increase in payments. Therefore, the Secretary has certified that this 
final rule will not have a significant impact on the operations of a 
substantial number of small rural hospitals.

F. Unfunded Mandates Reform Act (UMRA)

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2024, that 
threshold is approximately $183 million. We do not interpret Medicare 
payment rules as being unfunded mandates but simply as conditions for 
the receipt of payments from the Federal Government for providing 
services that meet Federal standards. This interpretation applies 
whether the facilities or providers are private, State, local, or 
Tribal. Therefore, this final rule does not mandate any requirements 
for State, local, or Tribal governments, or for the private sector.

G. Federalism

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

H. Congressional Review Act

    This final regulation 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.

VIII. Files Available to the Public

    The Addenda for the annual ESRD PPS proposed and final rule will no 
longer appear in the Federal Register. Instead, the Addenda will be 
available only through the internet and will be posted on CMS's website 
under the regulation number, CMS-1805-F, at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices. In addition to the 
Addenda, limited data set files (LDS) are available for purchase at 
https://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/EndStageRenalDiseaseSystemFile. Readers who 
experience any problems accessing the Addenda or LDS files, should 
contact CMS by sending an email to CMS at the following mailbox: 
<a href="/cdn-cgi/l/email-protection#397c6a6b7d695840545c574d795a544a1751514a175e564f"><span class="__cf_email__" data-cfemail="cd889e9f899dacb4a0a8a3b98daea0bee3a5a5bee3aaa2bb">[email protected]</span></a>.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on October 23, 2024.

List of Subjects

42 CFR Part 410

    Diseases, Health facilities, Health professions, Laboratories, 
Medicare, Reporting and recordkeeping requirements, Rural areas, X-
rays.

42 CFR Part 413

    Diseases, Health facilities, Medicare, Puerto Rico, Reporting and 
recordkeeping requirements.

42 CFR Part 494

    Diseases, Health facilities, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 512

    Administrative practice and procedure, Health care, Health 
facilities, Health insurance, Intergovernmental relations, Medicare, 
Penalties, Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

0
1. The authority citation for part 410 continues to read as follows:

    Authority: 42 U.S.C. 1302, 1395m, 1395hh, 1395rr, and 1395ddd.

0
2. Section 410.52 is amended by revising paragraph (a) introductory 
text to read as follows:


Sec.  410.52  Home dialysis services, supplies, and equipment: Scope 
and conditions.

    (a) Medicare Part B pays for the following services, supplies, and 
equipment furnished to a patient with ESRD or an individual with Acute 
Kidney Injury (AKI) as defined in Sec.  413.371 of this chapter in his 
or her home:
* * * * *

[[Page 89212]]

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

0
3. The authority citation for part 413 continues to read as follows:

    Authority: 42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), 
(i), and (n), 1395m, 1395x(v), 1395x(kkk), 1395hh, 1395rr, 1395tt, 
and 1395ww.


0
4. Section 413.196 is amended by revising paragraph (d)(2) to read as 
follows:


Sec.  413.196  Notification of changes in rate-setting methodologies 
and payment rates.

* * * * *
    (d) * * *
    (2) The wage index using the most current wage data for occupations 
related to the furnishing of renal dialysis services from the Bureau of 
Labor Statistics and occupational mix data from the most recent full 
calendar year of Medicare cost reports submitted in accordance with 
Sec.  413.198(b).
* * * * *

0
5. Section 413.231 is amended by revising paragraph (a) to read as 
follows:


Sec.  413.231  Adjustment for wages.

    (a) CMS adjusts the labor-related portion of the base rate to 
account for geographic differences in the area wage levels using an 
appropriate wage index (established by CMS) which reflects the relative 
level of wages relevant to the furnishing of renal dialysis services in 
the geographic area in which the ESRD facility is located.
* * * * *

0
6. Section 413.234 is amended by revising paragraph (c) introductory 
text and adding paragraph (c)(4) to read as follows:


Sec.  413.234  Drug designation process.

* * * * *
    (c) Transitional drug add-on payment adjustment. A new renal 
dialysis drug or biological product is paid for using a transitional 
drug add-on payment adjustment, which is based on 100 percent of 
average sales price (ASP), except as provided in paragraph (c)(4) of 
this section. If ASP is not available then the transitional drug add-on 
payment adjustment is based on 100 percent of wholesale acquisition 
cost (WAC) and, when WAC is not available, the payment is based on the 
drug manufacturer's invoice. Notwithstanding the provisions in 
paragraphs (c)(1) and (2) of this section, if CMS does not receive a 
full calendar quarter of ASP data for a new renal dialysis drug or 
biological product within 30 days of the last day of the 3rd calendar 
quarter after we begin applying the transitional drug add-on payment 
adjustment for the product, CMS will no longer apply the transitional 
drug add-on payment adjustment for that product beginning no later than 
2-calendar quarters after we determine a full calendar quarter of ASP 
data is not available. If CMS stops receiving the latest full calendar 
quarter of ASP data for a new renal dialysis drug or biological product 
during the applicable time period specified in paragraph (c)(1) or (2) 
of this section, CMS will no longer apply the transitional drug add-on 
payment adjustment for the product beginning no later than 2-calendar 
quarters after CMS determines that the latest full calendar quarter of 
ASP data is not available.
* * * * *
    (4) For calendar years 2025 and 2026, the transitional drug add-on 
payment adjustment amount for a phosphate binder is based on 100 
percent of ASP plus an additional amount derived from 6 percent of per-
patient phosphate binder spending based on utilization and cost data.
* * * * *

0
7. Section 413.236 is amended by revising paragraphs (b)(4) and (c) to 
read as follows:


Sec.  413.236  Transitional add-on payment adjustment for new and 
innovative equipment and supplies.

* * * * *
    (b) * * *
    (4) Has a complete Healthcare Common Procedure Coding System 
(HCPCS) Level II code application submitted, in accordance with the 
HCPCS Level II coding procedures on the CMS website, by the HCPCS Level 
II code application deadline for biannual Coding Cycle 2 for non-drug 
and non-biological items, supplies, and services as specified in the 
HCPCS Level II coding guidance on the CMS website prior to the 
particular calendar year;
* * * * *
    (c) Announcement of determinations and deadline for consideration 
of new renal dialysis equipment or supply applications. CMS will 
consider whether a new renal dialysis supply or equipment meets the 
eligibility criteria specified in paragraph (b) of this section and 
announce the results in the Federal Register as part of its annual 
updates and changes to the ESRD prospective payment system. CMS will 
only consider a complete application received by CMS by February 1 
prior to the particular calendar year. FDA marketing authorization for 
the equipment or supply must occur by the HCPCS Level II code 
application deadline for biannual Coding Cycle 2 for non-drug and non-
biological items, supplies, and services as specified in the HCPCS 
Level II coding guidance on the CMS website prior to the particular 
calendar year.

0
8. Section 413.237 is amended by adding paragraph (a)(1)(vii) to read 
as follows:


Sec.  413.237  Outliers.

    (a) * * *
    (1) * * *
    (vii) Renal dialysis drugs and biological products that are 
Composite Rate Services as defined in Sec.  413.171.
* * * * *

0
9. Section 413.373 is revised to read as follows:


Sec.  413.373  Other adjustments to the AKI dialysis payment rate.

    (a) CMS applies the wage-adjusted add-on per treatment adjustment 
for home and self-dialysis training as set forth at Sec.  413.235(c) to 
payments for AKI dialysis claims that include such training.
    (b) The payment rate for AKI dialysis may be adjusted by the 
Secretary (on a budget neutral basis for payments under section 1834(r) 
of the Act) by any other adjustment factor under subparagraph (D) of 
section 1881(b)(14) of the Act.

0
10. Section 413.374 is amended by revising paragraph (a) to read as 
follows:


Sec.  413.374  Renal dialysis services included in the AKI dialysis 
payment rate.

    (a) The AKI dialysis payment rate applies to renal dialysis 
services (as defined in subparagraph (B) of section 1881(b)(14) of the 
Act) furnished under Part B by a renal dialysis facility or provider of 
services paid under section 1881(b)(14) of the Act, including home 
services, supplies, and equipment, and self-dialysis.
* * * * *

PART 494--CONDITIONS FOR COVERAGE FOR END-STAGE RENAL DISEASE 
FACILITIES

0
11. The authority citation for part 494 continues to read as follows:

    Authority:  42 U.S.C. l302 and l395hh.

0
12. Section 494.10 is amended by revising the definitions of ``Home 
dialysis'' and ``Self-dialysis'' to read as follows:

[[Page 89213]]

Sec.  494.10  Definitions.

* * * * *
    Home dialysis means dialysis performed at home by a patient or 
caregiver who has completed an appropriate course of training as 
described in Sec.  494.100(a).
    Self-dialysis means dialysis performed with little or no 
professional assistance by a patient or caregiver who has completed an 
appropriate course of training as specified in Sec.  494.100(a).
* * * * *

0
13. Section 494.70 is amended by revising paragraphs (a)(1) and (10) 
and (c)(1)(i) to read as follows:


Sec.  494.70  Condition: Patients' rights.

* * * * *
    (a) * * *
    (1) Respect, dignity, and recognition of his or her individuality 
and personal needs, and sensitivity to his or her psychological needs 
and ability to cope with kidney failure;
* * * * *
    (10) Be informed by the physician, nurse practitioner, clinical 
nurse specialist, or physician's assistant treating the patient for 
kidney failure of his or her own medical status as documented in the 
patient's medical record, unless the medical record contains a 
documented contraindication;
* * * * *
    (c) * * *
    (1) * * *
    (i) How plans in the individual market will affect the patient's 
access to, and costs for the providers and suppliers, services, and 
prescription drugs that are currently within the individual's plan of 
care as well as those likely to result from other documented health 
care needs. This must include an overview of the health-related and 
financial risks and benefits of the individual market plans available 
to the patient (including plans offered through and outside the 
Exchange).
* * * * *

0
14. Section 494.80 is amended by revising the introductory text to read 
as follows:


Sec.  494.80  Condition: Patient assessment.

    The facility's interdisciplinary team consists of, at a minimum, 
the patient or the patient's designee (if the patient chooses), a 
registered nurse, a physician treating the patient for kidney failure, 
a social worker, and a dietitian. The interdisciplinary team is 
responsible for providing each patient with an individualized and 
comprehensive assessment of his or her needs. The comprehensive 
assessment must be used to develop the patient's treatment plan and 
expectations for care.
* * * * *

0
15. Section 494.90 is amended by revising paragraph (b)(4) to read as 
follows:


Sec.  494.90  Condition: Patient plan of care.

* * * * *
    (b) * * *
    (4) The dialysis facility must ensure that all dialysis patients 
are seen by a physician, nurse practitioner, clinical nurse specialist, 
or physician's assistant providing dialysis care at least monthly, as 
evidenced by a monthly progress note placed in the medical record, and 
periodically while the hemodialysis patient is receiving in-facility 
dialysis.
* * * * *

0
16. Section 494.100 is amended by revising paragraph (a)(3)(i) to read 
as follows:


Sec.  494.100  Condition: Care at home.

* * * * *
    (a) * * *
    (3) * * *
    (i) The nature and management of their kidney failure.
* * * * *

0
17. Section 494.120 is amended by revising the introductory text to 
read as follows:


Sec.  494.120  Condition: Special purpose renal dialysis facilities.

    A special purpose renal dialysis facility is approved to furnish 
dialysis on a short-term basis at special locations. Special purpose 
dialysis facilities are divided into two categories: vacation camps 
(locations that serve patients with kidney failure while the patients 
are in a temporary residence) and facilities established to serve 
patients with kidney failure under emergency circumstances.
* * * * *

0
18. Section 494.130 is revised to read as follows:


Sec.  494.130  Condition: Laboratory services.

    The dialysis facility must provide, or make available, laboratory 
services (other than tissue pathology and histocompatibility) to meet 
the needs of the patient. Any laboratory services, including tissue 
pathology and histocompatibility must be furnished by or obtained from, 
a facility that meets the requirements for laboratory services 
specified in part 493 of this chapter.

0
19. Section 494.170 is amended by revising the introductory text to 
read as follows:


Sec.  494.170  Condition: Medical records.

    The dialysis facility must maintain complete, accurate, and 
accessible records on all patients, including home patients who elect 
to receive dialysis supplies and equipment from a supplier that is not 
a provider of dialysis services and all other home dialysis patients 
whose care is under the supervision of the facility.
* * * * *

PART 512--RADIATION ONCOLOGY MODEL AND END STAGE RENAL DISEASE 
TREATMENT CHOICES MODEL

0
20. The authority citation for part 512 continues to read as follows:

    Authority: 42 U.S.C. 1302, 1315a, and 1395hh.

0
21. Section 512.310 is amended by revising the definition of ``ESRD 
Beneficiary'' to read as follows:


Sec.  512.310  Definitions.

* * * * *
    ESRD Beneficiary means a beneficiary who meets any of the 
following:
    (1) Is receiving dialysis or other services for end-stage renal 
disease, up to and including the month in which the beneficiary 
receives a kidney transplant up to and including the month in which the 
beneficiary receives a kidney transplant.
    (2) Has already received a kidney transplant and has a non-AKI 
dialysis or MCP claim at least 12 months after the beneficiary's latest 
transplant date.
    (3) Has a kidney transplant failure less than 12 months after the 
beneficiary's latest transplant date as identified by:
    (i) Two or more MCP claims in the180 days following the date on 
which the kidney transplant was received;
    (ii) 24 or more maintenance dialysis treatments at any time after 
180 days following the transplant date; or,
    (iii) Indication of a transplant failure after the beneficiary's 
date of transplant based on data from the Scientific Registry of 
Transplant Recipients (SRTR) database.
    (4) If a beneficiary meets more than one of criteria described in 
paragraphs (3)(i) through (iii) of this definition, the beneficiary 
will be considered an ESRD beneficiary starting with the earliest month 
in which transplant failure was recorded.
* * * * *

Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2024-25486 Filed 11-1-24; 4:15 pm]
BILLING CODE 4120-01-P


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