Vol. 79 Friday, 

No. 133 July 11, 2014 

Part II 

Department of Health and Human Services 

Centers for Medicare & Medicaid Services 

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

Medicare Program; End-Stage Renal Disease Prospective Payment 

System, Quality Incentive Program, and Durable Medical Equipment, 

Prosthetics, Orthotics, and Supplies; Proposed Rule 

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40208 Federal Register / Vol. 79, No. 133 / Friday, July 11, 2014 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 405, 411, 413 and 414 

[CMS–1614–P] 

RIN 0938–AS13 

Medicare Program; End-Stage Renal 

Disease Prospective Payment System, 

Quality Incentive Program, and 

Durable Medical Equipment, 

Prosthetics, Orthotics, and Supplies 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This rule proposes to update 

and make revisions to the End-Stage 

Renal Disease (ESRD) prospective 

payment system (PPS) for calendar year 

(CY) 2015. This rule also proposes to set 

forth requirements for the ESRD quality 

incentive program (QIP), including 

payment years (PYs) 2017 and 2018. 

This rule also proposes to make a 

technical correction to remove outdated 

terms and definitions. In addition, this 

rule proposes to set forth the 

methodology for adjusting Durable 

Medical Equipment, Prosthetics, 

Orthotics, and Supplies (DMEPOS) fee 

schedule payment amounts using 

information from the Medicare 

DMEPOS Competitive Bidding Program 

(CBP); make alternative payment rules 

for DME and enteral nutrition under the 

Medicare DMEPOS CBP; clarify the 

statutory Medicare hearing aid coverage 

exclusion and specify devices not 

subject to the hearing aid exclusion; 

update the definition of minimal selfadjustment regarding what specialized 

training is needed by suppliers to 

provide custom fitting services if they 

are not certified orthotists; clarify the 

Change of Ownership (CHOW) and 

provides for an exception to the current 

requirements; revise the appeal 

provisions for termination of a contract 

and notification to beneficiaries under 

the Medicare DMEPOS CBP, and add a 

technical change related to submitting 

bids for infusion drugs under the 

Medicare DMEPOS CBP. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. E.S.T. on September 2, 

2014. 

ADDRESSES: In commenting, please refer 

to file code CMS–1614–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

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

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1614–P, P.O. Box 8010, Baltimore, 

MD 21244–8010. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–1614–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments ONLY to the 

following addresses prior to the close of 

the comment period: a. For delivery in 

Washington, DC—Centers for Medicare 

& Medicaid Services, Department of 

Health and Human Services, Room 445– 

G, Hubert H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244– 

1850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786–9994 in 

advance to schedule your arrival with 

one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Stephanie Frilling, (410) 786–4507, for 

issues related to the ESRD PPS, the 

ESRD PPS CY 2015 Base Rate and 

Payment for Frequent Hemodialysis. 

Michelle Cruse, (410) 786–7540, for 

issues related to the ESRD PPS and the 

Low Volume Payment Adjustment. 

Karen Reinhardt, (410) 786–0189, for 

issues related to the ESRD PPS and the 

Outlier Payment Policy. 

Wendy Tucker, (410) 786–3004, for 

issues related to the ESRD PPS and 

Wage Index. 

Heidi Oumarou, (410) 786–7342, for 

issues related to the ESRD PPS Market 

Basket Update. 

Anita Segar, (410) 786–4614, for 

issues related to the ESRD QIP. 

Christopher Molling (410) 786–6399 

and Hafsa Vahora (410) 786–7899 for 

issues related to the methodology for 

making national price adjustments 

based upon information gathered from 

the DMEPOS CBP. 

Sandhya Gilkerson, (410) 786–4085, 

for issues related to the alternative 

payment methodologies under the CBP. 

Sandhya Gilkerson, (410) 786–4085 

and Michelle Peterman, 410–786–2581 

for issues related to the clarification of 

the statutory Medicare hearing aid 

coverage exclusion. 

Michelle Peterman, (410) 786–2591 

for issues related to the definition of 

minimal self-adjustment at 414.402. 

Janae James (410) 786–0801 for issues 

related to CHOW and breach of contract 

appeals. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http://

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

Electronic Access 

This Federal Register document is 

also available from the Federal Register 

online database through Federal Digital 

System (FDsys), a service of the U.S. 

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Federal Register / Vol. 79, No. 133 / Friday, July 11, 2014 / Proposed Rules 40209 

Government Printing Office. This 

database can be accessed via the 

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

Addenda Are Only Available Through 

the Internet on the CMS Web site 

In the past, a majority of the Addenda 

referred to throughout the preamble of 

our proposed and final rules were 

available in the Federal Register. 

However, the Addenda of the annual 

proposed and final rules will no longer 

be available in the Federal Register. 

Instead, these Addenda to the annual 

proposed and final rules will be 

available only through the Internet on 

the CMS Web site. The Addenda to the 

End-Stage Renal Disease (ESRD) 

Prospective Payment System (PPS) rules 

are available at: http://www.cms.gov/

ESRDPayment/PAY/list.asp. Readers 

who experience any problems accessing 

any of the Addenda to the proposed and 

final rules of the ESRD PPS that are 

posted on the CMS Web site identified 

above should contact Stephanie Frilling 

at 410–786–4507. 

Table of Contents 

To assist readers in referencing 

sections contained in this preamble, we 

are providing a Table of Contents. Some 

of the issues discussed in this preamble 

affect the payment policies, but do not 

require changes to the regulations in the 

Code of Federal Regulations (CFR). 

I. Executive Summary 

A. Purpose 

1. End-Stage Renal Disease (ESRD) 

Prospective Payment System (PPS) 

2. End-Stage Renal Disease (ESRD) Quality 

Incentive Program (QIP) 

3. Durable Medical Equipment, Prosthetics, 

Orthotics, and Supplies (DMEPOS) 

B. Summary of the Major Provisions 

1. ESRD PPS 

2. ESRD QIP 

3. DMEPOS 

C. Summary of Costs and Benefits 

1. Impacts of the Proposed ESRD PPS 

2. Impacts for ESRD QIP 

3. Impacts for DMEPOS 

II. Calendar Year (CY) 2015 End-Stage Renal 

Disease (ESRD) Prospective Payment 

System (PPS) 

A. Background on the End-Stage Renal 

Disease (ESRD) Prospective Payment 

System (PPS) 

B. Routine Updates and Proposed Policy 

Changes to the CY 2015 ESRD PPS 

1. ESRD PPS Base Rate 

a. Changes to the Drug Utilization 

Adjustment 

i. The Drug Utilization Adjustment 

Finalized in CY 2014 ESRD PPS Final 

Rule 

ii. PAMA Changes to the Drug Utilization 

Adjustment 

b. Payment Rate Update for CY 2015 

c. CY 2015 ESRD PPS Wage Index Budget 

Neutrality Adjustment 

d. Labor-Related Share 

2. ESRD Bundled Market Basket and LaborRelated Share 

a. Background 

b. Rebasing and Revision the ESRD 

Bundled Market Basket 

i. Cost Category Weights 

ii. Proposed Price Proxies for the CY 2012 

ESRDB Market Basket 

iii. Proposed Market Basket Estimate for 

the CY 2015 ESRDB PPS Update 

c. Proposed Productivity Adjustment 

d. Calculation of the Proposed ESRDB 

Market Basket Update, Adjusted for 

Multifactor Productivity for CY 2015 

e. Labor-Related Share 

3. The Proposed CY 2015 ESRD PPS Wage 

Indices 

a. Background 

b. Proposed Implementation of New Labor 

Market Delineations 

c. Transition Period 

4. Proposed Revisions to the Outlier Policy 

a. Proposed Changes to the Outlier Services 

MAP Amounts and Fixed Dollar Loss 

Amounts 

b. Outlier Policy Percentage 

C. Restatement of Policy Regarding 

Reporting and Payment for More than 

Three Dialysis Treatments per Week – 

1. Reporting More than Three Dialysis 

Treatments per Week on Claims 

2. Medical Necessity for More Than Three 

Treatments per Week 

D. Delay of Payment for Oral-Only Drugs 

under the ESRD PPS 

E. ESRD Drug Categories Included in the 

ESRD PPS Base Rate 

F. Low-Volume Payment Adjustment 

(LVPA) 

1 . Background 

2. The United States Government 

Accountability Office Study on the 

LVPA 

a. The GAO’s Main Findings 

b. The GAO’s Recommendations 

3. Clarification of the LVPA Policy 

a. Hospital-Based ESRD Facilities 

b. Cost Reporting Periods Used for 

Eligibility 

G. Continued Use of ICD–9–CM Codes and 

Corrections to the ICD–10–CM Codes 

Eligible for the Comorbidity Payment 

Adjustment 

III. End-Stage Renal Disease (ESRD) Quality 

Incentive Program (QIP) 

A. Background 

B. Considerations in Updating and 

Expanding Quality Measures under the 

ESRD QIP 

C. Web sites for Measure Specifications 

D. Updating the NHSN Bloodstream 

Infection in Hemodialysis Outpatients 

Clinical Measure for the PY 2016 ESRD 

QIP and Future Payment Years 

E. Oral-Only Drugs Measures in the ESRD 

QIP 

F. Proposed Requirements for the PY 2017 

ESRD QIP 

1. Proposed Revision to the Expanded ICH 

CAHPS Reporting Measure 

2. Proposed Measures for the PY 2017 

ESRD QIP 

a. PY 2016 Measures Continuing in PY 

2017 and Future Payment Years 

b. Proposal to Determine when a Measure 

is ‘‘Topped-Out’’ in the ESRD QIP, and 

Proposal to Remove a Topped-Out 

Measure from the ESRD QIP, Beginning 

with PY 2017 

c. New Measures Proposed for PY 2017 and 

Future Payment Years 

i. Proposed Standardized Readmission 

Ratio (SRR) Clinical Measure 

3. Proposed Performance Period for the PY 

2017 ESRD QIP 

4. Proposed Performance Standards, 

Achievement Thresholds, and 

Benchmarks for the PY 2017 ESRD QIP 

a. Proposed Performance Standards, 

Achievement Thresholds, and 

Benchmarks for the Clinical Measures in 

the PY 2017 ESRD QIP 

b. Estimated Performance Standards, 

Achievement Thresholds, and 

Benchmarks for the Clinical Measures 

Proposed for the PY 2017 ESRD QIP 

c. Proposed Performance Standards for the 

PY 2017 Reporting Measures 

5. Proposal for Scoring the PY 2017 ESRD 

QIP Measures 

a. Scoring Facility Performance on Clinical 

Measures Based on Achievement 

b. Scoring Facility Performance on Clinical 

Measures Based on Improvement 

6. Weighting the Total Performance Score 

7. Proposed Minimum Data for Scoring 

Measures for the PY 2017 ESRD QIP and 

Proposal for Changing Attestation 

Process for Patient Minimums 

8. Proposed Payment Reductions for the PY 

2017 ESRD QIP 

9. Proposal for Data Validation 

10. Proposal to Monitor Access to Dialysis 

Facilities 

11. Proposed Extraordinary Circumstances 

Exception 

G. Proposed Requirements for the PY 2018 

ESRD QIP Beginning in PY 2018 

1. Proposal to Modify the Mineral 

Metabolism Reporting Measure 

2. Proposed New Measures for the PY 2018 

ESRD QIP and Future Payment Years 

a. Proposed Standardized Transfusion 

Ratio (STrR) Clinical Measure 

b. Proposal to Adopt the Pediatric 

Peritoneal Dialysis Adequacy Clinical 

Measure and Add the Proposed Measure 

to the Dialysis Adequacy Measure Topic 

c. Proposed ICH CAHPS Clinical Measure 

d. Proposed Screening for Clinical 

Depression and Follow-Up Reporting 

Measure 

e. Proposed Pain Assessment and FollowUp Reporting Measure 

f. Proposed NHSN Healthcare Personnel 

Influenza Vaccination Reporting 

Measure 

2. Proposed Performance Period for the PY 

2018 ESRD QIP 

3. Proposed Performance Standards, 

Achievement Thresholds, and 

Benchmarks for the PY 2018 ESRD QIP 

a. Proposed Performance Standards, 

Achievement Thresholds, and 

Benchmarks for the Clinical Measures in 

the PY 2018 ESRD QIP 

b. Estimated Performance Standards, 

Achievement Thresholds, and 

Benchmarks for the Clinical Measures 

Proposed for the PY 2018 ESRD QIP 

c. Proposed Performance Standards for the 

PY 2018 Reporting Measures 

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4. Proposal for Scoring the PY 2018 ESRD 

QIP Measures 

a. Scoring Facility Performance on Clinical 

Measures Based on Achievement 

b. Scoring Facility Performance on Clinical 

Measures Based on Improvement 

c. Proposal for Scoring the ICH CAHPS 

Clinical Measure 

d. Proposals for Calculating Facility 

Performance on Reporting Measures 

5. Proposed Minimum Data for Scoring 

Measures for the PY 2018 ESRD QIP 

6. Proposal for Calculating the Clinical 

Measure Domain Score 

7. Proposal for Calculating the Reporting 

Measure Domain Score, the Reporting 

Measure Adjuster, and the TPS for the 

PY 2018 ESRD QIP 

8. Example of the Proposed PY 2018 ESRD 

QIP Scoring Methodology 

H. Future Considerations for Stratifying 

ESRD QIP Measures for Dual-Eligible 

Beneficiaries 

IV. Technical Corrections for 42 Part 405 

V. Methodology for Adjusting DMEPOS 

Payment Amounts using Information 

from Competitive Bidding Programs 

A. Background 

1. Payment Basis for Certain DMEPOS 

2. Fee Schedule Payment Methodologies 

3. Regional Fee Schedule Payment 

Methodology for P&O 

4. DMEPOS Competitive Bidding Programs 

Payment Rules 

5. Adjusting Payment Amounts using 

Information from the DMEPOS 

Competitive Bidding Program 

6. Diversity of Costs 

7. Advanced Notice of Proposed 

Rulemaking 

B. Proposed Provisions 

1. Proposed Regional Adjustments Limited 

by National Parameters 

a. Regional Payment Adjustments 

1. P&O Regional Fee Weights—CMS Region 

1 (Boston) (Weighted by Total Paid 

Claims for Dates of Service from July 1, 

1991, thru June 30, 1992) 

b. National Parameters 

c. Rural and Frontier State Adjustments 

d. Areas Outside the Contiguous United 

States 

2. Methodology for Items and Services 

Included in Limited Number of 

Competitive Bidding Programs 

3. Adjusted Payment Amounts for 

Accessories used with Different Types of 

Base Equipment 

4. Adjustments to Single Payment 

Amounts that Result from Unbalanced 

Bidding 

5. National Mail Order Program—Northern 

Mariana Islands 

6. Updating Adjusted Payment Amounts 

7. Summary of Proposed Methodologies 

VI. Proposed Payment Methodologies and 

Payment Rules for Durable Medical 

Equipment and Enteral Nutrition 

Furnished under the Competitive 

Bidding Program 

A. Background 

B. Proposed Provisions 

1. Payment on a continuous rental basis for 

select items 

a. Enteral nutrition 

b. Oxygen and oxygen equipment 

c. Standard manual wheelchairs 

d. Standard power wheelchairs 

e. CPAP and respiratory assist devices 

f. Hospital beds 

g. Transition rules 

h. Beneficiary-owned equipment 

2. Responsibility for repair of beneficiaryowned power wheelchairs furnished 

under CBPs 

3. Phasing in the proposed payment rules 

in CBAs 

4. Submitting bids for items paid on a 

continuous rental basis 

VII. Scope of Hearing Aid Coverage 

Exclusion 

A. Background 

B. Current Issues 

C. Proposed Provisions 

VIII. Definition of Minimal Self-Adjustment 

of Orthotics Under Competitive Bidding 

A. Background 

B. Current Issues 

C. Proposed Provisions 

IX. Revision to Change of Ownership Rules 

to Allow Contract Suppliers to Sell 

Specific Lines of Business 

A. Background 

B. Proposed Provisions 

X. Proposed Changes to the Appeals Process 

for Termination of Competitive Bidding 

Contract 

XI. Technical Change Related to Submitting 

Bids for Infusion Drugs under the 

DMEPOS Competitive Bidding Program 

XII. Accelerating Health Information 

Exchange 

XIII. Collection of Information Requirements 

XIV. Response to Comments 

XV. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

2. Statement of Need 

3. Overall Impact 

B. Detailed Economic Analysis 

1. CY 2015 End-Stage Renal Disease 

Prospective Payment System 

a. Effects on ESRD Facilities 

b. Effects on Other Providers 

c. Effects on the Medicare Program 

d. Effects on Medicare Beneficiaries 

e. Alternatives Considered 

2. End-Stage Renal Disease Quality 

Incentive Program 

3. DMEPOS Provisions 

C. Accounting Statement 

XVI. Regulatory Flexibility Act Analysis 

XVII. Unfunded Mandates Reform Act 

Analysis 

XVIII. Federalism Analysis 

XIX. Congressional Review Act 

XX. Files Available to the Public via the 

Internet 

Regulations Text 

Acronyms 

Because of the many terms to which 

we refer by acronym in this final rule, 

we are listing the acronyms used and 

their corresponding meanings in 

alphabetical order below: 

AHRQ—Agency for Healthcare Research and 

Quality 

ANOVA—Analysis of Variance 

ANPRM—Advanced Notice of Proposed 

Rulemaking 

ARM—Adjusted Ranking Metric 

ASP—Average Sales Price 

ATRA—The American Taxpayer Relief Act of 

2012 

BEA—Bureau of Economic Analysis 

BLS—Bureau of Labor Statistics 

BMI—Body Mass Index 

CBA—Competitive Bidding Area 

CBP—Competitive Bidding Program 

CBSA—Core based statistical area 

CCN—CMS Certification Number 

CDC—Centers for Disease Control and 

Prevention 

CfC—Conditions for Coverage 

CHOW—Change of Ownership 

CKD—Chronic Kidney Disease 

CPAP—Continuous positive airway pressure 

CY—Calendar Year 

DFC—Dialysis Facility Compare 

DME—Durable Medical Equipment 

DMEPOS—Durable Medical Equipment, 

Prosthetics, Orthotics, and Supplies 

ESA—Erythropoiesis stimulating agent 

ESRD—End-Stage Renal Disease 

ESRDB End-Stage Renal Disease bundled 

ESRD PPS— End-Stage Renal Disease 

Prospective Payment System 

FDA—Food and Drug Administration 

GEM—General Equivalence Mappings 

HCP—Healthcare Personnel 

HD—Hemodialysis 

HAIs—Healthcare-Acquired Infections 

HCPCS—Healthcare Common Procedure 

Coding System 

HCFA—Health Care Financing 

Administration 

HLM—Hierarchical Logistic Modeling 

HHS—Department of Health and Human 

Services 

ICD—International Classification of Diseases 

ICD–9–CM—International Classification of 

Disease, 9th Revision, Clinical 

Modification 

ICD–10–CM—International Classification of 

Disease, 10th Revision, Clinical 

Modification 

ICH CAHPS—In-Center Hemodialysis 

Consumer Assessment of Healthcare 

Providers and Systems 

IGI—IHS Global Insight 

IIC—Inflation-indexed charge 

IOLs—Intraocular Lenses 

IPPS—Inpatient Prospective Payment System 

ICH CAHPS—In-Center Hemodialysis 

Consumer Assessment of Healthcare 

Providers and Services 

IUR—Inter-unit reliability 

MAC—Medicare Administrative Contractor 

MAP—Medicare Allowable Payment 

MFP—Multifactor Productivity 

MIPPA—Medicare Improvements for Patients 

and Providers Act of 2008 

MLR—Minimum Lifetime Requirement 

MSA—Metropolitan statistical areas 

NAMES—National Association of Medical 

Equipment Suppliers 

NHSN—National Health Safety Network 

NQF—National Quality Forum 

NQS—National Quality Strategy 

OBRA—Omnibus Budget Reconciliation Act 

OMB—Office of Management and Budget 

P&O—Prosthetics and orthotics 

PAMA—Protecting Access to Medicare Act of 

2014 

PC—Product category 

PD—Peritoneal Dialysis 

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Federal Register / Vol. 79, No. 133 / Friday, July 11, 2014 / Proposed Rules 40211 

PEN—Parenteral and enteral nutrition 

PFS—Physician Fee Schedule 

QIP—Quality Incentive Program 

RMA—Reporting Measure Adjuster 

RSPA—Regional single payment amounts 

RUL—Reasonable useful lifetime 

SAF—Standard Analysis File 

SHR—Standardized Hospitalization Ratio 

Admissions 

SMR—Standardized Mortality Ratio 

SPA—Single payment amount 

STrR—Standardized Transfusion Ratio 

TENS—Transcutaneous electrical nerve 

stimulation 

TEP—Technical Expert Panel 

TPS—Total Performance Score 

VBP—Value Based Purchasing 

I. Executive Summary 

A. Purpose 

1. End-Stage Renal Disease (ESRD) 

Prospective Payment System (PPS) 

On January 1, 2011, we implemented 

the ESRD PPS, a case-mix adjusted 

bundled prospective payment system 

for renal dialysis services furnished by 

ESRD facilities. This rule proposes to 

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

payment system (PPS) for calendar year 

(CY) 2015. Section 1881(b)(14) of the 

Social Security Act (the Act), as added 

by section 153(b) of the Medicare 

Improvements for Patients and 

Providers Act of 2008 (MIPPA) (Pub. L. 

110–275), and section 1881(b)(14)(F) of 

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

MIPPA and amended by section 3401(h) 

of the Affordable Care Act (Pub. L. 111– 

148), established that beginning CY 

2012, and each subsequent year, the 

Secretary shall annually increase 

payment amounts by an ESRD market 

basket increase factor, reduced by the 

productivity adjustment described in 

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

Section 632 of the American Taxpayer 

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

240) included several provisions that 

apply to the ESRD PPS. Section 632(a) 

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

the Act, which required the Secretary, 

by comparing per patient utilization 

data from 2007 with such data from 

2011, to reduce the single payment 

amount to reflect the Secretary’s 

utilization of ESRD-related drugs and 

biologicals. We finalized the amount of 

the drug utilization adjustment pursuant 

to this section in the CY 2014 ESRD PPS 

final rule with a 3- to 4-year transition 

(78 FR 72161 through 72170). Section 

632(b) of ATRA prohibited the Secretary 

from paying for oral-only ESRD-related 

drugs and biologicals under the ESRD 

PPS before January 1, 2016. And finally, 

section 632(c) of ATRA requires the 

Secretary, by no later than January 1, 

2016, to analyze the case mix payment 

adjustments under section 

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

appropriate revisions to those 

adjustments. 

On April 1, 2014, the Congress 

enacted the Protecting Access to 

Medicare Act of 2014 (PAMA) (Pub. L. 

113–93). PAMA section 217 includes 

several provisions that apply to the 

ESRD PPS. Specifically, sections 

217(b)(1) and (2) of PAMA amend 

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

Act. We interpret the amendments to 

sections 1881(b)(14)(F) and (I) as 

replacing the drug utilization 

adjustment that was finalized in the CY 

2014 ESRD PPS final rule with specific 

provisions that dictate what the market 

basket update will be for CY 2015 (0.0 

percent) and how it will be reduced in 

CYs 2016 through 2018. Section 

217(a)(1) of PAMA amends section 

632(b)(1) of ATRA, which now provides 

that the Secretary may not pay for oralonly drugs and biologicals used for the 

treatment of ESRD under the ESRD PPS 

prior to January 1, 2024. Section 

217(a)(2) further amends section 

632(b)(1) of ATRA by adding a sentence 

that provides: ‘‘Notwithstanding section 

1881(b)(14)(A)(ii) of the Social Security 

Act (42 U.S.C. 1395rr(b)(14)(A)(ii)), 

implementation of the policy described 

in the previous sentence shall be based 

on data from the most recent year 

available.’’ Finally, PAMA section 

217(c) provides that, as part of the CY 

2016 ESRD PPS rulemaking, the Sectary 

shall establish a process for (1) 

determining when a product is no 

longer an oral-only drug; and (2) 

including new injectable and 

intravenous products into the ESRD PPS 

bundled payment. 

As discussed further below, section 

212 of PAMA provides that the 

Secretary may not adopt ICD–10 prior to 

October 1, 2015. HHS has announced 

that it intends to issue an interim final 

rule that will require use of ICD–10 

beginning October 1, 2015 and will 

require the continued use of 

ICD–9–CM through September 30, 2015. 

Therefore, the ESRD PPS will continue 

to use ICD–9 through September 30, 

2015 and will require use of ICD–10 

beginning October 1, 2015 for purposes 

of the comorbidity payment adjustment. 

2. End-Stage Renal Disease (ESRD) 

Quality Incentive Program (QIP) 

This rule also proposes to set forth 

requirements for the ESRD Quality 

Incentive Program (QIP), including for 

payment years (PYs) 2017 and 2018. 

The program is authorized under 

section 1881(h) of the Social Security 

Act (the Act). The ESRD QIP is the most 

recent step in fostering improved 

patient outcomes by establishing 

incentives for dialysis facilities to meet 

or exceed performance standards 

established by CMS. 

3. Durable Medical Equipment, 

Prosthetics, Orthotics, and Supplies 

(DMEPOS) 

This proposed rule proposes a 

methodology for making national price 

adjustments to payments for Durable 

Medical Equipment, Prosthetics, 

Orthotics, and Supplies (DMEPOS) paid 

under fee schedules based upon 

information gathered from the DMEPOS 

competitive bidding programs (CBPs) 

and proposes to phase in special 

payment rules in a limited number of 

competitive bidding areas (CBAs) under 

the CBP for certain, specified DME and 

enteral nutrition. This rule proposes to 

clarify the statutory Medicare hearing 

aid coverage exclusion under section 

1862(a)(7) of the Act and the regulation 

at 42 CFR 411.15(d) to further specify 

the scope of this exclusion and to note 

certain devices excepted from the 

hearing aid exclusion. In addition, this 

rule proposes to update the definition of 

minimal self-adjustment at § 414.402 to 

note the specialized training that is 

needed by suppliers to provide custom 

fitting services if they are not certified 

orthotists. Finally, this rule proposes a 

revision to the Change of Ownership 

(CHOW) policy in the current 

regulations to allow a product category 

to be severed from a competitive 

bidding contract and transferred to a 

new contract when a contract supplier 

sells a distinct line of business to a 

qualified successor entity. 

B. Summary of the Major Provisions 

1. ESRD PPS 

• Update to the ESRD PPS base rate 

for CY 2015: For CY 2015, we are 

proposing an ESRD PPS base rate of 

$239.33. This amount reflects a 0.0 

percent update to the payment rate as 

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

the Act, as amended by section 217(b)(2) 

of PAMA, and the application of the 

proposed wage index budget-neutrality 

adjustment factor of 1.001306 to the CY 

2014 ESRD PPS base rate of $239.02. 

• Rebasing and revision of the ESRD 

bundled (ESRDB) market basket: For CY 

2015, we are proposing to rebase and 

revise the ESRDB market basket so the 

cost weights and price proxies would 

reflect the mix of goods and services 

that underlie ESRD bundled operating 

and capital costs for CY 2012. We note 

that if PAMA had not been enacted the 

proposed 2012-based ESRDB market 

basket update less productivity for CY 

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2015 would have been 1.6 percent, or 

(2.0 percent less 0.4 percentage point). 

• Update to the labor-related share: 

Because the cost distributions would 

change significantly as a result of the 

proposed ESRDB market basket 

revision, the proposed labor-related 

share would be 50.673 percent 

compared to the current labor-related 

share of 41.737 percent. The change to 

the labor-related share would have a 

significant impact on payments for 

certain ESRD facilities, specifically 

those ESRD facilities that have low wage 

index values. Therefore, for CY 2015 we 

are proposing a 2-year transition, in 

which the CY 2015 payment would be 

based on a 50/50 blended labor-related 

share that would apply to all ESRD 

facilities. ESRD facilities would receive 

50 percent of their current labor-related 

share and 50 percent of their revised 

labor-related share. Specifically, we 

would apply a labor-related share of 

46.205 ((41.737+50.673)/2 = 46.205). For 

CY 2016, the labor-related share would 

be based on 100 percent of the revised 

labor-related share. 

• Update to the wage index and wage 

index floor: We adjust wage indices on 

an annual basis using the most current 

hospital wage data to account for 

differing wage levels in areas in which 

ESRD facilities are located. In CY 2015, 

we are not proposing any changes to the 

application of the wage index budgetneutrality adjustment factor and will 

continue to apply the budget-neutrality 

adjustment to the base rate for the ESRD 

PPS. We will continue our policy for the 

gradual phase-out of the wage index 

floor and reduce the wage index floor 

values to 0.40, as finalized in the CY 

2014 ESRD PPS final rule (78 FR 72173– 

72174). 

• Update to the Core-Based Statistical 

Areas (CBSA): For CY 2015, we are 

proposing to implement the new CBSA 

delineations as described in the 

February 28, 2013 OMB Bulletin No. 

13–01, beginning with the CY 2015 

ESRD PPS wage index. In addition, we 

are proposing to implement a 2-year 

transition, under which a 50/50 blended 

wage index would apply to all ESRD 

facilities for CY 2015. Specifically, 

facilities would receive 50 percent of 

their CY 2015 wage index based on the 

CBSA delineations for CY 2014 and 50 

percent of their CY 2015 wage index 

based on the proposed new CBSA 

delineations. In CY 2016, facilities’ 

wage index values would be based 100 

percent on the new CBSA delineations. 

• Update to the outlier policy: We are 

updating the outlier services fixed 

dollar loss amounts for adult and 

pediatric patients and Medicare 

Allowable Payments (MAPs) for adult 

patients for CY 2015 using 2013 claims 

data. Based on the use of more current 

data, the fixed-dollar loss amount for 

pediatric beneficiaries would increase 

from $54.01 to $56.30 and the MAP 

amount would increase from $37.29 to 

$40.05, as compared to CY 2014 values. 

For adult beneficiaries, the fixed-dollar 

loss amount would decrease from 

$98.67 to $85.24 and the MAP amount 

would increase from $51.97 to $52.61. 

The 1 percent target for outlier 

payments was not achieved in CY 2013. 

We believe using CY 2013 claims data 

to update the outlier MAP and fixed 

dollar loss amounts for CY 2015 will 

increase payments for ESRD 

beneficiaries requiring higher resource 

utilization in accordance with a 1 

percent outlier percentage. 

• Clarification for the low-volume 

payment adjustment (LVPA): We are 

clarifying two policies regarding MAC 

verification and proposing conforming 

changes to the LVPA regulation. The 

first clarification explains that MACs 

can consider supporting data from 

hospital-based ESRD facilities to verify 

the facility’s total treatment count. The 

second clarification explains that MACs 

can add or prorate treatment counts 

from non-standard cost reporting 

periods (those that are not 12-month 

periods) where there is a change in 

ownership that does not result in a new 

Provider Transaction Access Number. 

• Continued use of ICD–9–CM codes 

and corrections to the ICD–10–CM codes 

eligible for the comorbidity payment 

adjustment: Section 212 of PAMA 

provides that the Secretary may not 

adopt ICD–10 prior to October 1, 2015. 

HHS has announced that it intends to 

issue an interim final rule that will 

require use of ICD–10 beginning October 

1, 2015 and will require the continued 

use of ICD–9–CM through September 

30, 2015. Therefore, the ESRD PPS will 

continue to use ICD–9 through 

September 30, 2015 and will require use 

of ICD–10 beginning October 1, 2015 for 

purposes of the comorbidity payment 

adjustment. For CY 2015, we are 

correcting several typographical errors 

and omissions in the Tables that 

appeared in the CY 2014 ESRD PPS 

final rule. 

2. ESRD QIP 

This rule proposes to implement 

requirements for the ESRD QIP, 

including measure sets for PYs 2017 and 

2018. 

• PY 2017 Measure Set: For PY 2017, 

we are proposing to remove one 

measure from the ESRD QIP, the 

Hemoglobin Greater than 12 g/dL 

clinical measure, on the grounds that it 

is ‘‘topped out’’. We are also proposing 

to adopt the Standardized Readmission 

Ratio (SRR) clinical measure, which 

evaluates care coordination. 

• PY 2018 Measure Set: For PY 2018, 

we are proposing to adopt two new 

clinical measures—the Standardized 

Transfusion Ratio (STrR) and Pediatric 

Peritoneal Dialysis Adequacy—and 

three new reporting measures: (1) Pain 

Assessment and Follow-Up; (2) Clinical 

Depression Screening and Follow-Up; 

and (3) National Healthcare Safety 

Network (NHSN) Healthcare Personnel 

Influenza Vaccination. We are also 

proposing to transition the In-Center 

Hemodialysis Consumer Assessment of 

Healthcare Providers and Systems (ICH 

CAHPS) survey reporting measure to a 

clinical measure. 

• Revision to the ICH CAHPS 

Reporting Measure: Beginning with the 

PY 2017 program year, we are proposing 

to revise the ICH CAHPS reporting 

measure to determine facility eligibility 

for the measure based on the number of 

survey-eligible patients treated during 

the ‘‘eligibility period’’, which we 

propose to define as the Calendar Year 

(CY) that immediately precedes the 

performance period. Survey-eligible 

patients are defined in the ICH CAHPS 

measure specifications available at 

http://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/ESRDQIP/061_

TechnicalSpecifications.html and 

https://ichcahps.org. 

• Revision to the NHSN Bloodstream 

Infection in Hemodialysis Outpatients 

Clinical Measure: Beginning with the 

PY 2016 program year, we are proposing 

to revise the NHSN Bloodstream 

Infection in Hemodialysis Outpatients 

clinical measure to calculate facility 

performance using the Adjusted 

Ranking Metric (ARM). 

• Revision to the Mineral Metabolism 

Reporting Measure: Beginning with the 

PY 2018 program year, we are proposing 

to revise the Mineral Metabolism 

reporting measure to allow facilities to 

submit both serum phosphorus and 

plasma phosphorus measurements. 

• Extraordinary Circumstances 

Exemption: Beginning with the PY 2017 

ESRD QIP, we are proposing to exempt 

dialysis facilities from all requirements 

of the ESRD QIP clinical and reporting 

measures during the months in which 

they are forced to close due to a natural 

disaster or other extraordinary 

circumstances. 

• New Scoring Methodology for PY 

2018: For PY 2018, we are proposing to 

use a new scoring methodology for the 

ESRD QIP. This proposed scoring 

methodology would assign facility Total 

Performance Scores (TPS) on the basis 

of two domains, the Clinical Measure 

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Domain and the Reporting Measure 

Domain. Facility scores on clinical 

measures in the Clinical Measure 

Domain would be divided into 

subdomains that align with National 

Quality Strategy (NQS) domains and 

weighted according to the number of 

measures in a subdomain, facility 

experience with the measure, and the 

measure’s alignment with CMS 

priorities for quality improvement. 

These weighted scores would be 

summed to produce a facility’s Clinical 

Measure Domain score. Facility scores 

on reporting measures in the Reporting 

Measure Domain would be summed and 

calculated to produce a facility’s 

Reporting Measure Adjuster, which 

would be subtracted from the facility’s 

Clinical Measure Domain score to 

produce a facility’s TPS. 

3. DMEPOS 

• The methodology for making 

national price adjustments based upon 

information gathered from the DMEPOS 

CBPs: As required by the MIPPA, this 

rule proposes methodologies for using 

information from the DMEPOS CBP to 

adjust the fee schedule amounts for 

DME in areas where CBPs are not 

implemented. The rule proposes to use 

the same methodologies to adjust the fee 

schedule amounts for enteral nutrition 

and off-the shelf (OTS) orthotics in areas 

where CBPs are not implemented. 

• Phase in of special payment rules in 

a limited number of CBAs under the 

CBP for certain, specified DME and 

enteral nutrition. This rule proposes to 

phase-in special payment rules for 

certain DME and enteral nutrition under 

the DMEPOS CBP in a limited number 

of CBAs. 

• Medicare hearing aid coverage 

exclusion under section 1862(a)(7) of 

the Act: This rule proposes to modify 

the regulation at § 411.15 to address the 

scope of the statutory hearing aid 

exclusion and note the types of devices 

that are not subject to the hearing aid 

exclusion. 

• Definition of minimal selfadjustment at § 414.402: This rule 

proposes to update the regulation to 

indicate what specialized training is 

needed to provide custom fitting 

services if suppliers are not certified 

orthotists. 

• Change of Ownership Rules to 

Allow Contract Suppliers to Sell 

Specific Lines of Business: This 

proposed rule proposes to establish an 

exception under the CHOW rules to 

allow CMS to sever a product category 

from a contract, incorporate the product 

category into a new contract, and 

transfer the new contract to a qualified 

new owner under certain specific 

circumstances. 

• Termination of a Competitive 

Bidding Contract: This rule proposes to 

clarify the effective date for 

terminations of competitive bidding 

contracts, which impacts the deadline 

for which contract suppliers must notify 

its beneficiaries of the termination. 

C. Summary of Costs and Benefits 

In section XII.B of this proposed rule, 

we set forth a detailed analysis of the 

impacts that the proposed changes 

would have on affected entities and 

beneficiaries. The impacts include the 

following: 

1. Impacts of the Proposed ESRD PPS 

The impact chart in section XII.B.1.a 

of this proposed rule displays the 

estimated change in payments to ESRD 

facilities in CY 2015 compared to 

estimated payments in CY 2014. The 

overall impact of the CY 2015 changes 

is projected to be a 0.3 percent increase 

in payments. Hospital-based ESRD 

facilities have an estimated 0.5 percent 

increase in payments compared with 

freestanding facilities with an estimated 

0.3 percent increase. 

We estimate that the aggregate ESRD 

PPS expenditures would increase by 

approximately $30 million from CY 

2014 to CY 2015. This reflects a $0 

million change from the payment rate 

update and a $30 million increase due 

to the updates to the outlier threshold 

amounts. As a result of the projected 0.3 

percent overall payment increase, we 

estimate that there will be an increase 

in beneficiary co-insurance payments of 

0.3 percent in CY 2015, which translates 

to approximately $10 million. 

2. Impacts for ESRD QIP 

The overall economic impact of the 

ESRD QIP is an estimated $11.9 million 

in PY 2017 and $7.2 million in PY 2018. 

In PY 2017, we expect the total payment 

reductions to be approximately $11.9 

million, and the costs associated with 

the collection of information 

requirements for the validation of NHSN 

data feasibility study to be 

approximately $27 thousand for all 

ESRD facilities. In PY 2018, we expect 

the total payment reductions to be 

approximately $7 million, and the costs 

associated with the collection of 

information requirements for the NHSN 

Healthcare Personnel Influenza 

Vaccination reporting measure to be 

approximately $248 thousand for all 

ESRD facilities. 

The ESRD QIP will continue to 

incentivize facilities to provide highquality care to beneficiaries. 

3. Impacts for DMEPOS 

a. Proposed methodology for making 

national price adjustments to DMEPOS 

fee schedule amounts based upon 

information gathered from the DMEPOS 

competitive bidding programs 

The proposed regulation proposes to 

adjust Medicare fee schedule amounts 

for items subject to DMEPOS CBPs 

beginning January 1, 2016, using 

information from the DMEPOS CBPs to 

be applied to items in non-competitive 

bidding areas. It is estimated that these 

adjustments would save over $7 billion 

for the 5-year period beginning January 

1, 2016, and ending December 30, 2020. 

The estimated savings are primarily 

derived from price reductions for items. 

It is expected that most of the economic 

impact would result from reduced 

payment amounts. The ability of 

suppliers to furnish items is not 

expected to be impacted. 

b. Proposed phase in of special payment 

rules under the competitive bidding 

program for certain DME and enteral 

nutrition 

We believe that the proposed special 

payment rules for certain DME and 

enteral nutrition under the DMEPOS 

CBPs would not have a significant 

impact on beneficiaries and suppliers. 

Contract suppliers are responsible for 

furnishing items and services needed by 

the beneficiary, and the cost to suppliers 

for furnishing these items and services 

does not change based on whether or 

not the equipment and related items and 

services are paid for separately under a 

capped rental payment method. Because 

the supplier’s bids would reflect the 

cost of furnishing items in accordance 

with the new payment rules, we expect 

the overall savings to generally be the 

same as they are under the current 

payment rules. 

Furthermore, the proposed special 

payment rules would be phased under 

a limited number of areas first to 

evaluate their impact on the program, 

beneficiaries, and suppliers, including 

costs, quality, and access. Expanded use 

of the special payment rules in other 

areas or for other items would be 

addressed in future rulemaking. 

c. Proposed clarification of the statutory 

Medicare hearing aid coverage 

exclusion stipulated at section 

1862(a)(7) of the Act 

This proposed rule proposes to clarify 

the scope of the Medicare coverage 

exclusion for hearing aids and withdraw 

coverage of bone anchored hearing aids. 

This proposal would not have a 

significant fiscal impact on the 

Medicare program, because the 

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Medicare program expenditures for 

bone anchored hearing aids during the 

period CY2005 through CY 2013 are less 

than $9,000,000. This proposed rule, if 

finalized, would provide further 

guidance about coverage of DME with 

regard to the statutory hearing aid 

exclusion. The proposed rule, if 

finalized, would leave unchanged 

coverage of cochlear implants and brain 

stem implants, which are not 

considered hearing aids. 

d. Proposed update of the definition of 

minimal self-adjustment at 42 CFR 

414.402 

The proposed rule proposes to update 

the definition of minimal selfadjustment to make clear that minimal 

self-adjustment means an adjustment 

that the beneficiary, caretaker for the 

beneficiary, or supplier of the device 

can perform and does not require the 

services of a certified orthotist (that is, 

an individual certified by either the 

American Board for Certification in 

Orthotics and Prosthetics, Inc., or the 

Board for Orthotist/Prosthetist 

Certification) or a physician as defined 

in section 1861(r) of the Act, a treating 

practitioner means a physician assistant, 

nurse practitioner, or clinical nurse 

specialist as defined in section 

1861(aa)(5) of the Act, an occupational 

therapist as defined in 42 CFR 484.4, or 

physical therapist as defined in 42 CFR 

484.4 in compliance with all applicable 

Federal and State licensure and 

regulatory requirements. If finalized, 

this revised definition would impact 

suppliers furnishing custom fitted 

orthotics that do not have this expertise. 

These suppliers would be required to 

hire an individual with expertise. For 

example, according to the Bureau of 

Labor Statistics Occupational 

Employment Statistics May 2013 the 

median pay for a certified orthotist is 

$30.27 an hour. The impact will vary 

according to the caseload of custom 

fitted orthotics provided by an 

individual supplier. 

e. Change of Ownership Rules to Allow 

Contract Suppliers to Sell Specific Lines 

of Business 

This rule proposes to clarify the 

CHOW rules in order to limit disruption 

to the normal course of business for 

DME suppliers. This rule proposes to 

establish an exception under the current 

CHOW rules to allow CMS to sever a 

product category from a contract, 

incorporate the product category into a 

new contract, and transfer the new 

contract to a qualified new owner under 

certain specific circumstances. This 

proposed clarification would impact 

businesses in a positive way by allowing 

them to conduct everyday transactions 

with less disruption from our rules and 

regulations. 

II. Calendar Year (CY) 2015 End-Stage 

Renal Disease (ESRD) Prospective 

Payment System (PPS) 

A. Background on the End-Stage Renal 

Disease (ESRD) Prospective Payment 

System (PPS) 

On August 12, 2010, we published in 

the Federal Register a final rule (75 FR 

49030 through 49214) in which we 

implemented a case-mix adjusted 

bundled PPS for Medicare outpatient 

ESRD dialysis services beginning 

January 1, 2011, in accordance with 

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

by section 153(b) of MIPPA. On 

November 10, 2011, we published in the 

Federal Register a final rule (76 FR 

70228 through 70316) in which we 

made a number of routine updates for 

CY 2012, implemented the second year 

of the transition to the ESRD PPS, made 

several policy changes and 

clarifications, and made technical 

changes. On November 9, 2012, we 

published in the Federal Register a final 

rule (77 FR 67450 through 67531) in 

which we made a number of routine 

updates for CY 2013, implemented the 

third year of the transition to the ESRD 

PPS, and made several policy changes 

and reiterations. 

On December 2, 2013, we published 

in the Federal Register a final rule (78 

FR 72156 through 72253) titled, 

Medicare Program; End-Stage Renal 

Disease Prospective Payment System, 

Quality Incentive Program, and Durable 

Medical Equipment, Prosthetics, 

Orthotics, and Supplies’’ (hereinafter 

referred to as the CY 2014 ESRD PPS 

final rule). In that final rule, for the 

ESRD PPS, we made a number of 

routine updates for CY 2014, 

implemented the fourth and final year 

of the transition, implemented sections 

632(a) and (b)(1) of ATRA, and made 

policy changes and clarifications. 

Specifically, in that rule, we finalized 

the following: 

• Update to the ESRD PPS base rate 

for CY 2015. An ESRD PPS base rate of 

$239.02 per treatment for renal dialysis 

services. This amount reflected the CY 

2014 ESRD bundled (ESRDB) market 

basket update of 3.2 percent minus a 

multifactor productivity adjustment of 

0.4 percent, that is, a 2.8 percent 

increase. This amount also reflected the 

application of the wage index budgetneutrality adjustment of 1.000454, the 

home dialysis training add-on budget 

neutrality adjustment factor of 0.999912, 

and the portion of the drug utilization 

adjustment that was transitioned for CY 

2014, or $8.16. 

• Update to the wage index floor. A 

0.05 reduction to the CY 2014 and CY 

2015 wage index floor values, which 

resulted in a wage index floor value of 

0.45 for CY 2014 and a wage index floor 

value of 0.40 for CY 2015 under the 

ESRD PPS. 

• Update to the outlier policy. Using 

CY 2012 claims data to update the 

outlier Medicare Allowable Payments 

(MAPs) and fixed dollar loss amounts 

for CY 2014, which resulted in updated 

fixed dollar loss amounts for adult and 

pediatric patients and MAPs for adult 

patients. Specifically, for pediatric 

beneficiaries, we finalized a fixed-dollar 

loss amount of $54.01 and a MAP 

amount of $40.49. For adult 

beneficiaries, we finalized a fixed-dollar 

loss amount of $98.67 and a MAP 

amount of $50.25. 

• The application of ICD–10–CM 

diagnosis codes to the comorbidity 

payment adjustment. We discussed and 

provided a crosswalk from ICD–9–CM to 

ICD–10–CM for codes that are subject to 

the comorbidity payment adjustment. 

We finalized a policy under which all 

ICD–10–CM codes to which ICD–9–CM 

codes that are eligible for the 

comorbidity payment adjustment 

crosswalk are eligible for the 

comorbidity payment adjustment 

beginning on October 1, 2014 with two 

exceptions. As discussed further below, 

however, section 212 of the Protecting 

Access to Medicare Act of 2014 (PAMA) 

(Pub. L. 113–93) provides that the 

Secretary may not adopt ICD–10 prior to 

October 1, 2015. HHS has announced 

that it intends to issue an interim final 

rule that will require use of ICD–10 

beginning October 1, 2015 and will 

continue to require use of ICD–9–CM 

through September 30, 2015. 

Accordingly, we plan to continue to 

require facilities to utilize ICD–9–CM 

codes to identify comorbidities eligible 

for the comorbidity payment adjustment 

through September 30, 2015, and then 

to use ICD–10–CM codes beginning 

October 1, 2015. 

• The self-dialysis and home dialysis 

training add-on adjustment. An increase 

to the self-dialysis and home dialysis 

training add-on adjustment from $33.44 

to $50.16. 

• The delay in payment for oral-only 

ESRD-related drugs and biologicals 

until January 1, 2016. We also delayed 

payment for oral-only ESRD-related 

drugs under the ESRD PPS until January 

1, 2016. As discussed further below, 

section 217(a)(1) of PAMA amended 

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

that the Secretary may not include oralonly ESRD-related drugs for payment 

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under the ESRD PPS prior to January 1, 

2024. 

B. Routine Updates and Proposed Policy 

Changes to the CY 2015 ESRD PPS 

1. ESRD PPS Base Rate 

In the CY 2011 ESRD PPS final rule 

(75 FR 49071 through 49083), we 

discussed the development of the ESRD 

PPS per treatment base rate that is 

codified in the Medicare regulations at 

§ 413.220 and § 413.230. The CY 2011 

ESRD PPS final rule also provides a 

detailed discussion of the methodology 

used to calculate the ESRD PPS base 

rate and the computation of factors used 

to adjust the ESRD PPS base rate for 

projected outlier payments and budgetneutrality in accordance with sections 

1881(b)(14)(D)(ii) and 1881(b)(14)(A)(ii) 

of the Act, respectively. Specifically, the 

ESRD PPS base rate was developed from 

CY 2007 claims (that is, the lowest per 

patient utilization year as required by 

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

updated to CY 2011, and represented 

the average per treatment Medicare 

Allowable Payment (MAP) for 

composite rate and separately billable 

services. In accordance with section 

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

regulations at § 413.230, the ESRD PPS 

base rate is adjusted for the patientspecific case-mix adjustments, 

applicable facility adjustments, 

geographic differences in area wage 

levels using an area wage index, as well 

as applicable outlier payments or 

training payments. 

a. Changes to the Drug Utilization 

Adjustment 

i. The Drug Utilization Adjustment 

Finalized in the CY 2014 ESRD PPS 

Final Rule 

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

added by section 632(a) of the American 

Taxpayer Relief Act of 2012 (ATRA), 

required that, for services furnished on 

or after January 1, 2014, the Secretary 

shall make reductions to the single 

payment for renal dialysis services to 

reflect the Secretary’s estimate of the 

change in the utilization of ESRDrelated drugs and biologicals (excluding 

oral-only ESRD-related drugs) by 

comparing per patient utilization data 

from 2007 with such data from 2012. 

Section 1881(b)(14)(I) further required 

that in making the reductions, the 

Secretary take into account the most 

recently available data on Average Sales 

Prices (ASP) and changes in prices for 

drugs and biologicals reflected in the 

ESRD market basket percentage increase 

factor under section 1881(b)(14)(F). 

Consistent with these requirements, in 

CY 2014, we finalized a payment 

adjustment to the CY 2014 ESRD PPS 

base rate that reflected the change in 

utilization of ESRD-related drugs and 

biologicals from CY 2007 to CY 2012. 

Specifically, we finalized the drug 

utilization adjustment amount of $29.93 

per treatment, and finalized a policy to 

implement this amount over a 3- to 4- 

year transition period. For CYs 2014 and 

2015, we stated that we would 

implement the transition by offsetting 

the payment update by a portion of the 

reduction amount necessary to create an 

overall impact of a zero percent for 

facilities from the previous year’s 

payments. For example, in CY 2014 we 

finalized a per treatment drug 

utilization adjustment amount for the 

first transition year of $8.16 or 3.3 

percent, which represented the CY 2014 

ESRDB market basket update minus 

productivity and other impacts to create 

an overall impact of zero percent. For a 

complete discussion of the methodology 

for computing the drug adjustment 

please see the CY 2014 ESRD PPS final 

rule (78 FR 72161 through 72170). 

ii. PAMA Changes to the Drug 

Utilization Adjustment 

On April 1, 2014, Congress enacted 

PAMA. Section 217(b), titled Mitigation 

of the Application of Adjustment to 

ESRD Bundled Payment Rate to 

Account for Changes in the Utilization 

of Certain Drugs and Biologicals, 

amends section 1881(b)(14)(I) of the Act 

by inserting ‘‘and before January 1, 

2015’’ after January 1, 2014. This 

amendment effectively eliminates the 

remaining years of the drug utilization 

adjustment transition. In its place, the 

PAMA amendments to section 

1881(b)(14)(F)(i) dictate what the market 

basket increase factor will be for 2015 

and how it will be reduced in 2016 

through 2018. In particular, PAMA 

section 217(b)(2)(C) amended section 

1881(b)(14)(F)(i) by adding subclause 

(III), which provides that 

‘‘[n]otwithstanding subclauses (I) and 

(II), in order to accomplish the purposes 

of subparagraph (I) with respect to 2015, 

the increase factor described in 

subclause (I) for 2015 shall be 0.0 

percent.’’ We interpret subclause (III) to 

mean that the market basket increase 

factor less the productivity adjustment 

for 2015 is 0.0 percent. The PAMA 

amendments also provide for a payment 

reduction in lieu of the drug utilization 

adjustment in 2016 through 2018. In 

particular, PAMA section 217(b)(2)(ii) 

further amends section 1881(b)(14)(i)(I) 

by adding at the end the following new 

sentence, ‘‘ In order to accomplish the 

purpose of subparagraph (I) with respect 

to 2016, 2017, and 2018, after 

determining the increase factor 

described in the preceding sentence for 

each of 2016, 2017, and 2018, the 

Secretary shall reduce such increase 

factor by 1.25 percentage points for each 

of 2016 and 2017 and by 1 percentage 

point for 2018.’’ We interpret this 

provision as requiring us to reduce the 

market basket increase factor for 2016 

through 2018 by the percentages 

prescribed in the statute. 

b. Payment Rate Update for CY 2015 

As discussed in section II.B.2 of this 

proposed rule, section 1881(b)(14)(F)(i) 

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

of MIPPA and amended by section 

3401(h) of the Affordable Care Act, 

provides that, beginning in 2012, the 

ESRD PPS payment amounts are 

required to be annually increased by the 

rate of increase in the ESRD market 

basket, reduced by the productivity 

adjustment described in section 

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

had not stipulated a 0.0 percent 

payment update for CY 2015, we would 

have proposed a payment update of 1.6 

percent, (a 2.0 percent ESRDB market 

basket update less a 0.4 percent 

productivity adjustment). In accordance 

with section 1881(b)(14)(F)(i)(III) of the 

Act, as added by PAMA section 

217(b)(2)(C), however, we propose a 0.0 

percent update to the CY 2014 ESRD 

PPS base rate of $239.02 for CY 2015. 

c. CY 2015 ESRD PPS Wage Index 

Budget Neutrality Adjustment 

For CY 2015 we propose to apply the 

wage index budget-neutrality 

adjustment factor of 1.001306 to the 

unadjusted CY 2014 and CY 2015 ESRD 

PPS base rate (that is, $239.02), yielding 

a proposed CY 2015 ESRD PPS wageindex budget-neutrality adjusted base 

rate of $239.33 ($239.02 × 1.001306 = 

$239.33). 

d. Labor-Related Share 

As discussed in section II.2.e, as part 

of the proposed ESRDB market basket 

rebasing and revision, we are proposing 

to update the labor-related share value 

from 41.737 percent to 50.673 percent. 

We note that some ESRD facilities are 

adversely affected by this proposal. For 

example, rural facilities and facilities 

located in CBSA areas with wage 

indexes below 1 will experience 

reduced payments due to an increase in 

the labor-related share, while other 

facilities located in CBSA area where 

wage indices are above 1 will 

experience increased payments. While 

we are proposing the new labor-related 

share under the ESRD PPS payment 

system computed at 50.673 percent, we 

propose to implement this value using 

a 2-year 50/50 blend transition. 

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Therefore, for CY 2015 we propose to 

apply 50 percent of the value of the 

current labor-related share under the 

ESRD PPS (41.737) and 50 percent of 

the value of the new labor-related share, 

(50.673), add the values together and 

divide by two, for a CY 2015 laborrelated value of 46.205 ((41.737 + 

50.673)/2 = 46.205). Beginning in CY 

2016 we propose to apply 100 percent 

of the proposed labor-related share 

value of 50.673 percent. We propose to 

continue to apply a labor-related share 

value of 50.673 percent until such time 

in the future the ESRDB market basket 

is again rebased in computing a wage 

index-adjusted base rate for ESRD 

facilities. We believe that this approach 

is similar to the 50/50 blend transition 

proposed for the CY 2015 wage indexes 

and discussed in section II.3.c of this 

rule and that a 2- year transition is 

necessary to allow ESRD facilities time 

to adjust to the new labor related-share 

value. 

We note that we considered 

implementing the computed labor 

related share value of 50.673 for CY 

2015, but that would have increased the 

CY 2015 proposed wage index budget 

neutrality factor to 1.002081. This 

increase would have resulted in a 

decrease in CY 2015 Medicare payments 

to rural facilities of 1.3 percent, and an 

increase to urban facilities 0.5 percent. 

When we apply the transition laborrelated share value of 46.205, the 

disparity in impacts for rural and urban 

facilities is reduced to less than 1.0 

percent. Specifically, rural facilities 

would experience a decrease in 

payments of 0.5 percent and urban 

facilities would experience an increase 

in payments of 0.4 percent. (For more 

information of the CY 2015 Impact of 

Proposed Changes in Payments to ESRD 

Facilities for CY 2015 ESRD proposed 

rule, see section XV of this rule). 

Therefore, we believe a 2-year transition 

strikes an appropriate balance between 

ensuring that ESRD PPS payments are as 

accurate and stable as possible while 

giving facilities time to adjust to the 

new labor-related share factor. 

In summary, we propose a CY 2015 

ESRD PPS base rate update of $239.33. 

This reflects a 0.0 percent payment 

update consistent with section 

1881(b)(14)(F)(i)(III), as added by 

section 217(b)(2) of PAMA. This base 

rate reflects the CY 2015 proposed wage 

index budget neutrality factor of 

1.001306, and a labor-related share 

value of 46.205. 

2. ESRD Bundled Market Basket and 

Labor-Related Share 

a. Background 

In accordance with section 

1881(b)(14)(F)(i) of the Act, beginning in 

2012, the ESRD payment amounts are 

required to be annually increased by an 

ESRD market basket increase factor that 

is reduced by the productivity 

adjustment in section 

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

application of the productivity 

adjustment may result in the increase 

factor being less than 0.0 for a year and 

may result in payment rates for a year 

being less than the payment rates for the 

preceding year. The statute also 

provides that the market basket increase 

factor should reflect the changes over 

time in the prices of an appropriate mix 

of goods and services used to furnish 

renal dialysis services. 

In the CY 2011 ESRD PPS final rule 

(75 FR 49151 through 49162), we 

established an ESRD Bundled market 

basket using CY 2008 as the base year. 

This market basket was used to annually 

update the ESRD base rate payments for 

CY 2012, CY 2013, and CY 2014. In this 

CY 2015 ESRD PPS proposed rule, we 

are proposing to revise and rebase the 

ESRDB market basket to a base year of 

CY 2012. We note that PAMA dictates 

a market basket update for CY 2015 of 

0.0 percent and a reduction to the 

market basket updates in CYs 2016 

through 2018 (by 1.25 percentage points 

for each of 2016 and 2017 and by 1 

percentage point for 2018). 

The term ‘‘market basket’’ refers to the 

mix of goods and services needed to 

produce ESRD care, and is also 

commonly used to denote the input 

price index that includes both weights 

(mix of goods and services) and price 

factors. The term ‘‘ESRDB market 

basket’’ as used in this proposed rule 

refers to the ESRDB input price index. 

The proposed CY 2012-based ESRDB 

market basket represents the costs of 

operating and capital-related costs. The 

percentage change in the ESRDB market 

basket reflects the average change in the 

price of a fixed set of goods (both 

operating and capital) and services 

purchased by ESRD facilities in 

providing renal dialysis services. For 

further background information, see the 

CY 2011 final rule with comment period 

(75 FR 49151 through 49162). 

For purposes of the ESRDB PPS, the 

ESRDB market basket is a fixed-weight 

(Laspeyres-type) price index. A 

Laspeyres-type index compares the cost 

of purchasing a specified mix of goods 

and services in a selected base period to 

the cost of purchasing that same group 

of goods and services at current prices. 

The effects on total expenditures 

resulting from changes in the quantity 

or mix of goods and services purchased 

subsequent or prior to the base period 

are, by design, not considered. 

We construct the market basket in 

three steps. The first step is to select a 

base period and estimate total base 

period expenditure shares for mutually 

exclusive and exhaustive spending 

categories. We use total costs for 

operating and capital expenses. These 

shares are called ‘‘cost’’ or 

‘‘expenditure’’ weights. The second step 

is to match each expenditure category to 

a price/wage variable, called a price 

proxy. We draw these price proxy 

variables from publicly available 

statistical series published on a 

consistent schedule, preferably at least 

quarterly. The final step involves 

multiplying the price series for each 

spending category by the cost weight for 

that category. The sum of these products 

(that is, weights multiplied by proxy 

index levels) for all cost categories 

yields the composite index level of the 

market basket for a given quarter or 

year. Repeating the third step for other 

quarters and years produces a time 

series of market basket index levels, 

from which we can calculate rates of 

growth. 

The market basket represents a fixedweight index because it answers the 

question of how much more or less it 

would cost, at a later time, to purchase 

the same mix of goods and services that 

was purchased in the base period. 

We are proposing to use CY 2012 as 

the base year for the proposed rebased 

and revised ESRDB market basket cost 

weights. The cost weights for this 

proposed ESRDB market basket are 

based on the cost report data for 

independent ESRD facilities. We refer to 

the market basket as a CY market basket 

because the base period for all price 

proxies and weights are set to CY 2012 

= 100. Source data included CY 2012 

Medicare cost reports (Form CMS–265– 

11), supplemented with 2012 data from 

the U.S. Census Bureau’s Services 

Annual Survey (SAS). Medicare cost 

reports from hospital-based ESRD 

providers were not used to construct the 

proposed ESRDB market basket because 

data from independent ESRD facilities 

tend to better reflect the actual cost 

structure faced by the ESRD facility 

itself, and are not influenced by the 

allocation of overhead over the entire 

institution, as can be the case with 

hospital-based providers. This approach 

is consistent with our standard 

methodology used in the development 

of other market baskets. 

Consistent with our discussion in the 

CY 2011 final rule with comment period 

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(75 FR 49153), and as further discussed 

below, to implement section 

1881(b)(14)(F)(i) of the Act we propose 

to revise and rebase the market basket 

so the cost weights and price proxies 

reflect the mix of goods and services 

that underlie ESRD bundled operating 

and capital costs for CY 2012. 

b. Rebasing and Revision of the ESRD 

Bundled Market Basket 

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

while often used interchangeably, 

actually denote different activities. 

Rebasing means shifting the base year 

for the structure of costs of the input 

price index (for example, for this 

proposed rule, we propose to shift the 

base year cost structure from CY 2008 to 

CY 2012). Revising means changing data 

sources, cost categories, price proxies, 

and/or methodology used in developing 

the input price index. We are proposing 

both to rebase and revise the ESRDB 

market basket to reflect CY 2012 total 

cost data. 

We selected CY 2012 as the new base 

year because 2012 is the most recent 

year for which relatively complete 

Medicare cost report (MCR) data are 

available. In developing the proposed 

market basket, we reviewed ESRD 

expenditure data from ESRD MCRs 

(CMS Form 265–11) for CY 2012 for 

each freestanding ESRD facility that 

reported expenses and payments. The 

CY 2012 cost reports are those with cost 

reporting periods beginning on or after 

January 1, 2012 and before December 

31, 2012. We propose to maintain our 

policy of using data from freestanding 

ESRD facilities because freestanding 

ESRD data reflect the actual cost 

structure faced by the ESRD facility 

itself. In contrast, expense data for a 

hospital-based ESRD reflect the 

allocation of overhead over the entire 

institution. Due to this method of 

allocation, the expenses of each 

hospital-based component may be 

skewed. 

We developed cost category weights 

for the proposed CY 2012-based ESRDB 

market basket in two stages. First, we 

derived base weights for nine major 

categories (Wages and Salaries, 

Employee Benefits, Medical Supplies, 

Lab Services, Housekeeping & 

Operations, Pharmaceuticals, 

Administrative and General, CapitalRelated Building & Fixed Equipment, 

and Capital-Related Machinery) from 

the ESRD MCRs. Second, we are 

proposing to divide the Administrative 

& General cost category into further 

detail using 2012 U.S. Census Bureau 

Services Annual Survey (SAS) Data for 

the industry Kidney Dialysis Centers 

(NAICS 621492). We apply the 2012 

distributions from the SAS data to the 

2012 ‘‘Administrative & General’’ cost 

weight to yield the more detailed 2012 

cost weights. This is similar to the 

methodology we used to break the 2008- 

based Administrative & General Costs 

into more detail for the ESRDB market 

basket as detailed in the CY 2011 ESRD 

final rule (75 FR 49154 through 49159). 

The main difference is that in the 2008- 

based market basket we relied on data 

from the U.S. Census Bureau Business 

Expenses Survey (BES). The BES data 

was the predecessor to the SAS. The 

Census Bureau SAS data are published 

annually, with the most recent data 

available being 2012. For more 

information on the SAS data, see 

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

about_the_surveys.html. 

We are proposing to include a total of 

20 detailed cost categories for the 

proposed CY 2012-based ESRDB market 

basket, which is four more cost 

categories than the CY 2008-based 

ESRDB market basket. In addition, we 

are proposing to further decompose both 

the Wages and Salaries and Employee 

Benefits cost categories into four more 

detailed cost categories reflecting the 

occupational mix of full time 

equivalents (FTEs) at ESRD facilities. 

The four detailed occupational 

categories that will underlie both Wages 

and Salaries and Employee Benefits are: 

(1) Health-related workers; (2) 

Management workers; (3) 

Administrative workers; and (4) Service 

workers. Having more detailed cost 

categories for these compensation costs 

enables them to be proxied more 

precisely. We are also proposing to 

collapse the Professional Fees and All 

Other Services cost categories into 

single categories rather than splitting 

those categories into Labor-Related and 

Non-Labor-Related Services. We will 

continue to assume that 87 percent of 

Professional Fees are labor-related costs 

and will be included in the proposed 

labor-related share. In addition, we are 

proposing to revise our labels for All 

Other Materials to Medical Materials 

and Supplies, Laboratories to Lab 

Services, and All Other Labor-Related/

Non Labor-Related to All Other Goods 

and Services. A more thorough 

discussion of our proposals is provided 

below. 

i. Cost Category Weights 

Using Worksheets A and B from the 

CY 2012 Medicare cost reports, we first 

computed cost shares for nine major 

expenditure categories: Wages and 

Salaries, Employee Benefits, 

Pharmaceuticals, Supplies, Lab 

Services, Administrative and General 

(A&G), Housekeeping and Operations, 

Capital-Related Building & Equipment, 

and Capital-Related Machinery. Edits 

were applied to include only cost 

reports that had total costs greater than 

zero. In order to reduce potential 

distortions from outliers in the 

calculation of the cost weights for the 

major expenditure categories, cost 

values for each category less than the 

5th percentile or greater than the 95th 

percentile were excluded from the 

computations. The resulting data set 

included information from 

approximately 4,700 independent ESRD 

facilities’ cost reports from an available 

pool of 5,333 cost reports. Expenditures 

for the nine cost categories as a 

proportion of total expenditures are 

shown in Table 1. 

Table 1 presents the proposed CY 

2012-based ESRDB and CY 2008-based 

ESRDB market basket major cost 

weights as derived directly from the 

MCR data. Following the table, we 

describe the sources of the major 

category weights and their subcategories 

in the proposed CY 2012-based ESRDB 

market basket. 

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

Cost category Proposed CY 2012-based 

ESRDB market basket 

CY 2008-based ESRDB 

market basket 

Wages and Salaries ............................................................................................ 31.839% 26.338% 

Employee Benefits ............................................................................................... 6.570% 5.163% 

Pharmaceuticals .................................................................................................. 16.510% 26.358% 

Supplies ............................................................................................................... 10.097% 9.726% 

Lab Services ........................................................................................................ 1.532% 0.356% 

Housekeeping & Operations ................................................................................ 3.785% 3.604% 

Administrative & General (residual) ..................................................................... 17.419% 17.594% 

Capital-related Building & Fixed Equipment ........................................................ 8.378% 7.910% 

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TABLE 1—PROPOSED CY 2012-BASED ESRDB MARKET BASKET MAJOR COST WEIGHTS—Continued 

Cost category Proposed CY 2012-based 

ESRDB market basket 

CY 2008-based ESRDB 

market basket 

Capital-related Machinery .................................................................................... 3.870% 2.951% 

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

Some costs are reported on the 

Medicare cost report but are not 

included in the ESRD bundled payment. 

For example, we removed the expenses 

related to vaccine costs from total 

expenditures since these are excluded 

from the ESRD bundled payment, but 

reported on the Medicare cost report. 

We are proposing to expand the 

expenditure categories developed from 

the Medicare cost reports to allow for 

more detailed expenditure 

decomposition. To expand these cost 

categories, SAS data were used because 

the Medicare cost reports do not collect 

detailed information on the items of 

interest. Those categories include: 

benefits for all employees, professional 

fees, telephone, utilities, and all other 

goods and services. We chose to 

separately break out these categories to 

more accurately reflect ESRD facility 

costs. We describe below how the 

initially computed categories and 

weights from the cost reports were 

modified to yield the final 2012 ESRDB 

market basket expenditure categories 

and weights presented in this proposed 

rule. 

Wages and Salaries 

The weight for wages and salaries for 

direct patient care for 2012 was initially 

derived from Worksheet B of the 

Medicare cost report. However, because 

the cost center for direct patient care 

salaries does not include all other wage 

and salary costs for non-health workers 

and physicians, it was necessary to 

derive a methodology to include all 

salaries, not just direct patient care 

salaries, in order to calculate the 

appropriate market basket cost weight. 

This was accomplished in the following 

steps. 

(1) From the trial balance of the cost 

report (Worksheet A), we computed the 

ratio of salaries to total costs in each of 

the following cost centers: housekeeping 

and operations, employee benefits for 

direct patient care, Administrative & 

General, Supplies, Laboratories, and 

Pharmaceuticals. 

(2) We then multiplied the ratios 

computed in step 1 by the total costs for 

each corresponding cost center from 

Worksheet B. This provided us with an 

estimate of salaries other than directpatient care for each cost center. 

(3) The estimated salaries for each of 

the cost centers on Worksheet B 

estimated in step 2 were subsequently 

summed and added to the direct patient 

care salary figure (resulting in a new 

total salaries figure). 

(4) The estimated non-direct patient 

care salaries (see step 2) were then 

subtracted from their respective cost 

categories to avoid double-counting 

their values in the total costs. 

As a result of this process, we moved 

from an estimated Wages and Salaries 

cost weight of 23.242 percent (as 

estimated using only direct patient care 

salaries as a percent of total costs) to a 

weight of 31.839 percent (capturing both 

direct patient care salaries and all other 

salary costs and, again, dividing that by 

total costs found on the Medicare cost 

report), as seen in Table 2. 

The final adjustment made to this 

category is to include contract labor 

costs. These costs appear on the 

Medicare cost report; however, they are 

embedded in the Administrative and 

General category and cannot be 

disentangled using the Medicare cost 

reports alone. To move the appropriate 

expenses from the A&G category to 

Wages and Salaries, we used data from 

the 2012 SAS, which reported 2.3 of 

total expenses were spent on contract 

labor costs. We allocated 80 percent of 

that figure to Wages and Salaries. At the 

same time, we subtracted that same 

amount from A&G, where the contract 

labor expenses would be reported on the 

cost report. The 80 percent figure that 

was used was determined by taking 

salaries as a percentage of total 

compensation (excluding contract labor) 

from the 2012 MCR data. The resulting 

cost weight for Wages and Salaries 

increases to 33.650 percent. 

TABLE 2—ESRD WAGES & SALARIES SHARE DETERMINATION

Components Cost share 

(%) 

08 MCR Salaries Direct Patient Care (DPC) ...................................................................................................................................... 22.297 

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

08 Wage & Salary Weight normalized after adding separately billable services into the bundle ...................................................... ¥1.373 

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

08 Final Wage & Salary Weight .......................................................................................................................................................... 26.755 

12 MCR Salaries Direct Patient Care (DPC) ...................................................................................................................................... 23.242 

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

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

12 Final Wage & Salary Weight .......................................................................................................................................................... 33.650 

Benefits 

The Benefits weight was derived from 

the MCR data for employee benefits for 

direct patient care and supplemented 

with data from the 2012 SAS to account 

for non-direct patient care benefits. The 

cost report only reflects health-related 

benefit costs associated with direct 

patient care; that is, it does not reflect 

retirement benefits. In order to include 

the benefits related to non-direct patient 

care, we estimated this marginal 

increase from the SAS Benefits weight. 

Unlike the MCR, data the SAS benefits 

share includes expenses related to the 

retirement and pension benefits. In 

order to be consistent with the cost 

report definitions we do not want to 

include the costs associated with 

retirement and pension benefits in the 

cost share weights. These costs are 

relatively small compared to the costs 

for the health related benefits, 

accounting for only 2.7 percent of the 

total benefits costs as reported on the 

SAS. Our method produced a Benefits 

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(both direct patient care and non-direct 

patient care) weight that was 1.824 

percentage points larger (8.394 vs. 

6.570) than the Benefits weight for 

direct patient care calculated directly 

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

basket weights still totaled 100 percent, 

we removed this additional 1.824 

percentage point for Benefits from the 

residual category. 

The final adjustment made to this 

category is to include contract labor 

costs. Once again, these costs appear on 

the Medicare cost report; however, they 

are embedded in the Administrative and 

General category and cannot be 

disentangled using the Medicare cost 

report alone. We applied 20 percent of 

total contract labor costs, as estimated 

using the SAS, to the Benefits cost 

weight calculated from the cost reports. 

The resulting cost weight for Benefits 

increases to 8.847 percent. 

The Table 3 compares the 2008-based 

Benefits cost share derivation as 

detailed in the CY 2011 ESRD final rule 

(75 FR 49155–49156) to the proposed 

2012-based Benefits cost share 

derivation as explained above. 

TABLE 3—ESRD BENEFIT SHARE

DETERMINATION

Components Cost share 

(percent) 

08 MCR Benefits .................. 5.163 

08 BES Additional Benefits 

Weight (Health only) ......... 1.143 

08 Contract Labor (20% of 

BES benefits share) .......... 0.448 

08 Final Benefit Weight ........ 6.754 

12 MCR Benefits .................. 6.570 

12 SAS Additional Benefits 

Weight (Health only) ......... 1.824 

12 Contract Labor (20% of 

SAS benefits share) .......... 0.453 

12 Final Benefit Weight ........ 8.847 

Utilities 

We developed a weight for Utility 

expenses using the 2012 SAS data, as 

utilities are not separately identified on 

the Medicare cost report. The SAS data 

reports the percentage of expenses for 

‘purchased fuels (except motor fuels)’, 

‘purchased electricity’, and ‘water, 

sewer, refuse, and other utilities.’ We 

applied these ratios to the 

administrative and general cost share 

(net of contract labor and additional 

benefits). The resulting Electricity, Fuel 

(Natural Gas), and Water and Sewerage 

weights in the proposed 2012 ESRDB 

market basket are 0.973, 0.101, and 

0.765 percent, respectively; together 

these categories yield a combined 

Utilities cost weight of 1.838 percent. 

Pharmaceuticals 

The proposed ESRDB market basket 

includes expenditures for all drugs, 

including formerly separately billable 

drugs and ESRD-related drugs that were 

covered under Medicare Part D before 

the ESRD PPS was implemented. We 

were able to calculate an expenditure 

weight for pharmaceuticals directly 

from the following cost centers on 

Worksheet B: columns 11 ‘Drugs 

Included in Composite Rate’; 12 ‘ESAs’; 

13 ‘ESRD-Related Drugs; and drug 

expenses reported on line 5 column 10, 

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

drugs and biologicals, administered 

during dialysis for non-ESRD related 

conditions as well as oral-only drugs. 

Since these are costs to the facility for 

providing ESRD treatment to the patient 

we propose to include them in the drug 

cost share weight. Vaccine 

expenditures, which are mandated as 

separately reimbursable, were excluded 

when calculating this cost weight. 

Section 1842(o)(1)(A)(iv) of the Act 

requires that influenza, pneumococcal, 

and hepatitis B vaccines described in 

subparagraph (A) or (B) of section 

1861(s)(10) of the Act be paid based on 

95 percent of average wholesale price 

(AWP) of the drug. Since these drugs are 

excluded from other prospective 

payment systems, we exclude them 

from the proposed ESRDB market 

basket, as well. 

Finally, to avoid double-counting, the 

weight for the Pharmaceuticals category 

was reduced to exclude the estimated 

share of non-direct patient care salaries 

and benefits associated with the 

applicable drug cost centers referenced 

above. This resulted in a proposed 

ESRDB market basket weight for 

Pharmaceuticals of 16.510 percent. ESA 

expenditures accounted for 12.383 

percentage points of the 

Pharmaceuticals weight, and all other 

drugs accounted for the remaining 4.127 

percentage points (.438 percent for 

Drugs Included in Composite Rate, 

3.534 percent for ESRD-Related Drugs, 

and 0.155 percent for Non-ESRD related 

drugs). 

The 9-percentage point decrease in 

the pharmaceutical share between 2008 

and 2012 (25.052 percent to 16.510 

percent) is due largely to the drop in 

drug utilization. The drug percentage of 

the base rate used in 2011 was about 31 

percent; however, the analysis 

conducted for the drug utilization 

adjustment showed that the drug 

portion of the base rate in 2014 would 

have fallen to only be 22 percent of the 

base rate had it been fully implemented. 

The cost report data corroborate the 

drop in drug costs for facilities over the 

same time frame. 

Supplies 

We calculated the weight for Supplies 

included in the bundled rate using the 

costs reported in the Supplies cost 

center (column 7 on Worksheet B) of the 

Medicare cost report. This total was 

divided by total expenses to derive a 

weight for the Supplies component in 

the ESRDB market basket. Finally, to 

avoid double-counting, the weight for 

the Supplies category was reduced to 

exclude the estimated share of nondirect patient care salaries and benefits 

associated with this cost center. The 

resulting proposed 2012-based ESRDB 

market basket weight for Supplies is 

10.097 percent. 

Lab Services 

We calculated the weight for Lab 

Services included in the bundled rate 

using the costs reported in the 

Laboratory cost center (column 8 on 

Worksheet B) of the Medicare cost 

report. This total was divided by total 

expenses to derive a weight for the Lab 

component in the ESRDB market basket. 

Finally, to avoid double-counting, the 

weight for the Lab services category was 

reduced to exclude the estimated share 

of non-direct patient care salaries and 

benefits associated with this cost center. 

The resulting proposed 2012-based 

ESRDB market basket weight for Lab 

Services is 1.532 percent. 

The cost weight for lab services is 

substantially lower than the 2008 

ESRDB market basket lab weight of 

5.497 percent. This is due to the change 

in the method used to determine lab 

costs. In 2008, we relied on MCR data 

for the cost share weight; however, the 

majority of lab services were performed 

by labs outside of the dialysis facility 

and those costs were not reported on the 

MCR. Therefore, in the 2008 ESRDB 

market basket we inflated the expenses 

reported for labs in ESRD facilities to 

reflect the use from other provider 

types. This adjustment factor was 

estimated based on the lab payment to 

dialysis facilities relative to the lab fee 

payment to other providers. For the 

rebased ESRDB market basket, the 2012 

cost report data represents the expenses 

under the bundled payment system, and 

all of the expenses related to lab fees 

(whether in house or contracted through 

an outside lab) are reported in the MCR 

data. 

Housekeeping & Operations 

We calculated the weight for 

Housekeeping and Operations included 

in the bundled rate using the costs 

reported on worksheet A, column 8, 

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lines 3 & 4 of the Medicare Cost Report. 

This total was divided by total expenses 

to derive a weight for the Housekeeping 

and Operations component in the 

ESRDB market basket. Finally, to avoid 

double-counting, the weight for the 

Housekeeping & Operations category 

was reduced to exclude the estimated 

share of non-direct patient care salaries 

and benefits associated with this cost 

center. The resulting proposed 2012- 

based ESRDB market basket weight for 

Housekeeping and Operations is 3.785 

percent. 

Administrative and General (A&G) 

We computed the proportion of total 

A&G expenditures using the A&G cost 

center data from Worksheet B (column 

9) of the Medicare cost reports. As 

described above, we exclude contract 

labor from this cost category and 

apportion these costs to the salary and 

benefits cost weights. Similar to other 

expenditure category adjustments, we 

then reduced the computed weight to 

exclude salaries and benefits associated 

with the A&G cost center and the 

additional benefits for non-direct 

patient care. The resulting A&G cost 

weight is 13.331 percent. This A&G cost 

weight is then fully apportioned to 

derive detailed cost weights for Utilities, 

Telephone, Professional Fees, and All 

Other Goods and Services. 

Professional Fees 

A separate weight for Professional 

Fees was developed using the 2012 SAS 

data. Professional fees include fees 

associated with the following: 

purchased professional & technical 

services (such as accounting, 

bookkeeping, legal, management, 

consulting, and other professional 

services fees) and purchased advertising 

& promotional services. To estimate 

professional fees, we first calculated the 

ratio of SAS professional fees to SAS 

expenses that match the A&G expenses 

from the cost reports. We then applied 

this ratio to the A&G total cost weight 

to estimate the proportion of ESRD 

facility professional fees. The resulting 

weight for the proposed 2012-based 

ESRDB market basket is 0.617 percent. 

An estimated 87 percent of the expenses 

are considered labor-related and 

subsequently included in the proposed 

labor-related share, which is described 

in more detail below. 

Telephone 

Because telephone service expenses 

are not separately identified on the 

Medicare cost report, we developed a 

Telephone Services weight using the 

2012 SAS expenses. We estimated a 

ratio of telephone services expenses to 

total administrative and general 

expenses from SAS. We applied this 

ratio to the total A&G cost weight from 

the cost reports to estimate the 

proportion of ESRD facility telephone 

expenses. The resulting proposed 2012- 

based ESRDB market basket cost weight 

for Telephone Services is 0.468 percent. 

All Other Goods and Services 

A separate weight for All Other Goods 

and Services was developed using the 

2012 SAS data. All other Goods and 

Services include expenses for purchased 

software, professional liability 

insurance, data processing and other 

purchased computer services, and all 

other operating expenses not otherwise 

captured. We estimated a ratio of All 

Other Goods and Services expenses to 

Total Administrative and General 

expenses from SAS. We then applied 

this ratio to the total A&G cost weight 

from the cost reports to estimate the cost 

weight for ESRD facility All Other 

Goods and Services. The resulting 

proposed 2012-based ESRDB market 

basket cost weight for All Other Goods 

and Services is 10.407 percent. 

Capital 

We developed a market basket weight 

for the Capital category using data from 

Worksheet B of the Medicare cost 

reports. Capital-related costs include 

depreciation and lease expense for 

buildings, fixtures, movable equipment, 

property taxes, insurance, the costs of 

capital improvements, and maintenance 

expense for buildings, fixtures, and 

machinery. Because housekeeping as 

well as operation & maintenance costs 

are included in the Worksheet B cost 

center for Capital-Related costs 

(Worksheet B, column 2), we excluded 

the costs for these two categories and 

developed a separate expenditure 

category for housekeeping & operations, 

as detailed above. Similar to the 

methodology used for other market 

basket cost categories with a salaries 

component, we computed a share for 

non-direct patient care salaries and 

benefits associated with the Capitalrelated Machinery cost center. We used 

Worksheet B to develop two capitalrelated cost categories, one for Buildings 

and Equipment (based on worksheet B 

column 2 less housekeeping & 

operations), and one for Machinery 

(based on worksheet B column 4). We 

reasoned this delineation was 

particularly important given the critical 

role played by dialysis machines. 

Likewise, because price changes 

associated with Buildings and 

Equipment could move differently than 

those associated with Machinery, we 

felt that separate price proxies would be 

more appropriate. The resulting 

proposed 2012-based ESRDB market 

basket weights for Capital-related 

Buildings and Equipment and Capitalrelated Machinery are 8.378 and 3.870 

percent, respectively. 

Table 4 lists all of the cost categories 

and cost weights in the proposed CY 

2012 ESRDB market basket compared to 

the cost categories and cost weights in 

the CY 2008 ESRDB market basket. 

TABLE 4—COMPARISON OF THE PROPOSED CY 2012–BASED ESRDB MARKET BASKET COST CATEGORIES & WEIGHTS

AND THE CY 2008–BASED ESRDB MARKET BASKET COST CATEGORIES & WEIGHTS. 

2008 Cost category 

2008 Cost 

weight 

(percent) 

Proposed 

2012 cost 

weight 

(percent) 

Proposed 2012 cost category 

Total .................................................................................... 100.000 100.000 Total. 

Compensation .............................................................. 33.509 42.497 Compensation. 

Wages and Salaries ............................................. 26.755 33.650 Wages and Salaries. 

Employee Benefits ................................................ 6.754 8.847 Employee Benefits. 

Utilities ......................................................................... 1.264 1.839 Utilities. 

Electricity .............................................................. 0.621 0.973 Electricity. 

Natural Gas .......................................................... 0.127 0.101 Natural Gas. 

Water and Sewerage ............................................ 0.516 0.765 Water and Sewerage. 

All Other Materials ....................................................... 39.765 28.139 Medical Materials and Supplies. 

Pharmaceuticals ................................................... 25.052 16.510 Pharmaceuticals. 

Supplies ................................................................ 9.216 10.097 Supplies. 

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TABLE 4—COMPARISON OF THE PROPOSED CY 2012–BASED ESRDB MARKET BASKET COST CATEGORIES & WEIGHTS

AND THE CY 2008–BASED ESRDB MARKET BASKET COST CATEGORIES & WEIGHTS.—Continued 

2008 Cost category 

2008 Cost 

weight 

(percent) 

Proposed 

2012 cost 

weight 

(percent) 

Proposed 2012 cost category 

Lab Services ......................................................... 5.497 1.532 Lab Services. 

All Other Services ........................................................ 15.929 15.277 All Other Goods and Services. 

Telephone ............................................................. 0.597 0.468 Telephone Service. 

Housekeeping and Operations ............................. 2.029 3.785 Housekeeping and Operations. 

Labor-Related Services ........................................ 2.768 

Prof. Fees: Labor-related ..................................... 1.549 0.617 Professional Fees (Labor-related and NonLaborrelated services). 

All Other Labor-related ......................................... 1.219 

NonLabor-Related Services ................................. 10.535 10.407 All Other Goods and Services. 

Prof. Fees: Nonlabor-related ................................ 0.224 

All Other Nonlabor-related .................................... 10.311 

Capital Costs ............................................................... 9.533 12.248 Capital Costs. 

Capital Related-Building and Equipment ............. 7.459 8.378 Capital Related-Building and Equipment. 

Capital Related-Machinery ................................... 2.074 3.870 Capital Related-Machinery. 

Note: Totals may not sum to 100.000 percent due to rounding. 

ii. Proposed Price Proxies for the CY 

2012 ESRDB Market Basket 

After developing the cost weights for 

the proposed CY 2012-based ESRDB 

market basket, we selected the most 

appropriate wage and price proxies 

currently available to represent the rate 

of price change for each expenditure 

category. We base the price proxies on 

Bureau of Labor Statistics (BLS) data 

and group them into one of the 

following BLS categories: 

• Employment Cost Indexes. 

Employment Cost Indexes (ECIs) 

measure the rate of change in 

employment wage rates and employer 

costs for employee benefits per hour 

worked. These indexes are fixed-weight 

indexes and strictly measure the change 

in wage rates and employee benefits per 

hour. ECIs are superior to Average 

Hourly Earnings (AHE) as price proxies 

for input price indexes because they are 

not affected by shifts in occupation or 

industry mix, and because they measure 

pure price change and are available by 

both occupational group and by 

industry. The industry ECIs are based 

on the North American Classification 

System (NAICS) and the occupational 

ECIs are based on the Standard 

Occupational Classification System 

(SOC). 

• Producer Price Indexes. Producer 

Price Indexes (PPIs) measure price 

changes for goods sold in other than 

retail markets. PPIs are used when the 

purchases of goods or services are made 

at the wholesale level. 

• Consumer Price Indexes. Consumer 

Price Indexes (CPIs) measure change in 

the prices of final goods and services 

bought by consumers. CPIs are only 

used when the purchases are similar to 

those of retail consumers rather than 

purchases at the wholesale level, or if 

no appropriate PPIs were available. 

We evaluated the price proxies using 

the criteria of reliability, timeliness, 

availability, and relevance: 

• Reliability. Reliability indicates that 

the index is based on valid statistical 

methods and has low sampling 

variability. Widely accepted statistical 

methods ensure that the data were 

collected and aggregated in a way that 

can be replicated. Low sampling 

variability is desirable because it 

indicates that the sample reflects the 

typical members of the population. 

(Sampling variability is variation that 

occurs by chance because only a sample 

was surveyed rather than the entire 

population.) 

• Timeliness. Timeliness implies that 

the proxy is published regularly, 

preferably at least once a quarter. The 

market baskets are updated quarterly, 

and therefore, it is important for the 

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

available. We believe that using proxies 

that are published regularly (at least 

quarterly, whenever possible) helps to 

ensure that we are using the most recent 

data available to update the market 

basket. We strive to use publications 

that are disseminated frequently, 

because we believe that this is an 

optimal way to stay abreast of the most 

current data available. 

• Availability. Availability means that 

the proxy is publicly available. We 

prefer that our proxies are publicly 

available because this will help ensure 

that our market basket updates are as 

transparent to the public as possible. In 

addition, this enables the public to be 

able to obtain the price proxy data on 

a regular basis. 

• Relevance. Relevance means that 

the proxy is applicable and 

representative of the cost category 

weight to which it is applied. The CPIs, 

PPIs, and ECIs that we have selected to 

propose in this regulation meet these 

criteria. Therefore, we believe that they 

continue to be the best measure of price 

changes for the cost categories to which 

they would be applied. 

Table 7 lists all price proxies for the 

proposed revised and rebased ESRDB 

market basket. Below is a detailed 

explanation of the price proxies used for 

each cost category weight. 

Wages and Salaries 

We will continue using an ECI blend 

for wages and salaries in the proposed 

2012-based ESRDB market basket. 

However, we are proposing to expand 

the number of occupation categories and 

associated ECIs from two to four based 

on FTE data from ESRD Medicare Cost 

Reports and the availability of ECIs from 

BLS. We calculated weights for the 

Wages and Salaries sub-categories using 

2012 FTE data and associated 2012 

Average Mean Wage data from the 

Bureau of Labor Statistics’ Occupational 

Employment Statistics. 

Wages and Salaries—Health Related 

We are proposing to continue using 

the ECI for Wages & Salaries for 

Hospitals (All Civilian) (BLS series code 

#CIU1026220000000I). Of the two 

health-related ECIs that we considered 

(‘‘Hospitals’’ and ‘‘Health Care and 

Social Assistance’’), the wage 

distribution within the Hospital NAICS 

sector (622) is more closely related to 

the wage distribution of ESRD facilities 

than it is to the wage distribution of the 

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Health Care and Social Assistance 

NAICS sector (62). 

The Wages and Salaries—Health 

Related subcategory weight within the 

Wages and Salaries cost category is 

80percent. The ESRD Medicare Cost 

Report FTE categories used to define the 

Wages and Salaries—Health Related 

subcategory include ‘‘Physicians,’’ 

‘‘Registered Nurses,’’ ‘‘Licensed 

Practical Nurses,’’ ‘‘Nurses’ Aides,’’ 

‘‘Technicians,’’ and ‘‘Dieticians.’’ 

The current 2008-based ESRD Market 

Basket uses the ECI for Wages & Salaries 

for Hospitals (All Civilian) for 50 

percent of Wages and Salaries. 

Wages and Salaries—Management 

We propose using the ECI for Wages 

& Salaries for Management, Business, 

and Financial (Private Industry) (BLS 

series code #CIU2020000110000I). We 

feel this ECI is the most appropriate 

price proxy to measure the price growth 

of management functions at ESRD 

facilities. Furthermore, we regularly use 

this ECI-wages for management, 

business, and financial in our other 

market baskets, such as the MEI. 

The Wages and Salaries— 

Management subcategory weight within 

the Wages and Salaries cost category is 

8 percent. The ESRD Medicare Cost 

Report FTE category used to define the 

Wages and Salaries—Management 

subcategory is ‘‘Management.’’ 

Wages and Salaries—Administrative 

We propose using the ECI for Wages 

& Salaries for Office and Administrative 

Support (Private Industry) (BLS series 

code #CIU2020000220000I). We feel this 

ECI is the most appropriate price proxy 

to measure the price growth of 

administrative support at ESRD 

facilities. Furthermore, we regularly use 

this ECI for administrative wages in our 

other market baskets, such as the MEI. 

The Wages and Salaries— 

Administrative subcategory weight 

within the Wages and Salaries cost 

category is 7 percent. The ESRD 

Medicare Cost Report FTE category used 

to define the Wages and Salaries— 

Administrative subcategory is 

‘‘Administrative.’’ 

Wages and Salaries—Services 

We propose using the ECI for Wages 

& Salaries for Service Occupations 

(Private Industry) (BLS series code 

#CIU2020000300000I). We feel this ECI 

is the most appropriate price proxy to 

measure the price growth of all other 

non-health related, non-management, 

and non-administrative service support 

at ESRD facilities. Furthermore, we 

regularly use this ECI for all other 

service wages in our other market 

baskets, such as the MEI. 

The Wages and Salaries—Services 

subcategory weight within the Wages 

and Salaries cost category is 6 percent. 

The ESRD Medicare Cost Report FTE 

categories used to define the Wages and 

Salaries—Services subcategory are 

‘‘Social Workers’’ and ‘‘Other.’’ 

Table 5 lists the four ECI series and 

the corresponding weights used to 

construct the proposed ECI blend for 

wages and salaries. We feel this new ECI 

blend is the most appropriate price 

proxy to measure the growth of wages 

and salaries faced by ESRD facilities. 

TABLE 5—ECI BLEND FOR WAGES AND SALARIES IN THE PROPOSED 2012 BASED ESRDB MARKET BASKET

Cost category ECI Series Weight (%) 

Wages and Salaries—Health Related ......... ECI—Wages & Salaries—Hospital (All Civilian) ................................................. 80 

Wages and Salaries—Management ............ ECI—Wages & Salaries—Management, Business, and Financial (Private Industry).7 

Wages and Salaries—Administrative .......... ECI—Wages & Salaries—Office and Administrative Support (Private Industry) 7 

Wages and Salaries—Services ................... ECI—Wages & Salaries—Service Occupations (Private Industry) .................... 6 

The current 2008-based ESRDB 

market basket uses a 50 percent/50 

percent blend of the ‘‘ECI—Wages & 

Salaries—Hospital (All Civilian)’’ and 

the ‘‘ECI—Wages and Salaries— 

Healthcare and Social Assistance’’ for 

the wages and salaries ECI blend. 

Benefits 

We will continue using an ECI blend 

for Benefits in the proposed 2012-based 

ESRDB market basket; however, we are 

proposing to expand the number of 

occupation categories and associated 

ECIs from two to four based on the 

components of the proposed Wage and 

Salaries ECI blend. 

Benefits—Health Related 

We are proposing to continue using 

the ECI for Benefits for Hospitals (All 

Civilian) to measure price growth of this 

subcategory. The ECI for Benefits for 

Hospitals is calculated using the ECI for 

Total Compensation for Hospitals (BLS 

series code # CIU1016220000000I) and 

the relative importance of wages and 

salaries within total compensation. We 

believe this constructed ECI series is 

technically appropriate for the reason 

stated above in the wages and salaries 

price proxy section. 

Benefits—Management 

We propose using the ECI for Benefits 

for Management, Business, and 

Financial (Private Industry) to measure 

price growth of this subcategory. The 

ECI for Benefits for Management, 

Business, and Financial is calculated 

using the ECI for Total Compensation 

for Management, Business, and 

Financial (BLS series code # 

CIU2010000110000I) and the relative 

importance of wages and salaries within 

total compensation. We believe this 

constructed ECI series is technically 

appropriate for the reason stated above 

in the wages and salaries price proxy 

section. 

Benefits—Administrative 

We propose using the ECI for Benefits 

for Office and Administrative Support 

(Private Industry) to measure price 

growth of this subcategory. The ECI for 

Benefits for Office and Administrative 

Support is calculated using the ECI for 

Total Compensation for Office and 

Administrative Support (BLS series 

code # CIU2010000220000I) and the 

relative importance of wages and 

salaries within total compensation. We 

believe this constructed ECI series is 

technically appropriate for the reason 

stated above in the wages and salaries 

price proxy section. 

Benefits—Services 

We propose using the ECI for Benefits 

for Service Occupations (Private 

Industry) to measure price growth of 

this subcategory. The ECI for Benefits 

for Service Occupations is calculated 

using the ECI for Total Compensation 

for Service Occupations (BLS series 

code # CIU2030000300000I) and the 

relative importance of wages and 

salaries within total compensation. We 

believe this constructed ECI series is 

technically appropriate for the reason 

stated above in the wages and salaries 

price proxy section. 

We feel the new benefits ECI blend is 

the most appropriate price proxy to 

measure the growth of prices faced by 

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

00550.asp. 

ESRD facilities. Table 6 lists the four 

ECI series and the corresponding 

weights used to construct the proposed 

benefits ECI blend. 

TABLE 6—BENEFITES ECI BLEND IN THE PROPOSED 2012–BASED ESRDB MARKET BASKET

Cost category ECI Series Weight (%) 

Benefits—Health Related ............................ ECI—Benefits—Hospital (All Civilian) ................................................................. 80 

Benefits—Management ............................... ECI—Benefits—Management, Business, and Financial (Private Industry) ........ 7 

Benefits—Administrative .............................. ECI—Benefits—Office and Administrative Support (Private Industry) ............... 7 

Benefits—Services ....................................... ECI—Benefits—Service Occupations (Private Industry) .................................... 6 

The current 2008-based ESRDB 

market basket uses a 50 percent/50 

percent blend of the ‘‘ECI—Benefits— 

Hospital (All Civilian)’’ and the ‘‘ECI— 

Benefits—Healthcare and Social 

Assistance’’ for the benefits ECI blend. 

Electricity 

We propose to continue using the PPI 

for Commercial Electric Power (BLS 

series code #WPU0542) to measure the 

price growth of this cost category. This 

is the same proxy used in the current 

2008-based ESRDB market basket. 

Natural Gas 

We propose to continue using the PPI 

for Commercial Natural Gas (BLS series 

code #WPU0552) to measure the price 

growth of this cost category. This is the 

same proxy used in the current 2008- 

based ESRDB market basket. 

Water and Sewerage 

We propose to continue using the CPI 

for Water and Sewerage Maintenance 

(BLS series code #CUUR0000SEHG01) 

to measure the price growth of this cost 

category. This is the same proxy used in 

the current 2008-based ESRDB market 

basket. 

Pharmaceuticals 

We propose to change the price proxy 

used for the pharmaceuticals cost 

category. A recent Health and Human 

Services Office of the Inspector General 

(OIG) report titled ‘‘Update: Medicare 

Payment for End Stage Renal Disease 

Drugs’’ recommended that CMS 

consider updating the ESRD payment 

bundle using a factor that takes into 

account drug acquisition costs. CMS 

had responded to this recommendation 

by stating that we would consider these 

findings in the continual evaluation of 

the ESRD market basket, particularly 

during the next rebasing and revising of 

the market basket index.1

Drug acquisition cost data is neither 

publicly available nor the methods used 

to determine it transparent, and, 

therefore, wouldn’t meet our price 

proxy criteria of relevance, reliability, 

transparency, and public availability. 

However, after considering several 

viable options that do meet the criteria 

we are proposing to use the PPI: 

Vitamin, Nutrient, and Hematinic 

Preparations (BLS series code 

#WPU063807). This index includes 

drugs that are most similar to ESAs and 

other drugs used in the ESRD setting, 

such as iron supplements. The 

definition of a hematinic is a medicine 

that increases the hemoglobin content of 

the blood, and these types of drugs are 

used to treat iron-deficiency anemia 

essential for normal erythropoiesis. 

We believe the PPI: Vitamin, Nutrient, 

and Hematinic Preparations to be the 

most technically appropriate index 

available to measure the price growth of 

the pharmaceuticals cost category in the 

proposed 2012-based ESRDB market 

basket. The current 2008-based ESRDB 

market basket uses the PPI: 

Pharmaceuticals for Human Use. 

Supplies 

We propose using the PPI for Surgical 

and Medical Instruments (BLS series 

code #WPU1562) since it excludes 

orthopedic, prosthetic, ophthalmic, and 

dental type medical equipment and 

devices, which are not likely to be used 

extensively in the ESRD setting. The 

types of equipment under Surgical and 

Medical Instruments, particularly blood 

transfusion and IV equipment, seem 

most similar to the medical equipment 

and supplies that would be used in the 

ESRD setting. The current 2008-based 

ESRDB market basket uses the PPI for 

Medical, Surgical, and Personal Aid 

Devices. 

Lab Services 

We propose to continue using the PPI 

for Medical Laboratories (BLS series 

code #PCU621511621511) to measure 

the price growth of this cost category. 

This is the same proxy used in the 

current 2008-based ESRDB market 

basket. 

Telephone Service 

We propose to continue using the CPI 

for Telephone Services (BLS series code 

#CUUR0000SEED) to measure the price 

growth of this cost category. This is the 

same proxy used in the current 2008- 

based ESRDB market basket. 

Housekeeping and Operations 

We propose to continue using the PPI 

for Cleaning and Building Maintenance 

Services (BLS series code #WPU49) to 

measure the price growth of this cost 

category. This is the same proxy used in 

the current 2008-based ESRDB market 

basket. 

Professional Fees 

We propose to continue using the ECI 

(Compensation) for Professional and 

Related Occupations (Private Industry) 

(BLS series code # CIU2010000120000I) 

to measure the price growth of this cost 

category. This is the same proxy used in 

the current 2008-based ESRDB market 

basket. 

All Other Goods and Services 

We propose using the PPI for Finished 

Goods less Foods and Energy (BLS 

series code #WPUFD4131) as the price 

proxy for the All Other Goods and 

Services cost category. This PPI series is 

used in most of CMS’ other market 

baskets to measure the expenses for the 

residual category of all other goods and 

services. It is more consistent with the 

purchase of items at a wholesale rather 

than a consumer level. The current 

2008-based ESRDB market basket 

(specifically, the ‘‘All Other Non LaborRelated Services’’ cost category) uses the 

CPI–U, All Items less Foods and Energy. 

Capital-Related Building and Equipment 

We propose using the PPI for Lessors 

of Nonresidential Buildings (BLS series 

code #PCU531120531120) as it 

represents the types of fixed capital 

expenses most likely faced by ESRD 

facilities. We also use this proxy in the 

MEI as the fixed capital proxy for 

physicians. We believe the PPI for 

Lessors of Nonresidential Buildings is 

more appropriate as fixed capital 

expenses in both the ESRD and 

physician office setting should be more 

congruent with trends in business office 

space costs rather than residential costs. 

The current 2008-based ESRDB market 

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40224 Federal Register / Vol. 79, No. 133 / Friday, July 11, 2014 / Proposed Rules 

basket uses the CPI for Owners’ 

Equivalent Rent of Residences. 

Capital Related Machinery 

We propose to continue using the PPI 

for Electrical Machinery and Equipment 

(BLS series code #WPU117) to measure 

the price growth of this cost category. 

This is the same proxy used in the 

current 2008-based ESRDB market 

basket. 

Table 7 shows all the proposed price 

proxies for the proposed CY 2012-based 

ESRDB Market Basket. 

TABLE 7—PROPOSED PRICE PROXIES FOR THE CY 2012-BASED ESRDB MARKET BASKET

Cost category Price proxy Cost weight % 

Compensation .......................................................................................................................... 42.497 

Wages and Salaries ................................. .......................................................................................................................... 33.650 

Health-related Wages ....................... ECI—Wages & Salaries—Hospital (Civilian) .................................................. 26.920 

Management Wages ......................... ECI—Wages & Salaries—Management, Business, and Financial (Private) .. 2.356 

Administrative Wages ....................... ECI—Wages & Salaries—Office and Administrative Support (Private) .......... 2.356 

Service Wages .................................. ECI—Wages & Salaries—Service Occupations (Private) ............................... 2.019 

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

Health-related Benefits ..................... ECI—Benefits—Hospital (Civilian) .................................................................. 7.078 

Management Benefits ....................... ECI—Benefits—Management, Business, and Financial (Private) .................. 0.619 

Administrative Benefits ..................... ECI—Benefits—Office and Administrative Support (Private) .......................... 0.619 

Service Benefits ................................ ECI—Benefits—Service Occupations (Private) ............................................... 0.531 

Utilities .......................................................................................................................... 1.839 

Electricity .................................................. PPI—Commercial Electric Power .................................................................... 0.973 

Natural Gas .............................................. PPI—Commercial Natural Gas ........................................................................ 0.101 

Water and Sewerage ............................... CPI—Water and Sewerage Maintenance ....................................................... 0.765 

Medical Materials and Supplies .......................................................................................................................... 28.139 

Pharmaceuticals ....................................... PPI—Vitamin, Nutrient, and Hematinic Preparations ...................................... 16.510 

Supplies .................................................... PPI—Surgical and Medical Instruments .......................................................... 10.097 

Lab Services ............................................ PPI—Medical Laboratories .............................................................................. 1.532 

All Other Goods and Services .......................................................................................................................... 15.277 

Telephone Service ................................... CPI—Telephone Services ............................................................................... 0.468 

Housekeeping and Operations ................ PPI—Cleaning and Building Maintenance Services ....................................... 3.785 

Professional Fees .................................... ECI—Compensation—Professional and Related Occupations (Private) ........ 0.617 

All Other Goods and Services ................. PPI—Finished Goods less Foods and Energy ............................................... 10.407 

Capital Costs .......................................................................................................................... 12.248 

Capital Related Building and Equipment PPI—Lessors of Nonresidential Buildings ....................................................... 8.378 

Capital Related Machinery ....................... PPI—Electrical Machinery and Equipment ..................................................... 3.870 

Total .................................................. .......................................................................................................................... 100.000 

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

iii. Proposed Market Basket Estimate for 

the CY 2015 ESRDB PPS Update 

As discussed previously in this 

proposed rule, beginning with the CY 

2015 ESRD PPS update, we are 

proposing to adopt the CY 2012-based 

ESRDB market basket as the appropriate 

market basket of goods and services for 

the ESRD PPS. 

Based on the IHS Global Insight, Inc. 

(IGI) first quarter 2014 forecast with 

history through the fourth quarter of 

2013, the most recent estimate of the 

proposed CY 2012-based ESRDB market 

basket for CY 2015 is 2.0 percent. IGI is 

a nationally recognized economic and 

financial forecasting firm that contracts 

with CMS to forecast the components of 

the CMS market baskets. Based on IGI’s 

first quarter 2014 forecast with history 

through the fourth quarter of 2013, the 

estimate of the current CY 2008-based 

ESRDB market basket for CY 2015 is 2.7 

percent. 

Table 8 compares the proposed CY 

2012-based ESRDB market basket and 

the CY 2008-based ESRDB market 

basket percent changes. For the 

historical period between CY 2011 and 

CY 2013, the average difference between 

the two market baskets is -1.8 

percentage points. This is primarily the 

result of the lower pharmaceutical cost 

share combined with the proposed 

revised price proxy for the 

pharmaceutical cost category. For the 

CY 2014 and CY 2015 forecasts, the 

difference in the market basket forecasts 

are mainly driven by the same factors as 

in the historical period; however, it is 

important to note that the differences 

between the two market baskets are 

projected to be smaller as the growth in 

the price proxy for the pharmaceutical 

category are projected to grow at more 

similar growth rates in the projected 

period than the growth rates in the 

recent historical period. 

TABLE 8—PROPOSED CY 2012-BASED ESRDB MARKET BASKET AND CY 2008 BASED ESRDB MARKET BASKET, 

PERCENT CHANGES: 2011–2015 

Calendar Year (CY) Proposed Rebased CY 2012- 

based ESRDB Market Basket 

CY 2008-Based ESRDB 

Market Basket 

Historical data.

CY 2011 ........................................................................................................ 1.2 2.8 

CY 2012 ........................................................................................................ 1.4 3.4 

CY 2013 ........................................................................................................ 1.1 3.0 

Average CY 2011–2013 ............................................................................... 1.3 3.1 

Forecast: 

CY 2014 ........................................................................................................ 1.8 2.3 

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TABLE 8—PROPOSED CY 2012-BASED ESRDB MARKET BASKET AND CY 2008 BASED ESRDB MARKET BASKET, 

PERCENT CHANGES: 2011–2015—Continued 

Calendar Year (CY) Proposed Rebased CY 2012- 

based ESRDB Market Basket 

CY 2008-Based ESRDB 

Market Basket 

CY 2015 ........................................................................................................ 2.0 2.7 

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

c. Proposed Productivity Adjustment 

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

Act, as amended by section 3401(h) of 

the Affordable Care Act, for CY 2012 

and each subsequent year, the ESRD 

market basket percentage increase factor 

shall be reduced by the productivity 

adjustment described in section 

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

statute defines the productivity 

adjustment as equal to the 10-year 

moving average of changes in annual 

economy-wide private nonfarm business 

multifactor productivity (MFP) (as 

projected by the Secretary for the 10- 

year period ending with the applicable 

fiscal year, year, cost reporting period, 

or other annual period) (the ‘‘MFP 

adjustment’’). The Bureau of Labor 

Statistics (BLS) is the agency that 

publishes the official measure of private 

nonfarm business MFP. Please see 

http://www.bls.gov/mfp to obtain the 

BLS historical published MFP data. We 

note that the proposed and final 

methodology for calculating and 

applying the MFP adjustment to the 

ESRD payment update is similar to the 

methodology used in other payment 

systems, as required by section 3401 of 

the Affordable Care Act. 

The projection of MFP is currently 

produced by IGI. The details regarding 

the methodology for forecasting MFP 

and how it is applied to the market 

basket were finalized in the CY 2012 

ESRD PPS final rule (76 FR 70232 

through 70234). Using this method and 

the IGI forecast for the first quarter of 

2014 of the 10-year moving average of 

MFP, the CY 2015 MFP factor we would 

have proposed is 0.4 percent. As 

discussed further below, however, 

section 1881(b)(F)(i)(III) of the Act, as 

added by section 217(b)(2) of PAMA, 

requires the Secretary to implement a 

0.0 percent payment update in CY 2015. 

d. Calculation of the Proposed ESRDB 

Market Basket Update, Adjusted for 

Multifactor Productivity for CY 2015 

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

Act, beginning in CY 2012, ESRD PPS 

payment amounts shall be annually 

increased by an ESRD market basket 

percentage increase factor reduced by 

the productivity adjustment. For CY 

2015, section 1881(b)(14)(F)(i)(III) of the 

Act, as added by section 217(b)(2) of 

PAMA, requires the Secretary to 

implement a 0.0 percent ESRDB market 

basket increase to the ESRD PPS base 

rate. In addition, we interpret the 

reference to ‘‘[n]otwithstanding 

subclause (III)’’ that was added to 

amended section 1881(b)(14)(F)(i)(III) as 

precluding the application of the multifactor productivity (MFP) adjustment in 

2015. As a result of these provisions, the 

proposed CY 2015 ESRD market basket 

increase is 0.0 percent. We note that if 

PAMA had not been enacted the 

proposed 2012-based ESRDB market 

basket update less productivity for CY 

2015 would have been 1.6 percent, or 

2.0 percent less 0.4 percentage point. 

e. Labor-Related Share 

We define the labor-related share 

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

influenced by, the local labor market. 

The labor-related share of a market 

basket is determined by identifying the 

national average proportion of operating 

costs that are related to, influenced by, 

or vary with the local labor market. The 

labor-related share is typically the sum 

of Wages and Salaries, Benefits, 

Professional Fees, Labor-related 

Services, and a portion of the Capital 

share from a given market basket. 

We propose to use the proposed 2012- 

based ESRDB market basket costs to 

determine the proposed labor-related 

share for ESRD facilities of 50.673 

percent, as shown in Table 9 below. 

These figures represent the sum of 

Wages and Salaries, Benefits, 

Housekeeping and Operations, 87 

percent of the weight for Professional 

Fees (details discussed below), and 46 

percent of the weight for Capital-related 

Building and Equipment expenses 

(details discussed below). We note that 

this is a similar methodology used to 

compute the labor-related share used 

from CY 2011 through CY 2014. 

TABLE 9—PROPOSED CY 2015 LABOR-RELATED SHARE AND CY 2014 ESRDB LABOR-RELATED SHARE

Cost category 

Proposed CY 2015 ESRDB 

labor-related share 

(percent) 

CY 2014 ESRDB 

labor-related share 

(percent) 

Wages .................................................................................................................. 33.650 26.755 

Benefits ................................................................................................................ 8.847 6.754 

Housekeeping and operations ............................................................................. 3.785 2.029 

Professional fees (labor-related) ......................................................................... 0.537 2.768 

Capital labor-related ............................................................................................ 3.854 3.431 

Total .............................................................................................................. 50.673 41.737 

The labor-related share for 

Professional Fees (87 percent) reflects 

the proportion of ESRD facilities’ 

professional fees expenses that we 

believe vary with local labor market. We 

conducted a survey of ESRD facilities in 

2008 to better understand the 

proportion of contracted professional 

services that ESRD facilities typically 

purchase outside of their local labor 

market. These purchased professional 

services include functions such as 

accounting and auditing, management 

consulting, engineering, and legal 

services. Based on the survey results, we 

determined that, on average, 87 percent 

of professional services are purchased 

from local firms and 13 percent are 

purchased from businesses located 

outside of the ESRD facility’s local labor 

market. Thus, we are proposing to 

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40226 Federal Register / Vol. 79, No. 133 / Friday, July 11, 2014 / Proposed Rules 

include 87 percent of the cost weight for 

Professional Fees in the labor-related 

share, the same percentage as used in 

prior years. 

The labor-related share for capitalrelated expenses (46 percent of ESRD 

facilities’ adjusted Capital-related 

Building and Equipment expenses) 

reflects the proportion of ESRD 

facilities’ capital-related expenses that 

we believe varies with local labor 

market wages. Capital-related expenses 

are affected in some proportion by 

variations in local labor market costs 

(such as construction worker wages) 

that are reflected in the price of the 

capital asset. However, many other 

inputs that determine capital costs are 

not related to local labor market costs, 

such as interest rates. The 46-percent 

figure is based on regressions run for the 

inpatient hospital capital PPS in 1991 

(56 FR 43375). We use a similar 

methodology to calculate capital-related 

expenses for the labor-related shares for 

rehabilitation facilities (70 FR 30233), 

psychiatric facilities, long-term care 

facilities, and skilled nursing facilities 

(66 FR 39585). 

3. The Proposed CY 2015 ESRD PPS 

Wage Indices 

a. Background 

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

Act provides that the ESRD PPS may 

include a geographic wage index 

payment adjustment, such as the index 

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

the Act. In the CY 2011 ESRD PPS final 

rule (75 FR 49117), we finalized for the 

ESRD PPS the use of the Office of 

Management and Budget’s (OMB) CoreBased Statistical Areas (CBSAs)-based 

geographic area designations described 

in OMB bulletin 03–04, issued June 6, 

2003 as the basis for revising the urban 

and rural areas and their corresponding 

wage index values. This bulletin, as 

well as subsequent bulletins, is 

available online at http://

www.whitehouse.gov/omb/bulletins_

index2003-2005. 

We also finalized that we would use 

the urban and rural definitions used for 

the Medicare IPPS but without regard to 

geographic reclassification authorized 

under section 1886(d)(8) and (d)(10) of 

the Act. In the CY 2012 ESRD PPS final 

rule (76 FR 70239), we finalized that, 

under the ESRD PPS, we will continue 

to utilize the ESRD PPS wage index 

methodology, first established under the 

basic case-mix adjusted composite rate 

payment system, for updating the wage 

index values using the OMB’s CBSAbased geographic area designations to 

define urban and rural areas. 

b. Proposed Implementation of New 

Labor Market Delineations 

OMB publishes bulletins regarding 

CBSA changes, including changes to 

CBSA numbers and titles. In accordance 

with our established methodology, we 

have historically adopted via 

rulemaking CBSA changes that are 

published in the latest OMB bulletin. 

On February 28, 2013, OMB issued 

OMB Bulletin No. 13–01, which 

established revised delineations for 

Metropolitan Statistical Areas, 

Micropolitan Statistical Areas, and 

Combined Statistical Areas, and 

provided guidance on the use of the 

delineations of these statistical areas. A 

copy of this bulletin may be obtained at 

http://www.whitehouse.gov/sites/

default/files/omb/bulletins/2013/b-13- 

01.pdf. According to OMB, ‘‘[t]his 

bulletin provides the delineations of all 

Metropolitan Statistical Areas, 

Metropolitan Divisions, Micropolitan 

Statistical Areas, Combined Statistical 

Areas, and New England City and Town 

Areas in the United States and Puerto 

Rico based on the standards published 

on June 28, 2010, in the Federal 

Register (75 FR 37246–37252) and 

Census Bureau data.’’ In this CY 2015 

ESRD PPS proposed rule, when 

referencing the new OMB geographic 

boundaries of statistical areas, we are 

using the term ‘‘delineations’’ rather 

than the term ‘‘definitions’’ that we have 

used in the past, consistent with OMB’s 

use of the terms (75 FR 37249). Because 

the bulletin was not issued until 

February 28, 2013, with supporting data 

not available until later, and because the 

changes made by the bulletin and their 

ramifications needed to be extensively 

reviewed and verified, we were unable 

to undertake such a lengthy process 

before publication of the FY 2014 IPPS/ 

LTCH PPS proposed rule and, thus, did 

not implement changes to the hospital 

wage index for FY 2014 based on these 

new CBSA delineations. 

Likewise, for the same reasons, the CY 

2014 ESRD PPS wage index (based upon 

the pre-floor, pre-reclassified hospital 

wage data, which is unadjusted for 

occupational mix) also did not reflect 

the new CBSA delineations. In the FY 

2015 IPPS/LTCH PPS proposed rule, we 

proposed to implement the new CBSA 

delineations as described in the 

February 28, 2013 OMB Bulletin No. 

13–01, beginning with the FY 2015 IPPS 

wage index (79 FR 28054 through 

28055). 

Similarly, in this CY 2015 ESRD PPS 

proposed rule, we are proposing to 

implement the new CBSA delineations 

as described in the February 28, 2013 

OMB Bulletin No. 13–01, beginning 

with the CY 2015 ESRD PPS wage 

index. We believe that the most current 

CBSA delineations accurately reflect the 

local economies and wage levels of the 

areas where facilities are located, and 

we believe that it is important for the 

ESRD PPS to use the latest CBSA 

delineations available in order to 

maintain an up-to-date payment system 

that accurately reflects the reality of 

populations shifts and labor market 

conditions. We have reviewed our 

findings and impacts relating to the new 

CBSA delineations using the most 

recent data available at the time of this 

proposed rule, and have concluded that 

there is no compelling reason to further 

delay the implementation of the CBSA 

delineations as set forth in OMB 

Bulletin 13–01. 

In order to implement these changes 

for the ESRD PPS, it is necessary to 

identify the new labor market area 

delineation for each county and facility 

in the country. For example, if we adopt 

the new CBSA delineations, there 

would be new CBSAs, urban counties 

that would become rural, rural counties 

that would become urban, and existing 

CBSAs that would be split apart. 

Because the wage index of urban areas 

is typically higher than that of rural 

areas, ESRD facilities currently located 

in rural counties that would become 

urban if we adopt the new CBSA 

delineations would generally experience 

an increase in their wage index values. 

We have identified 105 counties and 

113 facilities that would move from 

rural to urban status if we adopt the new 

CBSA delineations beginning in CY 

2015. Table 10: (CY 2015 Proposed 

Rural to Urban CBSA Crosswalk) shows 

the CBSA delineations for CY 2014 and 

the rural wage index values proposed 

for CY 2015 based on those 

delineations, compared to the proposed 

CBSA delineations for CY 2015 and the 

proposed urban wage index values for 

CY 2015 based on the new delineations, 

and the percentage change in these 

values for those counties that would 

change from rural to urban if we adopt 

the new CBSA delineations. If we adopt 

the new OMB delineations illustrated in 

Table 10 below, approximately 100 

facilities would experience an increase 

in their wage index values. 

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Federal Register / Vol. 79, No. 133 / Friday, July 11, 2014 / Proposed Rules 40227 

TABLE 10—CY 2015 PROPOSED RURAL TO URBAN CBSA CROSSWALK

County name State 

ESRD PPS CY 2014 CBSA 

delineations 

Proposed ESRD PPS CY 2015 CBSA 

delineations Change in 

value 

(percent) CBSA Urban/Rural 

Wage 

index 

value 

CBSA Urban/Rural 

Wage 

index 

value 

BALDWIN ........................................ AL 01 RURAL ............... 0.6981 19300 URBAN ............... 0.7279 4.27 

PICKENS ......................................... AL 01 RURAL ............... 0.6981 46220 URBAN ............... 0.8288 18.72 

COCHISE ........................................ AZ 03 RURAL ............... 0.9159 43420 URBAN ............... 0.8970 ¥2.06 

LITTLE RIVER ................................. AR 04 RURAL ............... 0.7265 45500 URBAN ............... 0.7390 1.72 

WINDHAM ....................................... CT 07 RURAL ............... 1.1292 49340 URBAN ............... 1.1536 2.16 

SUSSEX .......................................... DE 08 RURAL ............... 1.0248 41540 URBAN ............... 0.9296 ¥9.29 

CITRUS ........................................... FL 10 RURAL ............... 0.8010 26140 URBAN ............... 0.7653 ¥4.46 

GULF ............................................... FL 10 RURAL ............... 0.8010 37460 URBAN ............... 0.7861 ¥1.86 

HIGHLANDS .................................... FL 10 RURAL ............... 0.8010 42700 URBAN ............... 0.8011 0.01 

SUMTER ......................................... FL 10 RURAL ............... 0.8010 45540 URBAN ............... 0.8125 1.44 

WALTON ......................................... FL 10 RURAL ............... 0.8010 18880 URBAN ............... 0.8260 3.12 

LINCOLN ......................................... GA 11 RURAL ............... 0.7425 12260 URBAN ............... 0.9213 24.08 

MORGAN ........................................ GA 11 RURAL ............... 0.7425 12060 URBAN ............... 0.9358 26.03 

PEACH ............................................ GA 11 RURAL ............... 0.7425 47580 URBAN ............... 0.7570 1.95 

PULASKI ......................................... GA 11 RURAL ............... 0.7425 47580 URBAN ............... 0.7570 1.95 

KALAWAO ....................................... HI 12 RURAL ............... 0.9953 27980 URBAN ............... 0.9510 ¥4.45 

MAUI ................................................ HI 12 RURAL ............... 0.9953 27980 URBAN ............... 0.9510 ¥4.45 

BUTTE ............................................. ID 13 RURAL ............... 0.7425 26820 URBAN ............... 0.8966 20.75 

DE WITT .......................................... IL 14 RURAL ............... 0.8363 14010 URBAN ............... 0.8935 6.84 

JACKSON ........................................ IL 14 RURAL ............... 0.8363 16060 URBAN ............... 0.8354 ¥0.11 

WILLIAMSON .................................. IL 14 RURAL ............... 0.8363 16060 URBAN ............... 0.8354 ¥0.11 

SCOTT ............................................ IN 15 RURAL ............... 0.8454 31140 URBAN ............... 0.8319 ¥1.60 

UNION ............................................. IN 15 RURAL ............... 0.8454 17140 URBAN ............... 0.8942 5.77 

PLYMOUTH ..................................... IA 16 RURAL ............... 0.8483 43580 URBAN ............... 0.8948 5.48 

KINGMAN ........................................ KS 17 RURAL ............... 0.7838 48620 URBAN ............... 0.8503 8.48 

ALLEN ............................................. KY 18 RURAL ............... 0.7770 14540 URBAN ............... 0.8403 8.15 

BUTLER .......................................... KY 18 RURAL ............... 0.7770 14540 URBAN ............... 0.8403 8.15 

ACADIA ........................................... LA 19 RURAL ............... 0.7608 29180 URBAN ............... 0.7896 3.79 

IBERIA ............................................. LA 19 RURAL ............... 0.7608 29180 URBAN ............... 0.7896 3.79 

ST. JAMES ...................................... LA 19 RURAL ............... 0.7608 35380 URBAN ............... 0.8778 15.38 

TANGIPAHOA ................................. LA 19 RURAL ............... 0.7608 25220 URBAN ............... 0.9487 24.70 

VERMILION ..................................... LA 19 RURAL ............... 0.7608 29180 URBAN ............... 0.7896 3.79 

WEBSTER ....................................... LA 19 RURAL ............... 0.7608 43340 URBAN ............... 0.8347 9.71 

ST. MARYS ..................................... MD 21 RURAL ............... 0.8586 15680 URBAN ............... 0.8625 0.45 

WORCESTER ................................. MD 21 RURAL ............... 0.8586 41540 URBAN ............... 0.9296 8.27 

MIDLAND ........................................ MI 23 RURAL ............... 0.8232 33220 URBAN ............... 0.7964 ¥3.26 

MONTCALM .................................... MI 23 RURAL ............... 0.8232 24340 URBAN ............... 0.8832 7.29 

FILLMORE ....................................... MN 24 RURAL ............... 0.9057 40340 URBAN ............... 1.1384 25.69 

LE SUEUR ...................................... MN 24 RURAL ............... 0.9057 33460 URBAN ............... 1.1162 23.24 

MILLE LACS .................................... MN 24 RURAL ............... 0.9057 33460 URBAN ............... 1.1162 23.24 

SIBLEY ............................................ MN 24 RURAL ............... 0.9057 33460 URBAN ............... 1.1162 23.24 

BENTON .......................................... MS 25 RURAL ............... 0.7603 32820 URBAN ............... 0.9069 19.28 

YAZOO ............................................ MS 25 RURAL ............... 0.7603 27140 URBAN ............... 0.7932 4.33 

GOLDEN VALLEY ........................... MT 27 RURAL ............... 0.9055 13740 URBAN ............... 0.8718 -3.72 

HALL ................................................ NE 28 RURAL ............... 0.8957 24260 URBAN ............... 0.9253 3.30 

HAMILTON ...................................... NE 28 RURAL ............... 0.8957 24260 URBAN ............... 0.9253 3.30 

HOWARD ........................................ NE 28 RURAL ............... 0.8957 24260 URBAN ............... 0.9253 3.30 

MERRICK ........................................ NE 28 RURAL ............... 0.8957 24260 URBAN ............... 0.9253 3.30 

JEFFERSON ................................... NY 33 RURAL ............... 0.8226 48060 URBAN ............... 0.8417 2.32 

YATES ............................................. NY 33 RURAL ............... 0.8226 40380 URBAN ............... 0.8783 6.77 

CRAVEN .......................................... NC 34 RURAL ............... 0.7963 35100 URBAN ............... 0.8547 7.33 

DAVIDSON ...................................... NC 34 RURAL ............... 0.7963 49180 URBAN ............... 0.8660 8.75 

GATES ............................................ NC 34 RURAL ............... 0.7963 47260 URBAN ............... 0.9156 14.98 

IREDELL .......................................... NC 34 RURAL ............... 0.7963 16740 URBAN ............... 0.9123 14.57 

JONES ............................................. NC 34 RURAL ............... 0.7963 35100 URBAN ............... 0.8547 7.33 

LINCOLN ......................................... NC 34 RURAL ............... 0.7963 16740 URBAN ............... 0.9123 14.57 

PAMLICO ........................................ NC 34 RURAL ............... 0.7963 35100 URBAN ............... 0.8547 7.33 

ROWAN ........................................... NC 34 RURAL ............... 0.7963 16740 URBAN ............... 0.9123 14.57 

OLIVER ........................................... ND 35 RURAL ............... 0.7125 13900 URBAN ............... 0.7251 1.77 

SIOUX ............................................. ND 35 RURAL ............... 0.7125 13900 URBAN ............... 0.7251 1.77 

HOCKING ........................................ OH 36 RURAL ............... 0.8315 18140 URBAN ............... 0.9499 14.24 

PERRY ............................................ OH 36 RURAL ............... 0.8315 18140 URBAN ............... 0.9499 14.24 

COTTON ......................................... OK 37 RURAL ............... 0.7824 30020 URBAN ............... 0.7948 1.58 

JOSEPHINE .................................... OR 38 RURAL ............... 1.0120 24420 URBAN ............... 1.0123 0.03 

LINN ................................................ OR 38 RURAL ............... 1.0120 10540 URBAN ............... 1.0919 7.90 

ADAMS ............................................ PA 39 RURAL ............... 0.8730 23900 URBAN ............... 1.0142 16.17 

COLUMBIA ...................................... PA 39 RURAL ............... 0.8730 14100 URBAN ............... 0.9382 7.47 

FRANKLIN ....................................... PA 39 RURAL ............... 0.8730 16540 URBAN ............... 1.0997 25.97 

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TABLE 10—CY 2015 PROPOSED RURAL TO URBAN CBSA CROSSWALK—Continued 

County name State 

ESRD PPS CY 2014 CBSA 

delineations 

Proposed ESRD PPS CY 2015 CBSA 

delineations Change in 

value 

(percent) CBSA Urban/Rural 

Wage 

index 

value 

CBSA Urban/Rural 

Wage 

index 

value 

MONROE ........................................ PA 39 RURAL ............... 0.8730 20700 URBAN ............... 0.9406 7.74 

MONTOUR ...................................... PA 39 RURAL ............... 0.8730 14100 URBAN ............... 0.9382 7.47 

UTUADO ......................................... PR 40 RURAL ............... 0.4000 10380 URBAN ............... 0.4000 0.00 

BEAUFORT ..................................... SC 42 RURAL ............... 0.8381 25940 URBAN ............... 0.8807 5.08 

CHESTER ....................................... SC 42 RURAL ............... 0.8381 16740 URBAN ............... 0.9123 8.85 

JASPER ........................................... SC 42 RURAL ............... 0.8381 25940 URBAN ............... 0.8807 5.08 

LANCASTER ................................... SC 42 RURAL ............... 0.8381 16740 URBAN ............... 0.9123 8.85 

UNION ............................................. SC 42 RURAL ............... 0.8381 43900 URBAN ............... 0.8275 ¥1.26 

CUSTER .......................................... SD 43 RURAL ............... 0.8343 39660 URBAN ............... 0.9075 8.77 

CAMPBELL ..................................... TN 44 RURAL ............... 0.7387 28940 URBAN ............... 0.7039 ¥4.71 

CROCKETT ..................................... TN 44 RURAL ............... 0.7387 27180 URBAN ............... 0.7775 5.25 

MAURY ............................................ TN 44 RURAL ............... 0.7387 34980 URBAN ............... 0.9053 22.55 

MORGAN ........................................ TN 44 RURAL ............... 0.7387 28940 URBAN ............... 0.7039 ¥4.71 

ROANE ............................................ TN 44 RURAL ............... 0.7387 28940 URBAN ............... 0.7039 ¥4.71 

FALLS .............................................. TX 45 RURAL ............... 0.7917 47380 URBAN ............... 0.8202 3.60 

HOOD .............................................. TX 45 RURAL ............... 0.7917 23104 URBAN ............... 0.9412 18.88 

HUDSPETH ..................................... TX 45 RURAL ............... 0.7917 21340 URBAN ............... 0.8356 5.55 

LYNN ............................................... TX 45 RURAL ............... 0.7917 31180 URBAN ............... 0.8870 12.04 

MARTIN ........................................... TX 45 RURAL ............... 0.7917 33260 URBAN ............... 0.8973 13.34 

NEWTON ......................................... TX 45 RURAL ............... 0.7917 13140 URBAN ............... 0.8541 7.88 

OLDHAM ......................................... TX 45 RURAL ............... 0.7917 11100 URBAN ............... 0.8308 4.94 

SOMERVELL ................................... TX 45 RURAL ............... 0.7917 23104 URBAN ............... 0.9412 18.88 

BOX ELDER .................................... UT 46 RURAL ............... 0.8877 36260 URBAN ............... 0.9259 4.30 

AUGUSTA ....................................... VA 49 RURAL ............... 0.7694 44420 URBAN ............... 0.8357 8.62 

BUCKINGHAM ................................ VA 49 RURAL ............... 0.7694 16820 URBAN ............... 0.9087 18.11 

CULPEPER ..................................... VA 49 RURAL ............... 0.7694 47894 URBAN ............... 1.0418 35.40 

FLOYD ............................................. VA 49 RURAL ............... 0.7694 13980 URBAN ............... 0.8504 10.53 

RAPPAHANNOCK .......................... VA 49 RURAL ............... 0.7694 47894 URBAN ............... 1.0418 35.40 

STAUNTON CITY ........................... VA 49 RURAL ............... 0.7694 44420 URBAN ............... 0.8357 8.62 

WAYNESBORO CITY ..................... VA 49 RURAL ............... 0.7694 44420 URBAN ............... 0.8357 8.62 

COLUMBIA ...................................... WA 50 RURAL ............... 1.0932 47460 URBAN ............... 1.0974 0.38 

PEND OREILLE .............................. WA 50 RURAL ............... 1.0932 44060 URBAN ............... 1.1467 4.89 

STEVENS ........................................ WA 50 RURAL ............... 1.0932 44060 URBAN ............... 1.1467 4.89 

WALLA WALLA ............................... WA 50 RURAL ............... 1.0932 47460 URBAN ............... 1.0974 0.38 

FAYETTE ........................................ WV 51 RURAL ............... 0.7391 13220 URBAN ............... 0.8037 8.74 

RALEIGH ......................................... WV 51 RURAL ............... 0.7391 13220 URBAN ............... 0.8037 8.74 

GREEN ............................................ WI 52 RURAL ............... 0.9074 31540 URBAN ............... 1.1190 23.32 

The wage index values of rural areas 

are typically lower than that of urban 

areas. Therefore, ESRD facilities located 

in a county that is currently designated 

as urban under the ESRD PPS wage 

index that would become rural if we 

adopt the new CBSA delineations may 

experience a decrease in their wage 

index values. We have identified 39 

counties and 29 ESRD facilities that 

would move from urban to rural status 

if we adopt the new CBSA delineations 

beginning in CY 2015. Table 11: (CY 

2015 Proposed Urban to Rural CBSA 

Crosswalk) shows the CBSA 

delineations for CY 2014 and the 

proposed urban wage index values for 

CY 2015 based on those delineations, 

compared with the proposed CBSA 

delineations and wage index values for 

CY 2015 based on those delineations, 

and the percentage change in these 

values for those counties that would 

change from urban to rural if we adopt 

the new CBSA delineations. If we 

adopted the new CBSA delineations 

illustrated in Table 11 below, 

approximately 30 facilities would 

experience a decrease in their wage 

index values. 

TABLE 11—CY 2015 PROPOSED URBAN TO RURAL CBSA CROSSWALK

County name State 

ESRD PPS CY 2014 CBSA 

delineations 

Proposed ESRD PPS CY 2015 CBSA 

delineations Change 

in value 

(%) CBSA Urban/Rural 

Wage 

index 

value 

CBSA Urban/Rural 

Wage 

index 

value 

GREENE .................................... AL ..................... 46220 URBAN ............ 0.8336 01 RURAL ............. 0.6930 ¥16.9 

FRANKLIN .................................. AR .................... 22900 URBAN ............ 0.7593 04 RURAL ............. 0.7265 ¥4.3 

POWER ...................................... ID ..................... 38540 URBAN ............ 0.9707 13 RURAL ............. 0.7425 ¥23.5 

FRANKLIN .................................. IN ..................... 17140 URBAN ............ 0.8942 15 RURAL ............. 0.8454 ¥5.5 

GIBSON ...................................... IN ..................... 21780 URBAN ............ 0.8524 15 RURAL ............. 0.8454 ¥0.8 

GREENE .................................... IN ..................... 14020 URBAN ............ 0.9096 15 RURAL ............. 0.8454 ¥7.1 

TIPTON ...................................... IN ..................... 29020 URBAN ............ 0.9023 15 RURAL ............. 0.8454 ¥6.3 

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Federal Register / Vol. 79, No. 133 / Friday, July 11, 2014 / Proposed Rules 40229 

TABLE 11—CY 2015 PROPOSED URBAN TO RURAL CBSA CROSSWALK—Continued 

County name State 

ESRD PPS CY 2014 CBSA 

Delineations 

Proposed ESRD PPS CY 2015 CBSA 

delineations Change 

in value 

(%) CBSA Urban/Rural 

Wage 

index 

value 

CBSA Urban/Rural 

Wage 

index 

value 

FRANKLIN .................................. KS .................... 28140 URBAN ............ 0.9454 17 RURAL ............. 0.7811 ¥17.4 

GEARY ....................................... KS .................... 31740 URBAN ............ 0.7225 17 RURAL ............. 0.7811 8.1

NELSON ..................................... KY .................... 31140 URBAN ............ 0.8313 18 RURAL ............. 0.7774 ¥6.5 

WEBSTER .................................. KY .................... 21780 URBAN ............ 0.8524 18 RURAL ............. 0.7774 ¥8.8 

FRANKLIN .................................. MA .................... 44140 URBAN ............ 1.0309 22 RURAL ............. 1.1596 12.5 

IONIA .......................................... MI ..................... 24340 URBAN ............ 0.8998 23 RURAL ............. 0.8313 ¥7.6 

NEWAYGO ................................. MI ..................... 24340 URBAN ............ 0.8998 23 RURAL ............. 0.8313 ¥7.6 

GEORGE .................................... MS .................... 37700 URBAN ............ 0.7423 25 RURAL ............. 0.7584 2.2 

STONE ....................................... MS .................... 25060 URBAN ............ 0.8209 25 RURAL ............. 0.7584 ¥7.6 

CRAWFORD .............................. MO ................... 41180 URBAN ............ 0.9457 26 RURAL ............. 0.7827 ¥17.2 

HOWARD ................................... MO ................... 17860 URBAN ............ 0.8349 26 RURAL ............. 0.7827 ¥6.3 

WASHINGTON ........................... MO ................... 41180 URBAN ............ 0.9457 26 RURAL ............. 0.7827 ¥17.2 

ANSON ....................................... NC .................... 16740 URBAN ............ 0.9283 34 RURAL ............. 0.7880 ¥15.1 

GREENE .................................... NC .................... 24780 URBAN ............ 0.9405 34 RURAL ............. 0.7880 ¥16.2 

ERIE ........................................... OH .................... 41780 URBAN ............ 0.7792 36 RURAL ............. 0.8338 7.0 

OTTAWA .................................... OH .................... 45780 URBAN ............ 0.9152 36 RURAL ............. 0.8338 ¥8.9 

PREBLE ..................................... OH .................... 19380 URBAN ............ 0.8918 36 RURAL ............. 0.8338 ¥6.5 

WASHINGTON ........................... OH .................... 37620 URBAN ............ 0.8167 36 RURAL ............. 0.8338 2.1 

STEWART .................................. TN .................... 17300 URBAN ............ 0.7554 44 RURAL ............. 0.7297 ¥3.4 

CALHOUN .................................. TX .................... 47020 URBAN ............ 0.8504 45 RURAL ............. 0.7909 ¥7.0 

DELTA ........................................ TX .................... 19124 URBAN ............ 0.9751 45 RURAL ............. 0.7909 ¥18.9 

SAN JACINTO ............................ TX .................... 26420 URBAN ............ 0.9881 45 RURAL ............. 0.7909 ¥20.0 

SUMMIT ..................................... UT .................... 41620 URBAN ............ 0.9548 46 RURAL ............. 0.8993 ¥5.8 

CUMBERLAND .......................... VA .................... 40060 URBAN ............ 0.9556 49 RURAL ............. 0.7573 ¥20.8 

DANVILLE CITY ......................... VA .................... 19260 URBAN ............ 0.7985 49 RURAL ............. 0.7573 ¥5.2 

KING AND QUEEN .................... VA .................... 40060 URBAN ............ 0.9556 49 RURAL ............. 0.7573 ¥20.8 

LOUISA ...................................... VA .................... 40060 URBAN ............ 0.9556 49 RURAL ............. 0.7573 ¥20.8 

PITTSYLVANIA .......................... VA .................... 19260 URBAN ............ 0.7985 49 RURAL ............. 0.7573 ¥5.2 

SURRY ....................................... VA .................... 47260 URBAN ............ 0.9156 49 RURAL ............. 0.7573 ¥17.3 

MORGAN ................................... WV ................... 25180 URBAN ............ 0.9113 51 RURAL ............. 0.7249 ¥20.5 

PLEASANTS .............................. WV ................... 37620 URBAN ............ 0.8167 51 RURAL ............. 0.7249 ¥11.2 

We note that facilities in some urban 

CBSAs could experience a change in 

their wage index values even though 

they remain urban because an urban 

CBSA’s boundaries and/or the counties 

included in that CBSA could change. 

Table 12 (CY 2015 Proposed Urban to a 

Different Urban CBSA Crosswalk) shows 

the CBSA delineations for CY 2014 and 

urban wage index values for CY 2015 

based on those delineations, compared 

with the proposed CBSA delineations 

and urban wage index values for CY 

2015 based on those delineations, and 

the percentage change in these values 

for counties that would remain urban 

even though the CBSA boundaries and/ 

or counties included in that CBSA 

would change. 

TABLE 12—CY 2015 PROPOSED URBAN TO A DIFFERENT URBAN CBSA CROSSWALK

County name State 

ESRD PPS CY 2014 CBSA 

delineations 

Proposed ESRD PPS CY 2015 CBSA 

delineations Change 

In value 

(%) CBSA Urban/Rural 

Wage 

index 

value 

CBSA Urban/Rural 

Wage 

index 

value 

MARIN ................................................. CA 41884 URBAN ................. 1.7049 42034 URBAN ................. 1.7317 1.6 

FLAGLER ............................................ FL 37380 URBAN ................. 0.8494 19660 URBAN ................. 0.8407 ¥1.0 

DE KALB ............................................. IL 16974 URBAN ................. 1.0368 20994 URBAN ................. 1.0347 ¥0.2 

KANE ................................................... IL 16974 URBAN ................. 1.0368 20994 URBAN ................. 1.0347 ¥0.2 

MADISON ............................................ IN 11300 URBAN ................. 1.0115 26900 URBAN ................. 1.0170 0.5

MEADE ................................................ KY 31140 URBAN ................. 0.8313 21060 URBAN ................. 0.7650 ¥8.0 

ESSEX ................................................. MA 37764 URBAN ................. 1.0808 15764 URBAN ................. 1.1196 3.6 

OTTAWA ............................................. MI 26100 URBAN ................. 0.8167 24340 URBAN ................. 0.8832 8.1

JACKSON ............................................ MS 37700 URBAN ................. 0.7423 25060 URBAN ................. 0.7927 6.8

BERGEN ............................................. NJ 35644 URBAN ................. 1.3136 35614 URBAN ................. 1.2887 ¥1.9 

HUDSON ............................................. NJ 35644 URBAN ................. 1.3136 35614 URBAN ................. 1.2887 ¥1.9 

MIDDLESEX ........................................ NJ 20764 URBAN ................. 1.1085 35614 URBAN ................. 1.2887 16.3 

MONMOUTH ....................................... NJ 20764 URBAN ................. 1.1085 35614 URBAN ................. 1.2887 16.3 

OCEAN ................................................ NJ 20764 URBAN ................. 1.1085 35614 URBAN ................. 1.2887 16.3 

PASSAIC ............................................. NJ 35644 URBAN ................. 1.3136 35614 URBAN ................. 1.2887 ¥1.9 

SOMERSET ........................................ NJ 20764 URBAN ................. 1.1085 35084 URBAN ................. 1.1520 3.9 

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40230 Federal Register / Vol. 79, No. 133 / Friday, July 11, 2014 / Proposed Rules 

TABLE 12—CY 2015 PROPOSED URBAN TO A DIFFERENT URBAN CBSA CROSSWALK—Continued 

County name State 

ESRD PPS CY 2014 CBSA 

delineations 

Proposed ESRD PPS CY 2015 CBSA 

delineations Change 

In value 

(%) CBSA Urban/Rural 

Wage 

index 

value 

CBSA Urban/Rural 

Wage 

index 

value 

BRONX ................................................ NY 35644 URBAN ................. 1.3136 35614 URBAN ................. 1.2887 ¥1.9 

DUTCHESS ......................................... NY 39100 URBAN ................. 1.1576 20524 URBAN ................. 1.1387 ¥1.6 

KINGS ................................................. NY 35644 URBAN ................. 1.3136 35614 URBAN ................. 1.2887 ¥1.9 

NEW YORK ......................................... NY 35644 URBAN ................. 1.3136 35614 URBAN ................. 1.2887 ¥1.9 

ORANGE ............................................. NY 39100 URBAN ................. 1.1576 35614 URBAN ................. 1.2887 11.3 

PUTNAM ............................................. NY 35644 URBAN ................. 1.3136 20524 URBAN ................. 1.1387 ¥13.3 

QUEENS ............................................. NY 35644 URBAN ................. 1.3136 35614 URBAN ................. 1.2887 ¥1.9 

RICHMOND ......................................... NY 35644 URBAN ................. 1.3136 35614 URBAN ................. 1.2887 ¥1.9 

ROCKLAND ......................................... NY 35644 URBAN ................. 1.3136 35614 URBAN ................. 1.2887 ¥1.9 

WESTCHESTER ................................. NY 35644 URBAN ................. 1.3136 35614 URBAN ................. 1.2887 ¥1.9 

BRUNSWICK ....................................... NC 48900 URBAN ................. 0.8899 34820 URBAN ................. 0.8641 ¥2.9 

BUCKS ................................................ PA 37964 URBAN ................. 1.0934 33874 URBAN ................. 1.0236 ¥6.4 

CHESTER ........................................... PA 37964 URBAN ................. 1.0934 33874 URBAN ................. 1.0236 ¥6.4 

MONTGOMERY .................................. PA 37964 URBAN ................. 1.0934 33874 URBAN ................. 1.0236 ¥6.4 

ARECIBO ............................................ PR 41980 URBAN ................. 0.4471 11640 URBAN ................. 0.4229 ¥5.4 

CAMUY ................................................ PR 41980 URBAN ................. 0.4471 11640 URBAN ................. 0.4229 ¥5.4 

CEIBA .................................................. PR 21940 URBAN ................. 0.4000 41980 URBAN ................. 0.4460 11.5 

FAJARDO ............................................ PR 21940 URBAN ................. 0.4000 41980 URBAN ................. 0.4460 11.5 

GUANICA ............................................ PR 49500 URBAN ................. 0.4000 38660 URBAN ................. 0.4169 4.2

GUAYANILLA ...................................... PR 49500 URBAN ................. 0.4000 38660 URBAN ................. 0.4169 4.2 

HATILLO .............................................. PR 41980 URBAN ................. 0.4471 11640 URBAN ................. 0.4229 ¥5.4 

LUQUILLO ........................................... PR 21940 URBAN ................. 0.4000 41980 URBAN ................. 0.4460 11.5 

PENUELAS ......................................... PR 49500 URBAN ................. 0.4000 38660 URBAN ................. 0.4169 4.2 

QUEBRADILLAS ................................. PR 41980 URBAN ................. 0.4471 11640 URBAN ................. 0.4229 ¥5.4 

YAUCO ................................................ PR 49500 URBAN ................. 0.4000 38660 URBAN ................. 0.4169 4.2 

ANDERSON ........................................ SC 11340 URBAN ................. 0.8775 24860 URBAN ................. 0.9025 2.8 

GRAINGER ......................................... TN 34100 URBAN ................. 0.7002 28940 URBAN ................. 0.7039 0.5 

LINCOLN ............................................. WV 16620 URBAN ................. 0.8017 26580 URBAN ................. 0.8773 9.4 

PUTNAM ............................................. WV 16620 URBAN ................. 0.8017 26580 URBAN ................. 0.8773 9.4

Likewise, ESRD facilities currently 

located in a rural area may remain rural 

under the new CBSA delineations but 

experience a change in their rural wage 

index value due to implementation of 

the new CBSA delineations. Table 13 

(CY 2015 Proposed Changes to the 

Statewide Rural Wage Index Crosswalk) 

shows the CBSA numbers for CY 2014 

and the proposed rural statewide wage 

index values for CY 2015, compared 

with the proposed statewide rural wage 

index values for CY 2015, and the 

percentage change in these values. 

TABLE 13—CY 2015 PROPOSED CHANGES TO THE STATEWIDE RURAL WAGE INDEX CROSSWALK

State 

ESRD PPS CY 2014 CBSA 

delineations 

Proposed ESRD PPS CY 2015 CBSA 

delineations Change 

in value 

(%) CBSA Urban/Rural 

Wage 

index 

value 

CBSA Urban/Rural 

Wage 

index 

value 

AL .............................................................. 01 RURAL ..................... 0.6981 01 RURAL .................... 0.6930 ¥0.73 

AZ .............................................................. 03 RURAL ..................... 0.9159 03 RURAL .................... 0.9253 1.03 

CT .............................................................. 07 RURAL ..................... 1.1292 07 RURAL .................... 1.1337 0.40 

FL ............................................................... 10 RURAL .................... 0.8010 10 RURAL ..................... 0.8394 4.79 

GA .............................................................. 11 RURAL .................... 0.7425 11 RURAL .................... 0.7439 0.19 

HI ............................................................... 12 RURAL .................... 0.9953 12 RURAL .................... 1.0276 3.25 

IL ................................................................ 14 RURAL .................... 0.8363 14 RURAL ..................... 0.8365 0.02 

KS .............................................................. 17 RURAL .................... 0.7838 17 RURAL ..................... 0.7811 ¥0.34 

KY .............................................................. 18 RURAL .................... 0.7770 18 RURAL ..................... 0.7774 0.05 

LA .............................................................. 19 RURAL ..................... 0.7608 19 RURAL .................... 0.7135 ¥6.22 

MD ............................................................. 21 RURAL .................... 0.8586 21 RURAL .................... 0.8778 2.24 

MA ............................................................. 22 RURAL .................... 1.3971 22 RURAL .................... 1.1596 ¥17.00 

MI ............................................................... 23 RURAL ..................... 0.8232 23 RURAL .................... 0.8313 0.98 

MS ............................................................. 25 RURAL .................... 0.7603 25 RURAL .................... 0.7584 ¥0.25 

NE .............................................................. 28 RURAL .................... 0.8957 28 RURAL ..................... 0.8909 ¥0.54 

NY .............................................................. 33 RURAL .................... 0.8226 33 RURAL ..................... 0.8208 ¥0.22 

NC .............................................................. 34 RURAL .................... 0.7963 34 RURAL ..................... 0.7880 ¥1.04 

OH ............................................................. 36 RURAL .................... 0.8315 36 RURAL .................... 0.8338 0.28 

OR ............................................................. 38 RURAL .................... 1.0120 38 RURAL .................... 0.9985 ¥1.33 

PA .............................................................. 39 RURAL .................... 0.8730 39 RURAL ..................... 0.8079 ¥7.46 

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Federal Register / Vol. 79, No. 133 / Friday, July 11, 2014 / Proposed Rules 40231 

TABLE 13—CY 2015 PROPOSED CHANGES TO THE STATEWIDE RURAL WAGE INDEX CROSSWALK—Continued 

State 

ESRD PPS CY 2014 CBSA 

delineations 

Proposed ESRD PPS CY 2015 CBSA 

delineations Change 

in value 

(%) CBSA Urban/Rural 

Wage 

index 

value 

CBSA Urban/Rural 

Wage 

index 

value 

SC .............................................................. 42 RURAL .................... 0.8381 42 RURAL ..................... 0.8357 ¥0.29 

TN .............................................................. 44 RURAL ..................... 0.7387 44 RURAL .................... 0.7297 ¥1.22 

TX .............................................................. 45 RURAL ..................... 0.7917 45 RURAL .................... 0.7909 ¥0.10 

UT .............................................................. 46 RURAL ..................... 0.8877 46 RURAL .................... 0.8993 1.31 

VA .............................................................. 49 RURAL .................... 0.7694 49 RURAL ..................... 0.7573 ¥1.57 

WA ............................................................. 50 RURAL ..................... 1.0932 50 RURAL .................... 1.0917 ¥0.14 

WV ............................................................. 51 RURAL ..................... 0.7391 51 RURAL .................... 0.7249 ¥1.92 

WI .............................................................. 52 RURAL .................... 0.9074 52 RURAL ..................... 0.9120 0.51 

While we believe that the new CBSA 

delineations would result in wage index 

values that are more representative of 

the actual costs of labor in a given area, 

we also recognize that use of the new 

CBSA delineations would result in 

reduced payments to some facilities. In 

particular, approximately 30 facilities 

would experience reduced payments if 

we adopt the new CBSA delineations. 

At the same time, use of the new CBSA 

delineations would result in increased 

payments for approximately 100 

facilities, while the majority of facilities 

would experience no change in 

payments due to the implementation of 

the new CBSA delineations. We are 

proposing to implement the new CBSA 

delineations using a 2-year transition 

with a 50/50 blended wage index value 

for all facilities in CY 2015 and 100% 

of the wage index based on the new 

CBSA delineations in CY 2016. 

c. Transition Period 

We considered having no transition 

period and fully implementing the 

proposed new CBSA delineations 

beginning in CY 2015, which would 

mean that all facilities would have 

payments based on the new delineations 

starting on January 1, 2015. However, 

because more facilities would have 

increased rather than decreased 

payments beginning in CY 2015, and 

because the overall amount of ESRD 

payments would increase slightly due to 

the new CBSA delineations, the wage 

index budget neutrality factor would be 

higher. This higher factor would reduce 

the ESRD PPS per treatment base rate 

for all facilities paid under the ESRD 

PPS, despite the fact that the majority of 

ESRD facilities are unaffected by the 

new CBSA delineations. Thus, we 

believe that it would be appropriate to 

provide for a transition period to 

mitigate any resulting short-term 

instability of a lower ESRD PPS base 

rate as well as any negative impacts to 

facilities that experience reduced 

payments. In addition, we note that for 

CY 2015, section 1881(b)(14)(F)(i)(III), as 

added by section 217 of PAMA, requires 

a 0.0 payment update (for further 

discussion on this update please see 

section II.B.1.a.ii of this rule), and thus, 

there is no possibility of offsetting any 

reduction, even a slight reduction, to the 

ESRD PPS base rate in CY 2015. 

Therefore, we are proposing a twoyear transition blended wage index for 

all facilities. Facilities would receive 50 

percent of their CY 2015 wage index 

value based on the CBSA delineations 

for CY 2014 and 50 percent of their CY 

2015 wage index value based on the 

proposed new CBSA delineations. This 

results in an average of the two values. 

We propose that facilities’ CY 2016 

wage index values would be based 100 

percent on the new CBSA delineations. 

We believe a two-year transition strikes 

an appropriate balance between 

ensuring that ESRD PPS payments are as 

accurate and stable as possible while 

giving facilities time to adjust to the 

new CBSA delineations. 

In the CY 2011 ESRD PPS final rule 

(75 FR 49117), we finalized a policy to 

use the labor-related share of 41.737 

percent for the ESRD PPS. For the CY 

2015 ESRD PPS, we propose to use a 

labor-related share of 50.673 percent, 

which we propose to transition over a 

2-year period with the labor-related 

share in CY 2015 based 50 percent on 

the old labor-related share and 50 

percent on the new labor-related share, 

and the labor-related share in CY 2016 

based 100 percent on the new laborrelated share. For a complete discussion 

of the proposed changes in the CY 2015 

ESRD PPS market basket and laborrelated share, as well as the transition of 

the labor-related share; please see 

sections II.B.2.e and XII.B.1.a of this 

proposed rule. 

4. Proposed Revisions to the Outlier 

Policy 

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

requires that the ESRD PPS include a 

payment adjustment for high cost 

outliers due to unusual variations in the 

type or amount of medically necessary 

care, including variability in the amount 

of erythropoiesis stimulating agents 

(ESAs) necessary for anemia 

management. Our regulations at 42 CFR 

413.237(a)(1) provide that ESRD outlier 

services are the following items and 

services that are included in the ESRD 

PPS bundle: (i) ESRD-related drugs and 

biologicals that were or would have 

been, prior to January 1, 2011, 

separately billable under Medicare Part 

B; (ii) ESRD-related laboratory tests that 

were or would have been, prior to 

January 1, 2011, separately billable 

under Medicare Part B; (iii) medical/

surgical supplies, including syringes, 

used to administer ESRD-related drugs, 

that were or would have been, prior to 

January 1, 2011, separately billable 

under Medicare Part B; and (iv) renal 

dialysis service drugs that were or 

would have been, prior to January 1, 

2011, covered under Medicare Part D, 

excluding ESRD-related oral-only drugs. 

In the CY 2011 ESRD PPS final rule 

(75 FR 49142), we stated that for 

purposes of determining whether an 

ESRD facility would be eligible for an 

outlier payment, it would be necessary 

for the facility to identify the actual 

ESRD outlier services furnished to the 

patient by line item on the monthly 

claim. The ESRD-related drugs, 

laboratory tests, and medical/surgical 

supplies that we would recognize as 

outlier services were specified in 

Attachment 3 of Change Request 7064, 

Transmittal 2033 issued August 20, 

2010, rescinded and replaced by 

Transmittal 2094, dated November 17, 

2010. With respect to the outlier policy, 

Transmittal 2094 identified additional 

drugs and laboratory tests that may be 

eligible for ESRD outlier payment. 

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40232 Federal Register / Vol. 79, No. 133 / Friday, July 11, 2014 / Proposed Rules 

Transmittal 2094 was rescinded and 

replaced by Transmittal 2134, dated 

January 14, 2011, which was issued to 

correct the subject on the Transmittal 

page and made no other changes. 

In the CY 2012 ESRD PPS final rule 

(76 FR 70246), we eliminated the 

issuance of a specific list of eligible 

outlier service drugs which were or 

would have been separately billable 

under Medicare Part B prior to January 

1, 2011. However, we use separate 

guidance to continue to identify renal 

dialysis service drugs which were or 

would have been covered under Part D 

for outlier eligibility purposes in order 

to provide unit prices for calculating 

imputed outlier services. We also can 

identify, through our monitoring efforts, 

items and services that are incorrectly 

being identified as eligible outlier 

services in the claims data. Information 

about these items and services and any 

updates to the list of renal dialysis items 

and services that qualify as outlier 

services are made through 

administrative issuances, if necessary. 

Our regulations at 42 CFR 413.237 

specify the methodology used to 

calculate outlier payments. An ESRD 

facility is eligible for an outlier payment 

if its actual or imputed Medicare 

Allowable Payment (MAP) amount per 

treatment for ESRD outlier services 

exceeds a threshold. The MAP amount 

represents the average incurred amount 

per treatment for services that were or 

would have been considered separately 

billable services prior to January 1, 

2011. The threshold is equal to the 

ESRD facility’s predicted ESRD outlier 

services MAP amount per treatment 

(which is case-mix adjusted) plus the 

fixed dollar loss amount. In accordance 

with § 413.237(c) of the regulations, 

facilities are paid 80 percent of the per 

treatment amount by which the imputed 

MAP amount for outlier services (that is, 

the actual incurred amount) exceeds 

this threshold. ESRD facilities are 

eligible to receive outlier payments for 

treating both adult and pediatric 

dialysis patients. 

In the CY 2011 ESRD PPS final rule, 

using 2007 data, we established the 

outlier percentage at 1.0 percent of total 

payments (75 FR 49142 through 49143). 

We also established the fixed dollar loss 

amounts that are added to the predicted 

outlier services MAP amounts. The 

outlier services MAP amounts and fixed 

dollar loss amounts are different for 

adult and pediatric patients due to 

differences in the utilization of 

separately billable services among adult 

and pediatric patients (75 FR 49140). 

As we explained in the CY 2011 ESRD 

PPS final rule (75 FR 49138 and 49139), 

the predicted outlier services MAP 

amounts for a patient are determined by 

multiplying the adjusted average outlier 

services MAP amount by the product of 

the patient-specific case-mix adjusters 

applicable using the outlier services 

payment multipliers developed from the 

regression analysis to compute the 

payment adjustments. For CY 2014, the 

outlier services MAP amounts and fixed 

dollar loss amounts were based on 2012 

data (78FR 72180). Therefore, the outlier 

thresholds for CY 2014 were based on 

utilization of ESRD-related items and 

services furnished under the ESRD PPS. 

Because of the utilization of epoetin and 

other outlier services has continued to 

decline under the ESRD PPS, we 

lowered the MAP amounts and fixed 

dollar loss amounts for CYs 2013 and 

2014 to allow for an increase in 

payments for ESRD beneficiaries 

requiring higher resources. 

a. Proposed Changes to the Outlier 

Services MAP Amounts and Fixed 

Dollar Loss Amounts 

For CY 2015, we are not proposing 

any changes to the methodology used to 

compute the MAP or fixed dollar loss 

amounts. Rather, in this proposed rule, 

we are updating the outlier services 

MAP amounts and fixed dollar loss 

amounts to reflect the utilization of 

outlier services reported on the 2013 

claims using the December 2013 claims 

file. The impact of this update is shown 

in Table 14, which compares the outlier 

services MAP amounts and fixed dollar 

loss amounts used for the outlier policy 

in CY 2014 with the updated estimates 

for this proposed rule. The estimates for 

the proposed outlier CY 2015 outlier 

policy, which are included in Column II 

of Table 14, were inflation-adjusted to 

reflect projected 2015 prices for outlier 

services. 

TABLE 14—OUTLIERPOLICY: IMPACT OF USING UPDATED DATA TO DEFINE THE OUTLIER POLICY

Column I 

Final outlier policy for CY 2014 

(based on 2012 data price 

inflated to 2014) * 

Column II 

Proposed outlier policy for CY 

2015 (based on 2013 data 

price inflated to 2015) * 

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

Average outlier services MAP amount per treatment 1 ................................... $37.29 $51.97 $40.05 $52.61 

Adjustments.

Standardization for outlier services 2 ........................................................ 1.1079 0.9866 1.1182 0.9899 

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

Adjusted average outlier services MAP amount 3 .................................... $40.49 $50.25 $43.89 $51.04 

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

the outlier threshold 4 ................................................................................... $54.01 $98.67 $56.30 $85.24 

Patient months qualifying for outlier payment ................................................. 6.7% 5.3% 6.2% 6.3% 

* The outlier services MAP amounts and fixed dollar loss amounts were inflation adjusted to reflect updated prices for outlier services (that is, 

2014 prices in Column I and projected 2015 prices in Column II). 1Excludes patients for whom not all data were available to calculate projected payments. The outlier services MAP amounts are based on 

2013 data. The medically unbelievable edits of 400,000 units for EPO and 1,200 mcg for Aranesp that are in place under the ESA claims monitoring policy were applied. 2Applied to the average outlier MAP per treatment. Standardization for outlier services is based on existing case mix adjusters for adult and 

pediatric patient groups. 3This is the amount to which the separately billable (SB) payment multipliers are applied to calculate the predicted outlier services MAP for 

each patient. 4The fixed dollar loss amounts were calculated using 2013 data to yield total outlier payments that represent 1% of total projected payments 

for the ESRD PPS. 

As seen in Table 14, the estimated 

fixed dollar loss amount that determines 

the CY 2015 outlier threshold amount 

for adults (Column II) is lower than that 

used for the CY 2014 outlier policy 

(Column I). The threshold is lower in 

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spite of the fact that the average outlier 

services MAP per treatment has 

increased. Between 2012 and 2013, the 

variation in outlier services across 

patients declined among adults. The net 

result is an increase in the percentage of 

patient-months qualifying for outlier 

payment (6.3 percent based on 2013 

data versus 5.3 percent based on 2012 

data) but a decrease in the average 

outlier payment per case. The estimated 

fixed dollar loss amount that determines 

the CY 2015 outlier threshold amount 

for pediatric patients (Column II) is 

higher than that used for the CY 2014 

outlier policy (Column I). 

For pediatric patients, there was an 

increase in the overall average outlier 

service MAP amount between 2012 

($37.29 per treatment as shown in 

Column I) and 2013 ($40.05 per 

treatment, as shown in Column II). In 

addition, there was a continuing 

tendency in 2013 for a relatively small 

percentage of pediatric patients to 

account for a disproportionate share of 

the total outlier service MAP amounts. 

The one percent target for outlier 

payments is therefore expected to be 

achieved based on a smaller percentage 

of pediatric outlier cases using 2013 

data compared to 2012 data (6.2 percent 

of pediatric patient months are expected 

to qualify for outlier payments rather 

than 6.7 percent). These patterns led to 

the estimated fixed dollar loss amount 

for pediatric patients being higher for 

the outlier policy for CY 2015 compared 

to the outlier policy for CY 2014. 

Generally, there is a relatively higher 

likelihood for pediatric patients that the 

outlier threshold may be adjusted to 

reflect changes in the distribution of 

outlier service MAP amounts. This is 

due to the much smaller overall number 

of pediatric patients compared to adult 

patients, and therefore to the fact that 

the outlier threshold for pediatric 

patients is calculated based on data for 

a much smaller number of pediatric 

patients compared to adult patients. 

We propose to update the fixed dollar 

loss amounts that are added to the 

predicted MAP amounts per treatment 

to determine the outlier thresholds for 

CY 2015 from $98.67 to $85.24 for adult 

patients and from $54.01 to $56.30 for 

pediatric patients compared with CY 

2014 amounts. We estimate that the 

percentage of patient months qualifying 

for outlier payments under the current 

policy will be 6.3 percent and 6.2 

percent for adult and pediatric patients, 

respectively, based on the 2013 data. 

The pediatric outlier MAP and fixed 

dollar loss amounts continue to be 

lower for pediatric patients than adults 

due to the continued lower use of 

outlier services (primarily reflecting 

lower use of epoetin and other 

injectable drugs). 

b. Outlier Policy Percentage 

42 CFR 413.220(b)(4) stipulates that 

the per treatment base rate is reduced by 

1 percent to account for the proportion 

of the estimated total payments under 

the ESRD PPS that are outlier payments. 

Based on the 2013 claims, outlier 

payments represented approximately 

0.5 percent of total payments, again 

falling short of the 1 percent target due 

to further declines in the use of outlier 

services. Use of 2013 data to recalibrate 

the thresholds, which reflect lower 

utilization of EPO and other outlier 

services and reduced variation in outlier 

services among adults, is expected to 

result in aggregate outlier payments 

close to the 1 percent target in CY 2015. 

We believe the proposed update to the 

outlier MAP and fixed dollar loss 

amounts for CY 2015 will increase 

payments for ESRD beneficiaries 

requiring higher resource utilization and 

come closer to meeting our 1 percent 

outlier policy. 

We note that recalibration of the fixed 

dollar loss amounts in this proposed 

rule for CY 2015 outlier payments 

results in no change in payments to 

ESRD facilities for beneficiaries with 

renal dialysis items and services that are 

not eligible for outlier payments, but 

increases payments to providers for 

beneficiaries with renal dialysis items 

and services that are eligible for outlier 

payments. Therefore, beneficiary coinsurance obligations would also 

increase for renal dialysis services 

eligible for outlier payments. 

C. Restatement of Policy Regarding 

Reporting and Payment for More Than 

Three Dialysis Treatments per Week 

1. Reporting More Than Three Dialysis 

Treatments per Week on Claims 

Since the composite payment system 

was implemented in the 1980s, CMS has 

reimbursed ESRD facilities based upon 

three hemodialysis treatments per week 

and allowed for the payment of 

additional weekly dialysis treatments 

with medical justification. When a 

dialysis modality regimen requires more 

than three weekly dialysis treatments, 

such as with short, frequent 

hemodialysis (HD) and peritoneal 

dialysis (PD) modalities, we apply 

payment edits to ensure that Medicare 

payment on the monthly claim is 

consistent with the three times-weekly 

dialysis treatment payment limit, which 

translates to payment for 13 treatments 

for a 30-day month and 14 treatments 

for a 31-day month. 

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

Act, the ESRD PPS may provide for 

payment on the basis of renal dialysis 

services furnished during a week, or 

month, or such other appropriate unit of 

payment as the Secretary specifies. In 

the CY 2011 ESRD PPS final rule (75 FR 

49064), CMS finalized the per treatment 

basis of payment in which ESRD 

facilities are paid for up to three 

treatments per week, unless there is 

medical justification for more than three 

treatments per week. We codified the 

per-treatment unit of payment under the 

ESRD PPS at 42 CFR 413.215(a). Also in 

the CY 2011 ESRD PPS final rule (75 FR 

49078), we explained how we converted 

patient weeks to HD-equivalent sessions 

for PD patients. Specifically, we noted 

that one week of PD was considered 

equivalent to three HD treatments. For 

example, a patient on PD for 21 days 

would have (21/7) x 3 or 9 HDequivalent sessions. Our policy is that 

ESRD facilities treating patients on PD 

or home HD will be paid for up to three 

HD-equivalent sessions for each week of 

dialysis, unless there is medical 

justification for furnishing additional 

treatments. 

Increasingly, some ESRD facilities 

have begun to offer dialysis modalities 

where the standard treatment regimen is 

more than three treatments per week. 

Also, we have observed a payment 

variance among Medicare 

Administrative Contractors (MACs) in 

processing claims for dialysis treatments 

for modalities that require more 

frequent dialysis, resulting in payment 

of more than 14 treatments per month 

without medical justification. Lastly, 

CMS has received several requests for 

clarification regarding Medicare 

payment and billing policies for dialysis 

treatments for modalities requiring more 

than three treatments per week that are 

furnished in-facility or in the patient’s 

home. Specifically, ESRD facilities, 

renal physician groups, and MACs have 

requested billing guidance regarding 

whether all of the dialysis treatments 

furnished to the patient during the 

billing month should be reported on the 

claim form, even though the Medicare 

benefit only provides for payment of 

three dialysis treatments per week. 

For these reasons, we are reiterating 

our policy with respect to payment for 

more than three dialysis treatments per 

week. We note that we are not changing 

our policy for reporting extra nonmedically necessary dialysis sessions. 

ESRD facility claims should continue to 

include all dialysis treatments furnished 

during the month on claims, but 

payment is limited to three dialysis 

treatments per week through the 

payment edits of 13 treatments for a 30- 

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day month or 14 treatments for a 31-day 

month. For example, an ESRD facility 

that furnishes dialysis services to 

patients who dialyze using modalities 

requiring shorter, more frequent dialysis 

(for example, a dialysis regimen of 4, 5, 

6 or 7 days a week in-facility or at 

home), should report all of the patient’s 

dialysis treatments on the monthly 

claim. However, payment for these 

services will reflect existing claims 

processing system edits, and the 

monthly Medicare payment would 

mirror the Medicare ESRD benefit of 

three dialysis treatments per week. 

2. Medical Necessity for More Than 

Three Treatments per Week 

Under the ESRD benefit, we have 

always recognized that some patient 

conditions benefit from more than three 

dialysis sessions per week and as such, 

the Medicare policy for medically 

necessary additional dialysis treatments 

was developed. Under this policy, the 

MACs determine whether additional 

treatments furnished during a month are 

medically necessary. While Medicare 

does not define specific patient 

conditions that meet the requirements of 

medical necessity, we do furnish 

instructions to MACs to consider 

appropriate patient conditions that 

would result in a patient’s medical need 

for additional dialysis treatments (for 

example, excess fluid of five or more 

pounds). When such patient conditions 

are indicated with the claim requesting 

payment, we instruct MACs to consider 

medical justification and the 

appropriateness of payment for the 

additional sessions. 

In section 50.A of the Medicare 

Benefit Policy Manual (Pub. 100–02), 

we explained our policy regarding 

payment for hemodialysis-equivalent 

PD and payment for more than three 

dialysis treatments per week under the 

ESRD PPS. We restated that ESRD 

facilities are paid for a maximum of 13 

treatments during a 30 day month and 

14 treatments during a 31-day month 

unless there is medical justification for 

additional treatments. The only time 

facilities should seek payment for 

additional dialysis sessions, including 

payment for shorter, more frequent 

modalities, is when the patient has a 

medical need for additional dialysis and 

the facility has furnished supporting 

medical justification for the extra 

treatments. Modality choice does not 

constitute medical justification. 

D. Delay of Payment for Oral-Only 

Drugs Under the ESRD PPS 

As we discussed in the CY 2014 ESRD 

PPS final rule (78 FR 72185 through 

72186), section 1881(b)(14)(A)(i) of the 

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

Medicare Improvements for Patients and 

Providers Act of 2008 (MIPPA), requires 

the Secretary to implement a payment 

system under which a single payment is 

made to a provider of services or a renal 

dialysis facility for ‘‘renal dialysis 

services’’ in lieu of any other payment. 

Section 1881(b)(14)(B) of the Act defines 

renal dialysis services, and subclause 

(iii) of that section states that these 

services include ‘‘other drugs and 

biologicals that are furnished to 

individuals for the treatment of ESRD 

and for which payment was (before the 

application of this paragraph) made 

separately under this title, and any oral 

equivalent form of such drug or 

biological[.]’’ 

We interpreted this provision as 

including not only injectable drugs and 

biologicals used for the treatment of 

ESRD (other than ESAs, which are 

included under clause (ii) of section 

1881(b)(14)(B)), but also all noninjectable oral drugs used for the 

treatment of ESRD furnished under title 

XVIII of the Act. We also concluded 

that, to the extent ESRD-related oralonly drugs do not fall within clause (iii) 

of the statutory definition of renal 

dialysis services, such drugs would fall 

under clause (iv), and constitute other 

items and services used for the 

treatment of ESRD that are not described 

in clause (i) of section 1881(b)(14)(B). 

As such, CMS finalized and 

promulgated the payment policies for 

oral-only drugs used for the treatment of 

ESRD in the CY 2011 ESRD PPS final 

rule (75 FR 49038 through 49053), and 

we defined ‘‘renal dialysis services’’ at 

42 CFR 413.171(3) as including, among 

other things ‘‘other drugs and 

biologicals that are furnished to 

individuals for the treatment of ESRD 

and for which payment was (prior to 

January 1, 2011) made separately under 

Title XVIII of the Act (including drugs 

and biologicals with only an oral 

form).’’ 

Although ESRD-related oral-only 

drugs are included in the definition of 

renal dialysis services, in the CY 2011 

ESRD PPS final rule (75 FR 49044), we 

also finalized a policy to delay payment 

for these drugs under the PPS until 

January 1, 2014. We stated that there 

were certain advantages to delaying the 

implementation of payment for oralonly drugs, including allowing ESRD 

facilities additional time to make 

operational changes and logistical 

arrangements in order to furnish oralonly ESRD-related drugs and biologicals 

to their patients. Accordingly, 42 CFR 

413.174(f)(6) provides that payment to 

an ESRD facility for renal dialysis 

service drugs and biologicals with only 

an oral form is incorporated into the 

PPS payment rates effective January 1, 

2014. 

On January 3, 2013, the Congress 

enacted ATRA. Section 632(b) of ATRA 

states that the Secretary ‘‘may not 

implement the policy under section 

413.176(f)(6) of title 42, Code of Federal 

Regulations (relating to oral-only ESRDrelated drugs in the ESRD prospective 

payment system), prior to January 1, 

2016.’’ Accordingly, in the CY 2014 

ESRD PPS final rule (78 FR 72185 

through 72186), we delayed payment for 

ESRD-related oral-only drugs under the 

ESRD PPS until January 1, 2016, instead 

of on January 1, 2014, which is the 

original date we finalized for payment 

of ESRD-related oral-only drugs under 

the ESRD PPS. We implemented this 

delay by revising the effective date for 

providing payment for oral-only ESRDrelated drugs under the ESRD PPS at 42 

CFR 413.174(f)(6) from January 1, 2014 

to January 1, 2016. In addition, we also 

changed the date when oral-only drugs 

would be eligible outlier services under 

the outlier policy described in 42 CFR 

413.237(a)(1)(iv) from January 1, 2014 to 

January 1, 2016. 

On April 1, 2014, PAMA was enacted. 

Section 217(a)(1) of PAMA amended 

section 632(b)(1) of ATRA, which now 

provides that the Secretary ‘‘may not 

implement the policy under section 

413.174(f)(6) of title 42, Code of Federal 

Regulations (relating to oral-only ESRD 

drugs in the ESRD prospective payment 

system), prior to January 1, 2024.’’ 

Accordingly, payment for ESRD-related 

oral-only drugs will not be made under 

the ESRD PPS prior to January 1, 2024 

instead of on January 1, 2016, which is 

the date we finalized for payment of 

ESRD-related oral-only drugs under the 

ESRD PPS in the CY 2014 ESRD PPS 

final rule (78 FR 72186). 

We propose to implement this delay 

by modifying the effective date for 

providing payment for oral-only ESRDrelated drugs and biologicals under the 

ESRD PPS at 42 CFR 413.174(f)(6) from 

January 1, 2016 to January 1, 2024. We 

also propose to change the date in 42 

CFR 413.237(a)(1)(iv) regarding outlier 

payments for oral-only ESRD-related 

drugs made under the ESRD PPS from 

January 1, 2016 to January 1, 2024. We 

continue to believe that oral-only drugs 

used for the treatment of ESRD are an 

essential part of the ESRD PPS payment 

bundle and should be paid for under the 

ESRD PPS as soon as possible, or 

beginning January 1, 2024. 

In addition to the delay of payment 

for oral-only ESRD-related drugs, 

section 217(a)(2) of PAMA further 

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

adding a new sentence that provides, 

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‘‘[n]otwithstanding section 

1881(b)(14)(A)(ii) of the Social Security 

Act (42 U.S.C. 1395rr(b)(14)(A)(ii)), 

implementation of the policy described 

in the previous sentence shall be based 

on data from the most recent year 

available.’’ We interpret this provision 

to mean that we are not to use per 

patient utilization data from 2007, 2008, 

or 2009 (whichever has the lowest per 

patient utilization) as we were required 

for the original ESRD PPS in 

implementing payment for oral-only 

ESRD drugs under the ESRD PPS. We 

will make proposals consistent with 

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

by section 217(a)(2) of PAMA, in future 

rulemaking. 

Section 217(c) of PAMA requires the 

Secretary, as part of the CY 2016 ESRD 

PPS rulemaking, to establish a process 

for ‘‘(1) determining when a product is 

no longer an oral-only drug; and (2) 

including new injectable and 

intravenous products into the bundled 

payment under such system.’’ 

Consistent with this statutory 

requirement, we plan to propose a drug 

designation process in our CY 2016 

rulemaking cycle and we are seeking 

industry and stakeholder comments on 

the components and elements of such a 

process for our consideration next year. 

E. ESRD Drug Categories Included in the 

ESRD PPS Base Rate 

In the CY 2011 ESRD PPS final rule 

(75 FR 49050), we finalized Table 4, 

(Renal Dialysis Service ESRD Drug 

Categories Included in the Final ESRD 

PPS Base Rate), and have included 

Table 15 below for the purpose of this 

discussion. In that rule, we noted that 

the categories of drugs and biologicals 

used for access management, anemia 

management, anti-infectives, bone and 

mineral metabolism and cellular 

management would always be 

considered ESRD-related drugs when 

furnished to an ESRD patient, and that 

payment for such drugs would be 

included in the ESRD PPS payment 

bundle. As such, beginning January 1, 

2011, Medicare no longer makes a 

separate payment when a drug or 

biological (except for oral-only ESRD– 

related drugs for which we are 

proposing to delay payment under the 

ESRD PPS until January 1, 2024) 

identified in the categories listed in the 

following table is furnished to a 

Medicare ESRD beneficiary. 

TABLE 15—RENAL DIALYSIS SERVICE ESRD DRUG CATEGORIES INCLUDED IN THE FINAL ESRD PPS BASE RATE

Drug category Rationale for inclusion 

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

is given, and provide anesthetic for access placement. 

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

ESAs as well as iron. 

Anti-infectives .................................. Vancomycin and daptomycin used to treat access site infections. 

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

and calcimimetics. 

Cellular Management ...................... Drugs used for deficiencies of naturally occurring substances needed for cellular management. This category includes levocarnitine. 

In the CY 2011 ESRD PPS final rule 

(75 FR 49050), we noted that we 

included the anti-infective drugs of 

vancomycin and daptomycin because 

these drugs were routinely furnished for 

the ESRD-related conditions of access 

site infections and peritonitis. However, 

in the CY 2012 ESRD PPS final rule (76 

FR 70242 through 70243), we responded 

to public comments that noted that 

vancomycin is a common anti-infective 

drug appropriate for treating infections 

that are both ESRD- and non-ESRDrelated by modifying our policy to 

eliminate the payment restriction for 

vancomycin when it is furnished for 

non-ESRD related conditions. In 

addition, we finalized the use of CMS 

payment modifier AY (Item or service 

furnished to an End Stage Renal Disease 

(ESRD) patient that is not for the 

treatment of ESRD) and instructed 

facilities to append the modifier to the 

claim reporting vancomycin to indicate 

that the drug was furnished for reasons 

other than ESRD. The presence of the 

AY modifier on the claim allows the 

MAC to make a separate payment for the 

drug when it is furnished by the facility 

to a Medicare beneficiary for reasons 

other than ESRD. 

In the CY 2013 ESRD PPS final rule 

(77 FR 67461), we further amended this 

policy to allow ESRD facilities to bill 

separately for daptomycin when it is 

furnished to ESRD beneficiaries for 

reasons other than ESRD. Once again, 

we instructed facilities to append claims 

reporting daptomycin furnished for 

reasons other than ESRD with the AY 

modifier so that MACs would be able to 

make a separate payment. 

Because we have removed the 

payment limitation for both vancomycin 

and daptomycin, and because we 

believe that anti-infectives are a drug 

category that may be furnished for both 

ESRD- and non-ESRD-related reasons, 

we have updated the list of drug 

categories that are always considered 

ESRD-related under the ESRD PPS by 

removing the drug category for antiinfectives. We have included Table 16 

(Renal Dialysis Service ESRD Drug 

Categories Included in the ESRD PPS 

Base Rate and Not Separately Payable) 

below to appropriately recognize the 

drug categories that are always 

considered ESRD-related and we 

confirm that the revised table reflects 

policy changes made in the CY 2012 

and CY 2013 ESRD PPS rulemaking 

cycles and does not constitute new 

policy. 

Over the past few years, we have 

received payment and billing inquiries 

requesting clarification for the payment 

for drugs represented by one of the drug 

categories included in the ESRD PPS, 

but not furnished for the treatment of 

ESRD. Therefore, we clarify that any 

drug included in the drug categories of 

access management, anemia 

management, bone and mineral 

metabolism and cellular management is 

not separately paid by Medicare 

regardless of why the drug is being 

furnished. In addition, the facility may 

not furnish a prescription for such drugs 

with the expectation that a Medicare 

Part D payment would be made, as the 

payment for the drug is included in the 

ESRD PPS payment bundle. 

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TABLE 16—RENAL DIALYSIS SERVICE ESRD DRUG CATEGORIES INCLUDED IN THE ESRD PPS BASE RATE AND NOT

SEPARATELY PAYABLE

Drug category Rationale for inclusion 

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

is given, and provide anesthetic for access placement. 

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

ESAs as well as iron. 

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

and calcimimetics. 

Cellular Management ...................... Drugs used for deficiencies of naturally occurring substances needed for cellular management. This category includes levocarnitine. 

The drug categories that may be 

separately paid by Medicare when 

furnished for non-ESRD patient 

conditions are included in Table 5 

(ESRD Drug Categories Included in the 

ESRD PPS Base Rate But May be Used 

for Dialysis and non-Dialysis Purposes) 

(75 FR 49051). This table is included 

below for the purpose of this discussion. 

When any drug identified in the drug 

categories listed in Table 17 (antiemetic, 

anti-infectives, antipruritic, anxiolytic, 

excess fluid management, fluid and 

electrolyte management or pain 

management), is furnished for the 

treatment of ESRD, payment for the drug 

is included in the ESRD PPS payment 

and may not be paid separately. If a 

drug represented by a drug category in 

Table 17 is furnished for reasons other 

than ESRD, a separate Medicare 

payment is permitted when the AY 

modifier is indicated on the claim line 

reporting the drug for payment. 

TABLE 17—ESRD DRUG CATEGORIES INCLUDED IN THE ESRD BASE RATE BUT MAY BE USED FOR DIALYSIS AND NON– 

DIALYSIS PURPOSES

Antiemetic ....................................... Used to prevent or treat nausea and vomiting secondary to dialysis. Excludes antiemetics used in conjunction with chemotherapy as these are covered under a separate benefit category. 

Anti-infectives .................................. Used to treat infections. May include antibacterial and antifungal drugs. 

Antipruritic ....................................... Drugs in this classification have multiple clinical indications and are included for their action to treat itching 

secondary to dialysis. 

Anxiolytic ......................................... Drugs in this classification have multiple actions but are included for the treatment of restless leg syndrome secondary to dialysis. 

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

Fluid and Electrolyte Management 

Including Volume Expanders.

Intravenous drugs/fluids used to treat fluid and electrolyte needs. 

Pain Management ........................... Drugs used to treat graft site pain and to treat pain medication overdose. 

F. Low-Volume Payment Adjustment 

1. Background 

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

requires a payment adjustment that 

‘‘reflects the extent to which costs 

incurred by low-volume facilities (as 

defined by the Secretary) in furnishing 

renal dialysis services exceed the costs 

incurred by other facilities in furnishing 

such services, and for payment for renal 

dialysis services furnished on or after 

January 1, 2011, and before January 1, 

2014, such payment adjustment shall 

not be less than 10 percent.’’ As a result 

of this provision and the regression 

analysis conducted for the ESRD PPS, 

effective January 1, 2011, the ESRD PPS 

provides a facility-level payment 

adjustment of 18.9 percent to ESRD 

facilities that meet the definition of a 

low-volume facility. 

Under 42 CFR 413.232(b), a lowvolume facility is an ESRD facility that: 

(1) Furnished less than 4,000 treatments 

in each of the 3 cost reporting years 

(based on as-filed or final settled 12- 

consecutive month cost reports, 

whichever is most recent) preceding the 

payment year; and (2) Has not opened, 

closed, or received a new provider 

number due to a change in ownership 

in the 3 cost reporting years (based on 

as-filed or final settled 12-consecutive 

month cost reports, whichever is most 

recent) preceding the payment year. 

Under § 413.232(c), for purposes of 

determining the number of treatments 

furnished by the ESRD facility, the 

number of treatments equals the 

aggregate number of treatments 

furnished by other ESRD facilities that 

are both under common ownership and 

25 road miles or less from the ESRD 

facility in question. This geographic 

proximity criterion is only applicable to 

ESRD facilities that were Medicare 

certified on or after January 1, 2011. 

For purposes of determining 

eligibility for the low-volume payment 

adjustment (LVPA), ‘‘treatments’’ means 

total hemodialysis (HD) equivalent 

treatments (Medicare and nonMedicare). For peritoneal dialysis (PD) 

patients, one week of PD is considered 

equivalent to 3 HD treatments. In the CY 

2012 ESRD PPS final rule (76 FR 70236), 

we clarified that we base eligibility on 

the three years preceding the payment 

year and those years are based on cost 

reporting periods. We further clarified 

that the ESRD facility’s cost reports for 

the cost reporting periods ending in the 

three years preceding the payment year 

must report costs for 12-consecutive 

months. 

In order to receive the LVPA under 

the ESRD PPS, an ESRD facility must 

submit a written attestation statement to 

its Medicare Administrative Contractor 

(MAC) that it qualifies as a low-volume 

ESRD facility and that it meets all of the 

requirements specified at 42 CFR 

413.232. In the CY 2012 ESRD PPS final 

rule (76 FR 70236), we finalized a yearly 

November 1 deadline for attestation 

submission and we revised the 

regulation at § 413.232(f) to reflect this 

date. We noted that this timeframe 

provides 60 days for a MAC to verify 

that an ESRD facility meets the LVPA 

eligibility criteria. Further information 

regarding the administration of the 

LVPA is provided in CMS Pub. 100–02, 

Medicare Benefit Policy Manual, 

chapter 11, section 60.B.1. 

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2. The United States Government 

Accountability Office Study on the 

LVPA 

The Medicare Improvements for 

Patients and Providers Act of 2008 

(MIPPA) required the United States 

Government Accountability Office (the 

GAO) to study the LVPA. The GAO 

examined (1) the extent to which the 

LVPA targeted low-volume, high-cost 

facilities that appeared necessary for 

ensuring access to care; and (2) CMS’s 

implementation of the LVPA, including 

the extent to which CMS paid the 2011 

LVPA to facilities eligible to receive the 

adjustment. To do this work, the GAO 

reviewed Medicare claims, facilities’ 

annual cost reports, and data on dialysis 

facilities’ locations to identify and 

compare facilities that were eligible for 

the LVPA with those that received the 

adjustment. The GAO published a 

report 13–287 on March 1, 2013, 

entitled, ‘‘End-Stage Renal Disease: CMS 

Should Improve Design and Strengthen 

Monitoring of Low-Volume 

Adjustment’’. The report found multiple 

discrepancies in the identification of 

low-volume facilities which are 

summarized below. 

a. The GAO’s Main Findings 

The GAO found that many of the 

facilities eligible for the LVPA were 

located near other facilities, indicating 

that they might not have been necessary 

for ensuring access to care. They also 

identified certain facilities with 

relatively low volume that were not 

eligible for the LVPA but had aboveaverage costs and appeared to be 

necessary for ensuring access to care. 

Lastly, they stated the design of the 

LVPA provides facilities with an 

adverse incentive to restrict their service 

provision to avoid reaching the 4,000 

treatment threshold. The GAO 

calculated that Medicare overpaid an 

estimated $5.3 million for the LVPA to 

dialysis facilities that did not meet the 

eligibility requirements established by 

CMS. They indicated in their report that 

the guidance that CMS issued for 

implementation of the regulatory 

requirements was sometimes unclear 

and not always available when needed, 

and the misunderstanding of LVPA 

eligibility likely was exacerbated 

because CMS conducted limited 

monitoring of the Medicare contractors’ 

administration of LVPA payments. 

b. The GAO’s Recommendations 

In the conclusion of their study, the 

GAO provided Congress with the 

following recommendations: (1) To 

more effectively target facilities 

necessary for ensuring access to care, 

the Administrator of CMS should 

consider restricting the LVPA to lowvolume facilities that are isolated; (2) To 

reduce the incentive for facilities to 

restrict their service provision to avoid 

reaching the LVPA treatment threshold, 

the Administrator of CMS should 

consider revisions such as changing the 

LVPA to a tiered adjustment; (3) To 

ensure that future LVPA payments are 

made only to eligible facilities and to 

rectify past overpayments, the 

Administrator of CMS should take the 

following four actions: Require 

Medicare contractors to promptly 

recoup 2011 LVPA payments that were 

made in error; investigate any errors that 

contributed to eligible facilities not 

consistently receiving the 2011 LVPA 

and ensure that such errors are 

corrected; take steps to ensure that CMS 

regulations and guidance regarding the 

LVPA are clear, timely, and effectively 

disseminated to both dialysis facilities 

and Medicare contractors; and improve 

the timeliness and efficacy of CMS’s 

monitoring regarding the extent to 

which Medicare contractors are 

determining LVPA eligibility correctly 

and promptly redetermining eligibility 

when all necessary data become 

available. 

In response to the GAO’s 

recommendations, we concurred with 

the need to ensure that the LVPA is 

targeted effectively at low-volume highcost facilities in areas where 

beneficiaries may lack other dialysis 

care options. We also agreed to take 

action to ensure appropriate payment is 

made in the following ways: (1) 

Evaluating our policy guidance and 

contractor instructions to ensure 

appropriate application of the LVPA; (2) 

using multiple methods of 

communication to MACs and ESRD 

facilities to deliver clear and timely 

guidance; and (3) improving our 

monitoring of MACs and considering 

measures that provide specific 

expectations. 

3. Clarification of the LVPA Policy 

For CY 2015, we are not proposing to 

make changes to the eligibility criteria 

for the adjustment or to the magnitude 

of the adjustment value. In accordance 

with section 632(c) of ATRA, for CY 

2016 we will assess and address other 

necessary LVPA policy changes when 

we use updated data and reevaluate all 

of the patient- and facility-level 

adjustments together in a regression 

analysis similar to the analysis that is 

discussed in the CY 2011 ESRD PPS 

final rule (75 FR 49083). At this time, 

we are not proposing to change the 

criteria in such a way that the number 

of low-volume facilities would deviate 

substantially from the number of 

facilities originally modeled to receive 

the adjustment in the first year of 

implementation. This is because of the 

interaction of the LVPA with other 

payment adjustments under the ESRD 

PPS. As discussed in the CY 2011 ESRD 

PPS final rule (75 FR 49081), we 

standardized the ESRD PPS base rate to 

account for the payment variables and it 

would not be appropriate to make 

changes to one variable in the regression 

when it could potentially affect the 

other adjustments or the standardization 

factor. However, there are two 

clarifications under the LVPA policy 

(discussed below) that we can address 

in this year’s rulemaking that we believe 

are responsive to stakeholder’s concerns 

and GAO’s concern that the LVPA 

should effectively target low-volume, 

high cost-facilities. 

a. Hospital-Based ESRD Facilities 

As stated above, for purposes of 

determining eligibility for the LVPA, 

‘‘treatments’’ means total hemodialysis 

(HD) equivalent treatments (Medicare 

and non-Medicare) and for peritoneal 

dialysis (PD) patients, one week of PD 

is considered equivalent to 3 HD 

treatments. Once a MAC receives an 

attestation from an ESRD facility, it 

reviews the ESRD facility’s cost reports 

to verify that the facility meets the lowvolume criteria specified at 42 CFR 

413.232(b). Specifically, the ESRD 

facility cost report is used to verify the 

total treatment count that an ESRD 

facility furnishes in its fiscal year, 

which includes Medicare and nonMedicare treatments. For independent 

ESRD facilities, this information is 

provided on Worksheet C of the Form 

CMS–265–11 form (previously Form 

CMS–265–94) and for hospital-based 

ESRD facilities, this information is on 

Worksheet I–4 of the Form CMS–2552– 

10. 

After the LVPA was implemented, we 

began hearing concerns from multiple 

stakeholders, including members of 

Congress and rural hospital-based ESRD 

facilities, about the MACs’ LVPA 

eligibility determinations. The 

stakeholders indicated that because 

hospital-based ESRD facilities are 

financially integrated with a hospital, 

their costs and treatment data are 

aggregated in the I-series of the 

hospital’s cost report. This means that if 

there is more than one ESRD facility 

that is affiliated with a hospital, the cost 

and treatment data for all facilities are 

aggregated on Worksheet I–4, typically 

causing the facilities’ treatment counts 

to exceed the 4,000-treatment criterion. 

We have learned that some MACs 

accepted treatment counts from 

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hospital-based ESRD facilities other 

than those provided on the hospital’s 

cost report and, as a result, certain 

hospital-based ESRD facilities received 

the LVPA. Other MACs solely used the 

aggregated treatment counts from the 

hospital’s cost report to verify LVPA 

eligibility, which resulted in denials for 

many hospital-based facilities that 

would have qualified for the adjustment 

if the MACs had considered other 

supporting documentation. 

We agree with stakeholders that 

limiting the MAC review to the hospital 

cost reports for verification of LVPA 

eligibility for hospital-based ESRD 

facilities places these facilities at a 

disadvantage and does not comport with 

the intent of our policy. We believe it 

can be necessary for MACs to use other 

supporting data to verify the treatment 

counts for individual hospital-based 

facilities that would meet the eligibility 

criteria for the LVPA if their treatment 

counts had not been aggregated with 

one or more other facilities on their 

hospitals’ cost reports. Because LVPA 

eligibility is based on cost report 

information and the individual hospitalbased facility treatment counts is the 

source of the aggregated treatment 

counts reported in the cost report, 

however, we continue to believe that 

cost report data is an integral part of the 

process of verifying whether a hospitalbased facility meets the LVPA eligibility 

criteria. 

For these reasons, we are clarifying 

that MACs may consider other 

supporting data, such as a hospitalbased facility’s total treatment count, 

along with the facility’s cost reports and 

attestation, to verify it meets the lowvolume eligibility criteria provided at 42 

CFR 413.232(b). The attestation should 

continue to be configured around the 

parent hospital’s cost reports, that is, it 

should be for the same fiscal periods. 

The MAC can consider other supporting 

data in addition to the total treatments 

reported in each of the 12-consecutive 

month cost reports, such as the 

individual facility’s total treatment 

counts, rather than the hospital’s cost 

report alone, to verify the number of 

treatments that were furnished by the 

individual hospital-based facility that is 

seeking the adjustment. Consistent with 

this policy clarification, hospital-based 

ESRD facilities’ eligibility for the LVPA 

should be determined at an individual 

facility level and their total treatment 

counts should not be aggregated with 

other ESRD facilities that are affiliated 

with the hospital unless the affiliated 

facilities are commonly owned and 

within 25 miles. 

MACs have discretion as to the format 

of the attestation and any supporting 

data, however, the facility must provide 

the total number of Medicare and nonMedicare treatments for the three cost 

reporting years preceding the payment 

year for all of the hospital-based 

facilities for which treatment counts 

appear on the hospital’s cost report. 

This will allow MACs to determine 

which treatments on the cost report 

were furnished by the individual 

hospital-based facility that is seeking 

the LVPA and which treatments were 

furnished by other affiliated facilities. 

Finally, we propose to amend the 

regulation text by adding a new 

paragraph (h)(1) to § 413.232 to reflect 

this clarification of current policy under 

which MACs can verify hospital-based 

ESRD facilities’ eligibility for the LVPA 

using supporting data in addition to 

hospital cost reports. We are soliciting 

comment on the proposed changes at 

§ 413.232(h)(1). 

b. Cost Reporting Periods Used for 

Eligibility 

In the CY 2012 ESRD PPS final rule 

(76 FR 70236), we clarified that for 

purposes of eligibility under 42 CFR 

413.232(b), we base eligibility on the 

three years preceding the payment year 

and those years are based on cost 

reporting periods. We further clarified 

that the ESRD facility’s cost reports for 

the cost reporting periods ending in the 

three years preceding the payment year 

must report costs for 12 consecutive 

months. 

After the LVPA was implemented, we 

began hearing concerns from the 

industry that there is a conflict within 

our policy. Currently, our policy allows 

an ESRD facility to remain eligible for 

the LVPA when they have a change of 

ownership (CHOW) that does not result 

in a new Provider Transaction Access 

Number (PTAN). However, our 

regulations at 42 CFR 413.232(b) suggest 

that MACs must verify treatment counts 

using cost reports for 12-consecutive 

month cost periods even though 

CHOWs often result in costs reports that 

are nonstandard, that is, longer or 

shorter than 12 months. In particular, 

the previous owner’s final cost report 

may not coincide with the ESRD 

facility’s cost report fiscal year end 

under its new ownership, resulting in 

two costs reports that are not 12- 

consecutive month cost reports. For 

example, where a CHOW occurs in the 

middle of the cost reporting period and 

the new owner wishes to retain the 

established cost report fiscal year end, 

the previous owner submits a final cost 

report covering their period of 

ownership and the new owner submits 

a cost report covering the remainder of 

the cost reporting period. Alternatively, 

a new owner could also choose not to 

retain the previous owner’s established 

cost reporting fiscal year end, in which 

case the CHOW could result in a cost 

reports that exceed twelve months when 

combined. Further details regarding the 

policies for filing cost reports during a 

CHOW are available in the Provider 

Reimbursement Manual—Part 1, chapter 

15, ‘‘Change of Ownership.’’ 

We agree with the industry that there 

is a conflict in the policies governing 

LVPA that may prevent an otherwise 

qualified ESRD facility from receiving 

the adjustment. We have always 

intended that if an ESRD facility has a 

CHOW where the new owner accepts 

the previous owner’s assets and 

liabilities by retaining the facility’s 

PTAN, they should continue to be 

eligible for the LVPA. However, some 

MACs used a strict reading of the 

regulatory language and denied these 

providers the LVPA. Other MACs added 

short cost reports together or prorated 

treatment counts for cost reporting 

periods spanning greater than 12 

months. 

In order to ensure consistent 

verification of LVPA eligibility, we are 

restating our intention that when there 

is a CHOW that does not result in a new 

PTAN but creates two non-standard cost 

reporting periods (that is, periods that 

are shorter or longer than 12 months) 

the MAC is either to add the two nonstandard cost reporting periods together 

where combined they would equal 12 

consecutive months or prorate the data 

when they would exceed 12 consecutive 

months to determine the total 

treatments furnished for a full cost 

reporting period as if there had not been 

a CHOW. 

For example, prior to a CHOW, 

Facility A had a cost reporting period 

that spanned January 1 through 

December 31. Facility A had a CHOW 

mid-year that did not result in a new 

PTAN but caused a break in the cost 

reporting period. Consistent with the 

clarification of our policy, the MAC 

would add Facility A’s cost report that 

spanned January 1 through May 31 to its 

cost report that spanned June 1 through 

December 31 to verify the total 

treatment count. 

The other situation that could occur is 

when a CHOW results in a change of the 

original fiscal period. For example, prior 

to a CHOW, Facility B had a cost 

reporting period that spanned January 1 

through December 31 and, based on its 

cost reports for 2012 and 2013, it met 

the LVPA eligibility criteria. Then, 

Facility B had a CHOW in the beginning 

of 2014 that did not result in a new 

PTAN, but changed its cost reporting 

period to that of its new owner, October 

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1, 2014 through September 30, 2015. 

This scenario would create a short and 

a long cost report that would not total 

12 months that the MAC would need to 

review for verification. That is, Facility 

B would have a cost report that spanned 

January 1, 2014 through July 31, 2014 (7 

months) and a cost report that spanned 

August 1, 2014 through September 30, 

2015 (14 months). 

In this situation, the MAC should 

combine the two non-standard cost 

reporting periods that in combination 

may exceed 12-consecutive months and 

prorate the data to equal a full 12- 

consecutive month period. Finally, we 

propose to amend the regulation text by 

adding a new paragraph (h)(2) to 

§ 413.232 to clarify the verification 

process for ESRD facilities that 

experience a CHOW with no change in 

the PTAN. We are soliciting comments 

on the proposed changes at 

§ 413.232(h)(2). 

Section 413.232(f) requires ESRD 

facilities to submit LVPA attestations by 

November 1 of each year. However, the 

changes we are proposing to the LVPA 

regulation text would not be finalized in 

enough time to give the ESRD facilities 

the opportunity to learn about the 

policy clarifications and provide an 

attestation to their MAC by November 1, 

2014. For these reasons, we are 

proposing to amend § 413.232(f) to 

extend the deadline for CY 2015 LVPA 

attestations until December 31, 2014. 

This timeframe would allow ESRD 

facilities to reassess their eligibility and 

apply for the LVPA for CY 2015. It 

would also give MACs an opportunity to 

verify any new attestations and reassess 

LVPA eligibility verifications made 

since 2011. We will issue guidance with 

additional detail regarding this policy 

clarification, which will include details 

about the process ESRD facilities should 

follow to seek the LVPA for past years. 

G. Continued Use of ICD–9–CM Codes 

and Corrections to the ICD–10–CM 

Codes Eligible for the Comorbidity 

Payment Adjustment 

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

requires that the ESRD PPS include a 

payment adjustment based upon case 

mix that may take into account, among 

other things, patient comorbidities. 

Comorbidities are specific patient 

conditions that coexist with the 

patient’s principal diagnosis that 

necessitates dialysis. The comorbidity 

payment adjustments recognize the 

increased costs associated with 

comorbidities and provide additional 

payment for certain conditions that 

occur concurrently with the need for 

dialysis. For a detailed discussion of our 

approach to developing the comorbidity 

payment adjustment, see the CY 2011 

ESRD PPS final rule (75 FR 49094 

through 49108). 

In the CY 2011 ESRD PPS final rule, 

we finalized six comorbidity categories 

that are eligible for a comorbidity 

payment adjustment, each with 

associated International Classification of 

Diseases, 9th Revision, Clinical 

Modification (ICD–9–CM) diagnosis 

codes (75 FR 49100). These categories 

include three acute, short-term 

diagnostic categories (pericarditis, 

bacterial pneumonia, and 

gastrointestinal tract bleeding with 

hemorrhage) and three chronic 

diagnostic categories (hereditary 

hemolytic sickle cell anemia, 

myelodysplastic syndrome, and 

monoclonal gammopathy). The 

comorbidity categories eligible for an 

adjustment and their associated ICD–9– 

CM codes were published in the 

Appendix of the CY 2011 ESRD PPS 

final rule as Table E: ICD–9–CM—Codes 

Recognized for the Comorbidity 

Payment Adjustment (75 FR 49211). 

In the CY 2012 ESRD PPS final rule 

(76 FR 70252), we clarified that the 

ICD–9–CM codes eligible for the 

comorbidity payment adjustment are 

subject to the annual ICD–9–CM coding 

updates that occur in the hospital IPPS 

final rule and are effective October 1st 

every year. We explained that any 

updates to the ICD–9–CM codes that 

affect the categories of comorbidities 

and the diagnoses within the 

comorbidity categories that are eligible 

for a comorbidity payment adjustment 

would be communicated to ESRD 

facilities through sub-regulatory 

guidance. 

Together with the rest of the 

healthcare industry, CMS was 

scheduled to implement the 10th 

revision of the ICD coding scheme— 

ICD–10—on October 1, 2014. Hence, in 

the CY 2014 ESRD PPS (78 FR 72175 

through 72179), we finalized a policy 

that ICD–10–CM codes will be eligible 

for a comorbidity payment adjustment 

where they crosswalk from ICD–9–CM 

codes that are eligible for a comorbidity 

payment adjustment with two 

exceptions. 

On April 1, 2014, PAMA was enacted. 

Section 212 of PAMA, titled ‘‘Delay in 

Transition from ICD–9 to ICD–10 Code 

Sets,’’ provides that ‘‘[t]he Secretary of 

Health and Human Services may not, 

prior to October 1, 2015, adopt ICD–10 

code sets as the standard for code sets 

under section 1173(c) of the Social 

Security Act (42 U.S.C. 1320d–2(c)) and 

section 162.1002 of title 45, Code of 

Federal Regulations.’’ On May 1, 2014, 

the Secretary announced that HHS 

expects to issue an interim final rule 

that will require use of ICD–10 

beginning October 1, 2015 and continue 

to require use of ICD–9–CM through 

September 30, 2015. This 

announcement is available on the CMS 

Web site at http://cms.gov/Medicare/

Coding/ICD10/index.html. Before the 

passage of PAMA, our policy required 

facilities to utilize ICD–10–CM codes to 

identify comorbidities eligible for the 

comorbidity payment adjustment 

beginning October 1, 2014. However, in 

light of section 212 of PAMA and the 

Secretary’s announcement of the new 

compliance date for ICD–10, we are 

proposing to require use of ICD–10–CM 

to identify comorbidities beginning on 

October 1, 2015. Until that time, we will 

continue to require use of the ICD–9– 

CM codes to identify comorbidities 

eligible for the comorbidity payment 

adjustment. The ICD–9–CM codes that 

are eligible for the comorbidity payment 

adjustment are listed in the crosswalk 

tables below. 

Because facilities will begin using 

ICD–10 during the calendar year to 

which this rule applies, we are 

correcting several typographical errors 

and omissions in the Tables that 

appeared in the CY 2015 ESRD PPS 

final rule. First, we are correcting one 

ICD–9–CM diagnosis code that was 

incorrectly identified due to a 

typographical error in Table 1—ONE 

ICD–9–CM CODE CROSSWALKS TO 

ONE ICD–10–CM CODE (78 FR 72176). 

In Table 2—ONE ICD–9–CM CODE 

CROSSWALKS TO MULTIPLE ICD–10– 

CM CODES (78 FR 72177), we are 

correcting two ICD–10–CM codes 

because of typographical errors and 

proposing two additional ICD–10–CM 

codes that were inadvertently omitted 

from the crosswalk. Lastly, in Table 3— 

MULTIPLE ICD–9–CM CODES 

CROSSWALK TO ONE ICD–10–CM 

CODE (78 FR 72178), we are proposing 

to include 9 additional ICD–10–CM 

crosswalk codes for eligibility for the 

comorbidity payment adjustment. These 

codes were omitted in error from the CY 

2014 ESRD PPS final rule, and we have 

furnished an updated Table 20 below 

reflecting the additional codes. 

We note that the ICD–10–CM codes 

that facilities will be required to use to 

identify eligible comorbidities when 

ICD–10 becomes the required medical 

data code set on October 1, 2015 are 

those that were finalized in the CY 2014 

ESRD PPS final rule at 78 FR 72175 to 

78 FR 72179 with the corrections and 

proposed additions included below. 

Table 18— ONE ICD–9–CM CODE 

CROSSWALKS TO ONE ICD–10–CM 

CODE (78 FR 72175 through 78 FR 

72176). 

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Table 18 lists all the instances in 

which one ICD–9–CM code crosswalks 

to one ICD–10–CM code. We finalized a 

policy in last year’s rule that all 

identified ICD–10–CM codes would 

receive a comorbidity adjustment with 

the exception of K52.81 Eosinophilic 

gastritis or gastroenteritis. We have 

since discovered that under the section 

titled Myelodysplastic Syndrome, ICD– 

9–CM code 238.7 Essential 

thrombocythemia was inaccurately 

identified. The table below has been 

amended to accurately identify ICD–9– 

CM diagnostic code 238.71 Essential 

thrombocythemia. 

TABLE 18—ONE ICD–9–CM CODE CROSSWALKS TO ONE ICD–10–CM CODE

ICD–9 Descriptor ICD–10 Descriptor 

Gastrointestinal Bleeding 

530.21 Ulcer of esophagus with bleeding ............................................. K22.11 Ulcer of esophagus with bleeding. 

535.71 Eosinophilic gastritis, with hemorrhage ..................................... K52.81 Eosinophilic gastritis or gastroenteritis. 

537.83 Angiodysplasia of stomach and duodenum with hemorrhage .. K31.811 Angiodysplasia of stomach and duodenum with bleeding. 

569.85 Angiodysplasia of intestine with hemorrhage ............................ K55.21 Angiodysplasia of colon with hemorrhage. 

Bacterial Pneumonia 

003.22 Salmonella pneumonia .............................................................. A02.22 Salmonella pneumonia. 

482.0 Pneumonia due to Klebsiella pneumonia .................................... J15.0 Pneumonia due to Klebsiella pneumoniae. 

482.1 Pneumonia due to Pseudomonas ............................................... J15.1 Pneumonia due to Pseudomonas. 

482.2 Pneumonia due to Hemophilus influenzae [H. influenzae] ......... J14 Pneumonia due to Hemophilus influenzae. 

482.32 Pneumonia due to Streptococcus, group B ............................... J15.3 Pneumonia due to streptococcus, group B. 

482.40 Pneumonia due to Staphylococcus, unspecified ....................... J15.20 Pneumonia due to staphylococcus, unspecified. 

482.41 Methicillin susceptible pneumonia due to Staphylococcus 

aureus.

J15.211 Pneumonia due to Methicillin susceptible Staphylococcus 

aureus. 

482.42 Methicillin resistant pneumonia due to Staphylococcus aureus J15.212 Pneumonia due to Methicillin resistant Staphylococcus

aureus. 

482.49 Other Staphylococcus pneumonia ............................................. J15.29 Pneumonia due to other staphylococcus. 

482.82 Pneumonia due to escherichia coli [E. coli] .............................. J15.5 Pneumonia due to Escherichia coli. 

482.83 Pneumonia due to other gram-negative bacteria ...................... J15.6 Pneumonia due to other aerobic Gram-negative bacteria. 

482.84 Pneumonia due to Legionnaires’ disease ................................. A48.1 Legionnaires’ disease. 

507.0 Pneumonitis due to inhalation of food or vomitus ....................... J69.0 Pneumonitis due to inhalation of food and vomit. 

507.8 Pneumonitis due to other solids and liquids ................................ J69.8 Pneumonitis due to inhalation of other solids and liquids. 

510.0 Empyema with fistula ................................................................... J86.0 Pyothorax with fistula. 

510.9 Empyema without mention of fistula ............................................ J86.9 Pyothorax without fistula. 

Pericarditis 

420.91 Acute idiopathic pericarditis ....................................................... I30.0 Acute nonspecific idiopathic pericarditis. 

Hereditary Hemolytic and Sickle Cell Anemia 

282.0 Hereditary spherocytosis ............................................................. D58.0 Hereditary spherocytosis. 

282.1 Hereditary elliptocytosis ............................................................... D58.1 Hereditary elliptocytosis. 

282.41 Sickle-cell thalassemia without crisis ......................................... D57.40 Sickle-cell thalassemia without crisis. 

282.43 Alpha thalassemia ...................................................................... D56.0 Alpha thalassemia. 

282.44 Beta thalassemia ....................................................................... D56.1 Beta thalassemia. 

282.45 Delta-beta thalassemia .............................................................. D56.2 Delta-beta thalassemia. 

282.46 Thalassemia minor ..................................................................... D56.3 Thalassemia minor. 

282.47 Hemoglobin E-beta thalassemia ................................................ D56.5 Hemoglobin E-beta thalassemia. 

282.49 Other thalassemia ...................................................................... D56.8 Other thalassemias. 

282.61 Hb-SS disease without crisis ..................................................... D57.1 Sickle-cell disease without crisis.

282.63 Sickle-cell/Hb-C disease without crisis ...................................... D57.20 Sickle-cell/Hb-C disease without crisis. 

282.68 Other sickle-cell disease without crisis ...................................... D57.80 Other sickle-cell disorders without crisis. 

Myelodysplastic Syndrome 

238.71 Essential thrombocythemia ........................................................ D47.3 Essential (hemorrhagic) thrombocythemia. 

238.73 High grade myelodysplastic syndrome lesions ......................... D46.22 Refractory anemia with excess of blasts 2. 

238.74 Myelodysplastic syndrome with 5q deletion .............................. D46.C Myelodysplastic syndrome with isolated del(5q) chromosomal 

abnormality. 

238.76 Myelofibrosis with myeloid metaplasia ...................................... D47.1 Chronic myeloproliferative disease. 

Table 19—ONE ICD–9–CM CODE 

CROSSWALKS TO MULIPLE ICD–10– 

CM CODES (78 FR 72177 through 78 FR 

72178). 

Table 19 lists all of the instances in 

which one ICD–9–CM code crosswalks 

to multiple ICD–10–CM codes. We 

finalized a policy in last year’s rule that 

all identified ICD–10–CM codes would 

receive a comorbidity adjustment with 

the exception of D89.2 

Hypergammaglobulinemia, unspecified. 

Under the section titled Gastrointestinal 

Bleeding, ICD–9–CM code 562 

Diverticulosis of small intestine with 

hemorrhage was inaccurately identified, 

as the complete code number is 562.02. 

The table below has been amended to 

accurately identify ICD–9–CM 

diagnostic code 562.02 Diverticulosis of 

small intestine with hemorrhage. 

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Also under the section titled 

Gastrointestinal Bleeding, ICD–9–CM 

diagnostic code 562.13 Diverticulitis of 

colon with hemorrhage did not include 

a complete crosswalk to ICD–10–CM 

diagnostic codes. Therefore, we propose 

to include ICD–10–CM diagnostic codes 

K57.81 Diverticulitis of intestine, part 

unspecified, with perforation and 

abscess with bleeding and K57.93 

Diverticulitis of intestine, part 

unspecified, without perforation or 

abscess with bleeding, in addition to the 

ICD–10–CM diagnostic codes K57.21, 

K57.33, K57.41, and K57.53, as eligible 

for the comorbidity payment adjustment 

when the use of ICD–10–CM is required, 

on October 1, 2015. 

Under the section titled Pericarditis, 

ICD–10–CM code 130.1 Infective 

pericarditis was inaccurately identified. 

The table below has been amended to 

accurately identify the ICD–10–CM 

diagnostic code I30.1 Infective 

pericarditis as eligible for a comorbidity 

payment adjustment when the use of 

ICD–10–CM is required, on October 1, 

2015. 

TABLE 19—ONE ICD–9–CM CODE CROSSWALKS TO MULTIPLE ICD–10–CM CODES

ICD–9 Descriptor ICD–10 Descriptor 

Gastrointestinal Bleeding 

562.02 Diverticulosis of small intestine with hemorrhage ..................... K57.11 Diverticulosis of small intestine without perforation or abscess 

with bleeding. 

K57.51 Diverticulosis of both small and large intestine without perforation or abscess with bleeding. 

562.03 Diverticulitis of small intestine with hemorrhage ....................... K57.01 Diverticulitis of small intestine with perforation and abscess 

with bleeding. 

K57.13 Diverticulitis of small intestine without perforation or abscess 

with bleeding. 

K57.41 Diverticulitis of both small and large intestine with perforation 

and abscess with bleeding. 

K57.53 Diverticulitis of both small and large intestine without perforation or abscess with bleeding. 

562.12 Diverticulosis of colon with hemorrhage .................................... K57.31 Diverticulosis of large intestine without perforation or abscess 

with bleeding. 

K57.91 Diverticulosis of intestine, part unspecified, without perforation 

or abscess with bleeding. 

K57.51 Diverticulosis of both small and large intestine without perforation or abscess with bleeding. 

562.13 Diverticulitis of colon with hemorrhage ...................................... K57.21 Diverticulitis of large intestine with perforation and abscess 

with bleeding. 

K57.33 Diverticulitis of large intestine without perforation or abscess 

with bleeding. 

K57.41 Diverticulitis of both small and large intestine with perforation 

and abscess with bleeding. 

K57.53 Diverticulitis of both small and large intestine without perforation or abscess with bleeding. 

K57.81 Diverticulitis of intestine, part unspecified, with perforation and 

abscess with bleeding. 

K57.93 Diverticulitis of intestine, part unspecified, without perforation or abscess with bleeding. 

Bacterial Pneumonia 

513.0 Abscess of lung ........................................................................... J85.0 Gangrene and necrosis of lung. 

J85.1 Abscess of lung with pneumonia. 

J85.2 Abscess of lung without pneumonia. 

Pericarditis 

420.0 Acute pericarditis in diseases classified elsewhere .................... A18.84 Tuberculosis of heart. 

I32 Pericarditis in diseases classified elsewhere. 

M32.12 Pericarditis in systemic lupus erythematosus. 

420.90 Acute pericarditis, unspecified ................................................... I30.1 Infective pericarditis. 

I30.9 Acute pericarditis, unspecified. 

420.99 Other acute pericarditis. ............................................................. I30.8 Other forms of acute pericarditis. 

I30.9 Acute pericarditis, unspecified. 

Hereditary Hemolytic and sickle cell anemia 

282.2 Anemias due to disorders of glutathione metabolism ................. D55.0 Anemia due to glucose-6-phosphate dehydrogenase [G6PD] 

deficiency. 

D55.1 Anemia due to other disorders of glutathione metabolism. 

282.3 Other hemolytic anemias due to enzyme deficiency ................... D55.2 Anemia due to disorders of glycolytic enzymes. 

D55.3 Anemia due to disorders of nucleotide metabolism. 

D55.8 Other anemias due to enzyme disorders. 

D55.9 Anemia due to enzyme disorder, unspecified. 

282.42 Sickle-cell thalassemia with crisis .............................................. D57.411 Sickle-cell thalassemia with acute chest syndrome. 

D57.412 Sickle-cell thalassemia with splenic sequestration. 

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TABLE 19—ONE ICD–9–CM CODE CROSSWALKS TO MULTIPLE ICD–10–CM CODES—Continued 

ICD–9 Descriptor ICD–10 Descriptor 

D57.419 Sickle-cell thalassemia with crisis, unspecified. 

282.62 Hb-SS disease with crisis .......................................................... D57.00 Hb-SS disease with crisis, unspecified. 

D57.01 Hb-SS disease with acute chest syndrome. 

D57.02 Hb-SS disease with splenic sequestration. 

282.64 Sickle-cell/Hb-C disease with crisis ........................................... D57.211 Sickle-cell/Hb-C disease with acute chest syndrome. 

D57.212 Sickle-cell/Hb-C disease with splenic sequestration. 

D57.219 Sickle-cell/Hb-C disease with crisis, unspecified. 

282.69 Other sickle-cell disease with crisis ........................................... D57.811 Other sickle-cell disorders with acute chest syndrome. 

D57.812 Other sickle-cell disorders with splenic sequestration. 

D57.819 Other sickle-cell disorders with crisis, unspecified. 

Monoclonal Gammopathy 

273.1 Monoclonal paraproteinemia ........................................................ D47.2 Monoclonal gammopathy. 

D89.2 Hypergammaglobulinemia, unspecified. 

Myelodysplastic Syndrome 

238.72 Low grade myelodysplastic syndrome lesions .......................... D46.0 Refractory anemia without ring sideroblasts, so stated. 

D46.1 Refractory anemia with ring sideroblasts. 

D46.20 Refractory anemia with excess of blasts, unspecified. 

D46.21 Refractory anemia with excess of blasts 1. 

D46.4 Refractory anemia, unspecified. 

D46.A Refractory cytopenia with multilineage dysplasia. 

D46.B Refractory cytopenia with multilineage dysplasia and ring 

sideroblasts. 

238.75 Myelodysplastic syndrome, unspecified .................................... D46.9 Myelodysplastic syndrome, unspecified. 

D46.Z Other myelodysplastic syndromes. 

Table 20—MULTIPLE ICD–9–CM 

CODES CROSSWALK TO ONE ICD–10– 

CM CODE (78 FR 72178). 

Table 20 displays the crosswalk 

where multiple ICD–9–CM codes 

crosswalk to one ICD–10–CM code. We 

finalized a policy in last year’s rule that 

all of the ICD–10–CM codes listed in 

Table 3 would be eligible for the 

comorbidity payment adjustment. 

Under the section titled Gastrointestinal 

Bleeding, nine ICD–10–CM codes (K25.0 

Acute gastric ulcer with hemorrhage, 

K25.2 Acute gastric ulcer with both 

hemorrhage and perforation, K25.4 

Chronic or unspecified gastric ulcer 

with hemorrhage, K25.6 Chronic or 

unspecified gastric ulcer with both 

hemorrhage and perforation, K26.0 

Acute duodenal ulcer with hemorrhage, 

K26.2 Acute duodenal ulcer with both 

hemorrhage and perforation, K26.4 

Chronic or unspecified duodenal ulcer 

with hemorrhage, K26.6 Chronic or 

unspecified duodenal ulcer with both 

hemorrhage and perforation, and K27.0 

Acute peptic ulcer, site unspecified, 

with hemorrhage) and the 

corresponding ICD–9–CM codes were 

inadvertently omitted from the 

crosswalk. We propose that these ICD– 

10–CM diagnostic codes—K25.0, K25.2 

K25.4, K25.6, K26.0, K26.2, K26.4, 

K26.6, K27.0—will be eligible for the 

comorbidity payment adjustment 

beginning October 1, 2015. We also 

propose that the corresponding ICD–9– 

CM codes will be eligible for the 

comorbidity adjustment through 

September 30, 2015. 

TABLE 20—MULTIPLE ICD–9–CM CODES CROSSWALK TO ONE ICD–10–CM CODE

Gastrointestinal Bleeding 

531.00 Acute gastric ulcer with hemorrhage, without mention of obstruction.K25.0 Acute gastric ulcer with hemorrhage. 

531.01 Acute gastric ulcer with hemorrhage, with obstruction.

531.20 Acute gastric ulcer with hemorrhage and perforation, without 

mention of obstruction.

K25.2 Acute gastric ulcer with both hemorrhage and perforation. 

531.21 Acute gastric ulcer with hemorrhage and perforation, with obstruction.

531.40 Chronic or unspecified gastric ulcer with hemorrhage, without 

mention of obstruction.

K25.4 Chronic or unspecified gastric ulcer with hemorrhage. 

531.41 Chronic or unspecified gastric ulcer with hemorrhage, with obstruction.

531.60 Chronic or unspecified gastric ulcer with hemorrhage and perforation, without mention of obstruction.K25.6 Chronic or unspecified gastric ulcer with both hemorrhage and 

perforation. 

531.61 Chronic or unspecified gastric ulcer with hemorrhage and perforation, with obstruction.

532.00 Acute duodenal ulcer with hemorrhage, without mention of obstruction.K26.0 Acute duodenal ulcer with hemorrhage. 

532.01 Acute duodenal ulcer with hemorrhage, with obstruction.

532.20 Acute duodenal ulcer with hemorrhage and perforation, without mention of obstruction.K26.2 Acute duodenal ulcer with both hemorrhage and perforation. 

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TABLE 20—MULTIPLE ICD–9–CM CODES CROSSWALK TO ONE ICD–10–CM CODE—Continued 

532.21 Acute duodenal ulcer with hemorrhage and perforation, with 

obstruction.

532.40 Chronic or unspecified duodenal ulcer with hemorrhage, without mention of obstruction.K26.4 Chronic or unspecified duodenal ulcer with hemorrhage. 

532.41 Chronic or unspecified duodenal ulcer with hemorrhage, with 

obstruction.

532.60 Chronic or unspecified duodenal ulcer with hemorrhage and 

perforation, without mention of obstruction.

K26.6 Chronic or unspecified duodenal ulcer with both hemorrhage 

and perforation. 

532.61 Chronic or unspecified duodenal ulcer with hemorrhage and 

perforation, with obstruction.

533.00 Acute peptic ulcer of unspecified site with hemorrhage, without mention of obstruction.K27.0 Acute peptic ulcer, site unspecified, with hemorrhage. 

533.01 Acute peptic ulcer of unspecified site with hemorrhage, with 

obstruction.

533.20 Acute peptic ulcer of unspecified site with hemorrhage and 

perforation, without mention of obstruction.

K27.2 Acute peptic ulcer, site unspecified, with both hemorrhage and 

perforation. 

533.21 Acute peptic ulcer of unspecified site with hemorrhage and 

perforation, with obstruction.

533.40 Chronic or unspecified peptic ulcer of unspecified site with 

hemorrhage, without mention of obstruction.

K27.4 Chronic or unspecified peptic ulcer, site unspecified, with hemorrhage. 

533.41 Chronic or unspecified peptic ulcer of unspecified site with 

hemorrhage, with obstruction.

533.60 Chronic or unspecified peptic ulcer of unspecified site with 

hemorrhage and perforation, without mention of obstruction.

K27.6 Chronic or unspecified peptic ulcer, site unspecified, with both 

hemorrhage and perforation. 

533.61 Chronic or unspecified peptic ulcer of unspecified site with 

hemorrhage and perforation, with obstruction.

534.00 Acute gastrojejunal ulcer with hemorrhage, without mention of 

obstruction.

K28.0 Acute gastrojejunal ulcer with hemorrhage. 

534.01 Acute gastrojejunal ulcer, with hemorrhage, with obstruction.

534.20 Acute gastrojejunal ulcer with hemorrhage and perforation, 

without mention of obstruction.

K28.2 Acute gastrojejunal ulcer with both hemorrhage and perforation. 

534.21 Acute gastrojejunal ulcer with hemorrhage and perforation, 

with obstruction.

534.40 Chronic or unspecified gastrojejunal ulcer with hemorrhage, 

without mention of obstruction.

K28.4 Chronic or unspecified gastrojejunal ulcer with hemorrhage. 

534.41 Chronic or unspecified gastrojejunal ulcer, with hemorrhage, 

with obstruction.

534.60 Chronic or unspecified gastrojejunal ulcer with hemorrhage 

and perforation, without mention of obstruction.

K28.6 Chronic or unspecified gastrojejunal ulcer with both hemorrhage and perforation. 

534.61 Chronic or unspecified gastrojejunal ulcer with hemorrhage 

and perforation, with obstruction.

Bacterial Pneumonia 

482.30 Pneumonia due to Streptococcus, unspecified ......................... J15.4 Pneumonia due to other streptococci. 

482.31 Pneumonia due to Streptococcus, group A.

482.39 Pneumonia due to other Streptococcus.

482.81 Pneumonia due to anaerobes ................................................... J15.8 Pneumonia due to other specified bacteria. 

482.89 Pneumonia due to other specified bacteria.

III. End-Stage Renal Disease (ESRD) 

Quality Incentive Program (QIP) 

A. Background 

For more than 30 years, monitoring 

the quality of care provided by dialysis 

facilities to patients with end-stage renal 

disease (ESRD) has been an important 

component of the Medicare ESRD 

payment system. The ESRD Quality 

Incentive Program (QIP) is the most 

recent step in fostering improved 

patient outcomes by establishing 

incentives for dialysis facilities to meet 

or exceed performance standards 

established by CMS. The ESRD QIP is 

authorized by section 1881(h) of the 

Social Security Act (the Act), which was 

added by section 153(c) of the Medicare 

Improvements for Patients and 

Providers Act (MIPPA). 

Specifically, section 1881(h) requires 

the Secretary to establish an ESRD QIP 

by (i) selecting measures; (ii) 

establishing the performance standards 

that apply to the individual measures; 

(iii) specifying a performance period 

with respect to a year; (iv) developing a 

methodology for assessing the total 

performance of each facility based on 

the performance standards with respect 

to the measures for a performance 

period; and (v) applying an appropriate 

payment reduction to facilities that do 

not meet or exceed the established Total 

Performance Score (TPS). This proposed 

rule discusses each of these elements 

and our proposals for their application 

to the ESRD QIP, including for PYs 2017 

and 2018. 

B. Considerations in Updating and 

Expanding Quality Measures Under the 

ESRD QIP 

Throughout the past decade, Medicare 

has been transitioning from a program 

that pays for healthcare based on 

particular services furnished to a 

beneficiary to a program that bases 

payments to providers and suppliers on 

the quality of services they furnish. By 

paying for the quality of care rather than 

simply the quantity of care, and by 

focusing on better care and lower costs 

through improvement, prevention and 

population health, expanded healthcare 

coverage, and enterprise excellence, we 

are strengthening the healthcare system 

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2 2013 Annual Progress Report to Congress: 

National Strategy for Quality Improvement in 

Health Care, http://www.ahrq.gov/

workingforquality/nqs/nqs2013annlrpt.htm. 

while also advancing the National 

Strategy for Quality Improvement in 

Health Care (that is, the National 

Quality Strategy (NQS)). We are also 

working to update a set of domains and 

specific quality measures for our VBP 

programs, and to link the aims of the 

NQS with our payment policies on a 

national scale. We are working in 

partnership with beneficiaries, 

providers, advocacy groups, the 

National Quality Forum (NQF), the 

Measures Application Partnership, 

operating divisions within the 

Department of Health and Human 

Services (HHS), and other stakeholders 

to develop new measures where gaps 

exist, refine measures where necessary, 

and remove measures when appropriate. 

We are also collaborating with 

stakeholders to ensure that the ESRD 

QIP serves the needs of our beneficiaries 

and also advances the goals of the NQS 

to improve the overall quality of care, 

improve the health of the U.S. 

population, and reduce the cost of 

quality healthcare.2

We believe that the development of an 

ESRD QIP that is successful in 

supporting the delivery of high-quality 

healthcare services in dialysis facilities 

is paramount. We seek to adopt 

measures for the ESRD QIP that promote 

better, safer, and more coordinated care. 

Our measure development and selection 

activities for the ESRD QIP take into 

account national priorities such as those 

established by the HHS Strategic Plan 

(http://www.hhs.gov/strategic-plan/

priorities.html), the NQS (http://

www.ahrq.gov/workingforquality/nqs/

nqs2013annlrpt.htm), and the HHS 

National Action Plan to Prevent 

Healthcare Associated Infections (HAIs) 

(http://www.hhs.gov/ash/initiatives/hai/

esrd.html). To the extent feasible and 

practicable, we have sought to adopt 

measures that have been endorsed by a 

national consensus organization; 

recommended by multi-stakeholder 

organizations; and developed with the 

input of providers, beneficiaries, health 

advocacy organizations, and other 

stakeholders. 

C. Web Sites for Measure Specifications 

In an effort to ensure that facilities 

and the general public are able to 

continue accessing the specifications for 

the measures that are being proposed for 

and have been adopted in the ESRD 

QIP, we are now posting these measure 

specifications on a CMS Web site, 

instead of posting them on 

www.dialysisreports.org as we have in 

the past. Measure specifications from 

previous years, as well as those 

proposed for the PY 2017 and PY 2018 

programs, can be found at: http://

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

TechnicalSpecifications.html. 

D. Updating the NHSN Bloodstream 

Infection in Hemodialysis Outpatients 

Clinical Measure for the PY 2016 ESRD 

QIP and Future Payment Years 

The NHSN Bloodstream Infection in 

Hemodialysis Outpatients clinical 

measure (that is, NHSN Bloodstream 

Infection clinical measure) that we 

adopted beginning with the PY 2016 

ESRD QIP is based on NQF #1460. At 

the time we adopted it, the measure 

included a risk adjustment for patients’ 

vascular access type but did not include 

any reliability adjustments to account 

for differences in the amount of 

exposure or opportunity for healthcare 

associated infections (HAIs) among 

patients. On April 4, 2014, in response 

to a measure update proposal submitted 

by CDC, NQF endorsed a reliability 

adjustment for volume of exposure and 

unmeasured variation across facilities to 

NQF #1460. This reliability adjustment 

is called the Reliability-Adjusted 

Standardized Infection Ratio or 

Adjusted Ranking Metric (ARM). As a 

result of this change to the NQFendorsed measure specifications, a 

facility’s performance on NQF #1460 

will be adjusted towards the mean (that 

is, facilities with low exposure volume 

will be adjusted more than facilities 

with high exposure volume, and the 

performance rate will be adjusted up or 

down depending on the facility estimate 

and mean) to account for the differences 

in the reliability of the infection 

estimates based on the number of 

patient-months at a facility and any 

unmeasured variation across facilities. 

Because the adjustment is based on the 

volume of exposure, facility scores will 

be adjusted more if there are fewer 

patient-months in the denominator, and 

facility scores will be adjusted less if 

there are many patient-months in the 

denominator. 

We propose to adopt the same 

reliability adjustment for purposes of 

calculating facility performance on the 

NHSN Bloodstream Infection clinical 

measure, beginning with the PY 2016 

ESRD QIP. We believe that the inclusion 

of this reliability adjustment, in 

addition to the risk factor adjustment, 

will enable us to better differentiate 

among facility performance on this 

measure, because it accounts not only 

for the variation in patient risk by 

vascular access type, but also for 

variation in the number of patients a 

facility treats in a given month. The 

ARM will be incorporated into the 

existing risk-adjustment methodology, 

which will also continue to include a 

risk adjustment for patient vascular 

access type. Further information about 

the reliability adjustment, and the 

NHSN Bloodstream Infection measure 

specifications can be found at http://

www.cdc.gov/nhsn/PDFs/dialysis/

NHSN–ARM.pdf, http://www.cdc.gov/

nhsn/dialysis/dialysis-event.html, and 

http://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/ESRDQIP/061_

TechnicalSpecifications.html. 

E. Oral-Only Drugs Measures in the 

ESRD QIP 

Section 217(d) of the Protecting 

Access to Medicare Act of 2014 (Pub. L. 

113–93), enacted on April 1, 2014, 

amends section 1881(h)(2) of the Act to 

require the Secretary, for PY 2016 and 

subsequent years, to adopt measures 

(outcome-based, to the extent feasible) 

in the ESRD QIP that are specific to the 

conditions treated with oral-only drugs. 

We believe that the Hypercalcemia 

clinical measure adopted beginning 

with the PY 2016 program (78 FR 72200 

through 72203) meets this new statutory 

requirement because hypercalcemia is a 

condition that is treated with oral-only 

drugs. The Hypercalcemia clinical 

measure is not an outcome-based 

measure, and we have considered the 

possibility of adopting outcomes-based 

measures that pertain to conditions 

treated with oral-only drugs. However, 

we have determined that it is not 

feasible to propose to adopt an outcomebased measure on this topic at this time 

because we are not aware of any 

outcome measures developed on this 

topic. 

F. Proposed Requirements for the PY 

2017 ESRD QIP 

1. Proposed Revision to the Expanded 

ICH CAHPS Reporting Measure 

For the ICH CAHPS reporting 

measure, we are proposing one change 

to the reporting requirements finalized 

in the CY 2014 ESRD PPS Final Rule for 

PY 2017. In the CY 2014 ESRD PPS final 

rule, we finalized that facilities would 

be eligible to receive a score on the 

measure if they treated 30 or more 

survey-eligible patients during the 

performance period (78 FR 72220 

through 72221). Subsequently, we were 

made aware that facilities may not know 

whether they will have enough surveyeligible patients during the performance 

period to be eligible for the ICH CAHPS 

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measure when they are making 

decisions about whether or not they will 

contract with a vendor to administer the 

survey. We agree that it would be 

preferable if facilities knew at the 

beginning of the performance period if 

they will be eligible to receive a score 

on the ICH CAHPS measure, because 

this would allow facilities to make 

informed decisions about whether they 

should contract with a vendor to 

administer the survey. For this reason, 

we propose that beginning with the PY 

2017 program, facilities will be eligible 

to receive a score on the ICH CAHPS 

measure if they treat 30 or more surveyeligible patients during the ‘‘eligibility 

period,’’ which we define as the CY 

before the performance period. 

However, even if a facility is eligible to 

receive a score on the measure because 

it has treated at least 30 survey-eligible 

patients according to the ICH CAHPS 

Survey measure specifications during 

the calendar year prior to the 

performance period, we are proposing 

that the facility will still not receive a 

score for performance during the 

performance period if it cannot collect 

30 survey completes during the 

performance period. We believe that 

facilities should be able to determine 

quickly the number of survey-eligible 

patients that they treated during the 

eligibility period, and that reaching this 

determination should not impact 

facilities’ ability to contract with a 

vender in time to meet the semiannual 

survey administration requirements. 

Technical specifications for the ICH 

CAHPS reporting measure can be found 

at: http://www.cms.gov/Medicare/

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

TechnicalSpecifications.html. 

We seek comments on this proposal. 

2. Proposed Measures for the PY 2017 

ESRD QIP 

a. PY 2016 Measures Continuing in PY 

2017 and Future Payment Years 

We previously finalized 11 measures 

in the CY 2014 ESRD PPS Final Rule for 

the PY 2016 ESRD QIP, and these 

measures are summarized in Table 21 

below. In accordance with our policy to 

continue using measures unless we 

propose to remove or replace them (77 

FR 67477), we will continue to use 10 

of these 11 measures in the PY 2017 

ESRD QIP. As we discuss in more detail 

below, we are proposing to remove one 

measure, Hemoglobin Greater than 12 g/ 

dL, beginning with the PY 2017 measure 

set (see Table 22 below). 

TABLE 21—PY 2016 ESRD QIP MEASURES BEING CONTINUED IN PY 2017 

NQF # Measure title and description 

0249 ..................... Hemodialysis Adequacy: Minimum delivered hemodialysis dose. 

Percent of hemodialysis patient-months with spKt/V greater than or equal to 1.2. 

0318 ..................... Peritoneal Dialysis Adequacy: Delivered dose above minimum. 

Percent of peritoneal dialysis patient-months with spKt/V greater than or equal to 1.7 (dialytic + residual) during the four 

month study period. 

1423 ..................... Pediatric Hemodialysis Adequacy: Minimum spKt/V. 

Percent of pediatric in-center hemodialysis patient-months with spKt/V greater than or equal to 1.2. 

0257 ..................... Vascular Access Type: AV Fistula. 

Percentage of patient-months on hemodialysis during the last hemodialysis treatment of the month using an autogenous AV 

fistula with two needles. 

0256 ..................... Vascular Access Type: Catheter > 90 days. 

Percentage of patient-months for patients on hemodialysis during the last hemodialysis treatment of month with a catheter 

continuously for 90 days or longer prior to the last hemodialysis session. 

N/A1 ..................... National Healthcare Safety Network (NHSN) Bloodstream Infection in Hemodialysis Patients. 

Number of hemodialysis outpatients with positive blood cultures per 100 hemodialysis patient-months.2

1454 ..................... Hypercalcemia. 

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

N/A3 ..................... In-Center Hemodialysis Consumer Assessment of Healthcare Providers and Systems (ICH CAHPS) Survey Administration. 

Facility administers, using a third-party CMS-approved vendor, the ICH CAHPS survey in accordance with survey specifications and submits survey results to CMS. 

N/A4 ..................... Mineral Metabolism Reporting. 

Number of months for which facility reports serum phosphorus for each Medicare patient. 

N/A ....................... Anemia Management Reporting. 

Number of months for which facility reports ESA dosage (as applicable) and hemoglobin/hematocrit for each Medicare patient. 

1We note that this measure is based on a current NQF-endorsed bloodstream infection measure (NQF#1460). 

2We are proposing a new method of calculating performance on this measure using the ARM methodology. If we decide to finalize this proposal based on public comments, the NHSN Bloodstream Infection clinical measure description will be updated to read: ‘‘ARM of Bloodstream Infection will be calculated among inpatients receiving hemodialysis at outpatient hemodialysis centers.’’ 3We note that a related measure utilizing the results of this survey has been NQF-endorsed (#0258). We are proposing to adopt NQF #0258 

in the PY 2018 program. 4We note that this measure is based upon a current NQF-endorsed serum phosphorus measure (NQF #0255). 

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TABLE 22—MEASURE PROPOSED FOR

REMOVAL BEGINNING WITH THE PY 

2017 ESRD QIP 

NQF# Measure title 

N/A ................. Anemia Management: Hgb 

>12. 

Percentage of Medicare patients with a mean hemoglobin value greater than 

12 g/dL. 

b. Proposal To Determine When a 

Measure is ‘‘Topped-Out’’ in the ESRD 

QIP, and Proposal To Remove a ToppedOut Measure From the ESRD QIP, 

Beginning With PY 2017 

In the CY 2013 ESRD PPS final rule 

(77 FR 67475), we finalized a list of 

seven criteria we would consider when 

making determinations about whether to 

remove or replace a measure: ‘‘(1) 

Measure performance among the 

majority of ESRD facilities is so high 

and unvarying that meaningful 

distinctions in improvements or 

performance can no longer be made; (2) 

performance or improvement on a 

measure does not result in better or the 

intended patient outcomes; (3) a 

measure no longer aligns with current 

clinical guidelines or practice; (4) a 

more broadly applicable (across settings, 

populations, or conditions) measure for 

the topic becomes available; (5) a 

measure that is more proximal in time 

to desired patient outcomes for the 

particular topic becomes available; (6) a 

measure that is more strongly associated 

with desired patient outcomes for the 

particular topic becomes available; or 

(7) collection or public reporting of a 

measure leads to negative unintended 

consequences.’’ 

In the CY 2014 ESRD PPS final rule 

(78 FR 72192), we stated that we were 

in the process of evaluating all of the 

ESRD QIP measures against the criteria. 

Subsequent to the publication of the CY 

2014 ESRD PPS final rule, we 

completed our evaluation and 

determined that none of the measures 

finalized in the PY 2016 ESRD QIP met 

criteria 2 through 7, as listed above. 

With respect to the first criterion, we are 

proposing to more specifically define 

when performance on a clinical measure 

is so high and unvarying that the 

measure no longer reflects meaningful 

distinctions in improvements or 

performance. The statistical definitions 

that we are proposing to adopt will align 

our methodology with that used by the 

Hospital VBP program to determine 

when a measure is topped out (76 FR 

26496 through 26497). Under this 

methodology, a clinical measure is 

considered to be topped out if national 

measure data show (1) statistically 

indistinguishable performance levels at 

the 75th and 90th percentiles; and (2) a 

truncated coefficient of variation (CV) of 

less than or equal to 0.1. 

To determine whether a clinical 

measure is topped out, we initially 

focused on the top distribution of 

facility performance on each measure 

and noted if their 75th and 90th 

percentiles were statistically 

indistinguishable. Then, to ensure that 

we properly accounted for the entire 

distribution of scores, we analyzed the 

truncated coefficient of variation (CV) 

for each of the clinical measures. 

The CV is a common statistic that 

expresses the standard deviation as a 

percentage of the sample mean in a way 

that is independent of the units of 

observation. Applied to this analysis, a 

large CV would indicate a broad 

distribution of individual facility scores, 

with large and presumably meaningful 

differences between hospitals in relative 

performance. A small CV would 

indicate that the distribution of 

individual facility scores is clustered 

tightly around the mean value, 

suggesting that it is not useful to draw 

distinctions between individual facility 

performance scores. We used a modified 

version of the CV, namely a truncated 

CV, for each clinical measure, in which 

the 5 percent of facilities with the 

lowest scores, and the 5 percent of 

facilities with the highest scores were 

first truncated (set aside) before 

calculating the CV. This was done to 

avoid undue effects of the highest and 

lowest outlier facilities; if included, 

they would tend to greatly widen the 

dispersion of the distribution and make 

the clinical measure appear to be more 

reliable or discerning. For example, a 

clinical measure for which most facility 

scores are tightly clustered around the 

mean value (a small CV) might actually 

reflect a more robust dispersion if there 

were also a number of facilities with 

extreme outlier values, which would 

greatly increase the perceived variance 

in the measure. Accordingly, the 

truncated CV of less than or equal to 

0.10 was added as a criterion for 

determining whether a clinical measure 

is topped out. 

We seek comments on this proposal. 

We evaluated each of the clinical 

measures finalized in the PY 2016 ESRD 

QIP against these proposed statistical 

conditions. The full analysis is available 

at: http://www.cms.gov/Medicare/

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

Specifications.html. The results of that 

analysis appear below in Table 23. 

TABLE 23—PY 2016 CLINICAL MEASURES USING CROWNWEB AND MEDICARE CLAIMS DATA FROM JANUARY 2013– 

DECEMBER 2013 

Measure N 75th 

percentile 

90th 

percentile Std. error Statistically indistin-guishable 

Truncated 

CV TCV <0.10 

Adult HD Kt/V .............................. 5665 96.1 97.4 0.13 No ........................ 0.04 Yes. 

Adult PD Kt/V ............................... 1176 92.9 94.8 0.55 No ........................ 0.15 No. 

Pediatric HD Kt/V ......................... 10 94.5 97.1 2.71 Yes ....................... 0.08 Yes. 

Hgb > 12 ...................................... 5521 0.0 0.0 0.02 Yes ....................... < 0.01 Yes. 

Fistula Use ................................... 5561 72.3 77.0 0.16 No ........................ 0.14 No. 

Catheter Use ................................ 5586 5.9 2.8 0.10 No ........................ ≤ 0.01 Yes. 

Hypercalcemia ............................. 5685 0.3 0.0 0.04 No ........................ ≤ 0.01 Yes. 

As the information presented in Table 

23 suggests, the Hemoglobin Greater 

than 12 g/dL measure meets the 

proposed criteria for determining when 

a clinical measure is topped-out in the 

ESRD QIP. Accordingly, we propose to 

remove the Hemoglobin Greater than 12 

g/dL measure from the ESRD QIP, 

beginning with the PY 2017 program. 

We recognize that the Pediatric 

Hemodialysis Adequacy measure also 

meets the conditions for being a toppedout clinical measure in the ESRD QIP. 

However, we are not proposing to 

remove the Pediatric Hemodialysis 

Adequacy measure from the ESRD QIP 

because we have determined that 

removing the measure will not be useful 

for dialysis facilities. There are 

currently very few measures available 

that focus on the care furnished to 

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3United States Renal Data System, USRDS 2013 

Annual Data Report: Atlas of Chronic Kidney 

Disease and End-Stage Renal Disease in the United 

States, National Institutes of Health, National 

Institute of Diabetes and Digestive and Kidney 

Diseases, Bethesda, MD, 2013. 

4 van Walraven C, Bennett C, Jennings A, Austin 

PC, Forster AJ. Proportion of hospital readmissions 

deemed avoidable: a systematic review. CMAJ. 

2011;183(7):E391–E402. 

pediatric patients with ESRD, and we 

are reticent to remove a measure that 

addresses the unique needs of this 

population. In addition, although only 

10 facilities were eligible to receive a 

score on the Pediatric Hemodialysis 

Adequacy measure (based on CY 2013 

data), we believe that the publicly 

reported performance of these facilities 

can influence the standard of care 

furnished by other facilities that treat 

pediatric patients, even if a facility does 

not treat a sufficient number of pediatric 

patients to be eligible to be scored on 

the measure. 

For these reasons, we believe that the 

drawbacks of removing a topped out 

clinical measure could be outweighed 

by the other benefits to retaining the 

measure. Accordingly, we propose that 

even if we determine that a clinical 

measure is topped out according to the 

statistical criteria we apply, we will not 

remove or replace it if we determine 

that its continued inclusion in the ESRD 

QIP measure set will continue to set a 

high standard of care for dialysis 

facilities. 

We seek comments on these 

proposals. 

c. New Measures Proposed for PY 2017 

and Future Payment Years 

As the program evolves, we believe it 

is important to continue to evaluate and 

expand the measures selected for the 

ESRD QIP. Therefore, for the PY 2017 

ESRD QIP and future payment years, we 

are proposing to adopt one new clinical 

measure that addresses care 

coordination (see Table 24). 

TABLE 24—NEW MEASURE PROPOSED

FOR THE PY 2017 ESRD QIP 

NQF# Measure title 

N/A1 .............. Standardized Readmission 

Ratio, a clinical measure. 

Risk-adjusted standardized 

hospital readmissions 

ratio. 

1We note that this measure is currently 

under review at NQF. 

i. Proposed Standardized Readmission 

Ratio (SRR) Clinical Measure 

Background 

At the end of 2011, 615,899 patients 

were being dialyzed, 115,643 of whom 

were new (incident) patients with 

ESRD.3 The SRR measure assesses the 

rate of unplanned readmissions of ESRD 

patients to an acute care hospital within 

30 days of an index discharge from an 

acute care hospital, thereby identifying 

potentially poor or incomplete quality 

of care in the dialysis facility. In 

addition, the SRR reflects an aspect of 

ESRD care that is especially resourceintensive. In 2011, the total amount paid 

by Medicare for the ESRD program was 

approximately $34.3 billion, a 5.4 

percent increase from 2010.2 In 

particular, Medicare paid more than 

$10.5 billion for costs associated with 

hospitalized ESRD patients in 2011. In 

2011, ESRD dialysis patients were 

admitted to the hospital twice on 

average, and spent an average of 12 total 

days in the hospital over the year, 

accounting for approximately 38 percent 

of Medicare expenditures for patients 

with ESRD.2 Furthermore, a substantial 

percentage (30 percent) of ESRD 

patients discharged from the hospital 

have an unplanned readmission within 

30 days.2 In the non-ESRD population, 

clinical studies have demonstrated that 

improved care coordination and 

discharge planning may reduce 

readmission rates. The literature also 

reports a wide range of estimates of the 

percentage of readmissions that may be 

preventable. One literature review of 

more than 30 studies found the median 

proportion of readmissions that may be 

preventable was 27%, with a range of 

5% to 79%.4 Preventability varied 

widely across diagnoses. Readmissions 

were more likely to be preventable in 

patients with more severe conditions. 

Therefore, a systematic measure on 

unplanned readmissions is essential for 

controlling escalating medical costs; it 

can identify where readmission rates are 

unusually high, and help facilities to 

provide cost-effective healthcare. 

Overview of Measure 

The SRR is a one-year riskstandardized measure of a facility’s 30- 

day, all-cause rate of unplanned 

hospital readmissions among Medicarecovered ESRD dialysis patients. The 

number of expected readmissions is 

determined by a risk-adjustment model 

that accounts for the hospital where the 

index discharge took place, certain 

patient characteristics (including age, 

sex, and comorbidities), and the 

national median expected performance 

for all dialysis facilities, given the same 

patient case mix. 

We are proposing to adopt the SRR 

measure currently under review by NQF 

(NQF #2496). Section 1881(h)(2)(B)(i) of 

the Act requires that, unless the 

exception set forth in section 

1881(h)(2)(B)(ii) of the Act applies, the 

measures specified for the ESRD QIP 

under section 1881(h)(2)(A)(iv) of the 

Act must have been endorsed by the 

entity with a contract under section 

1890(a) of the Act (that entity currently 

is NQF). Under the exception set forth 

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

the case of a specified area or medical 

topic determined appropriate by the 

Secretary for which a feasible and 

practical measure has not been endorsed 

by the entity with a contract under 

section 1890(a) of the Act, the Secretary 

may specify a measure that is not so 

endorsed, so long as due consideration 

is given to measures that have been 

endorsed or adopted by a consensus 

organization identified by the Secretary. 

We have given due consideration to 

endorsed measures, as well as those 

adopted by a consensus organization, 

and we are proposing this measure 

under the authority of 1881(h)(2)(B)(ii) 

of the Act. Although the NQF has 

endorsed an all-cause hospital 

readmission measure (NQF #1789), we 

do not believe it is feasible to adopt this 

measure in the ESRD QIP because NQF 

#1789 is specified for use in hospitals, 

not dialysis facilities. In addition, NQF 

#1789 is intended to evaluate 

readmissions across all patient types, 

whereas the proposed SRR measure is 

specified for the unique population of 

ESRD dialysis patients, which have a 

different risk profile than the general 

population captured in NQF #1789. 

Because the proposed SRR measure has 

been developed specifically for the 

dialysis-facility setting, and because the 

measure has the potential to improve 

clinical practice and decrease healthcare 

costs, we believe it is appropriate to 

adopt the SRR in the ESRD QIP at this 

time. 

We have analyzed the measure’s 

reliability, the results of which are 

provided below and in greater detail in 

the SRR Measure Methodology report, 

available at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/ESRDQIP/061_

TechnicalSpecifications.html. The InterUnit Reliability (IUR) was calculated for 

the proposed SRR using data from 2012 

and a ‘‘bootstrap’’ approach, which uses 

a resampling scheme to estimate the 

within-facility variation that cannot be 

directly estimated by the analysis of 

variance (ANOVA). The SRRs that we 

calculated for purposes of this analysis 

were for dialysis facilities that had at 

least 11 patients who had been 

discharged from a hospital during 2012. 

A small IUR (near 0) reveals that most 

of the variation of the measures between 

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facilities is driven by ‘‘random noise,’’ 

indicating the measure would not be a 

reliable characterization of the 

differences among facilities, whereas a 

large IUR (near 1) indicates that most of 

the variation between facilities is due to 

the real differences between facilities. 

The IUR for the proposed SRR measure 

was found to be 0.49, indicating that 

about one-half of the variation in the 

SRR can be attributed to betweenfacility differences, and about half to 

within-facility variation. This value of 

IUR indicates that an average-size 

facility would achieve a moderate 

degree of reliability for this measure. 

This level of reliability is consistent 

with the reliability of other outcome 

measures in CMS quality-reporting and 

VBP programs, such as the 30-day RiskStandardized All-Cause Acute 

Myocardial Infarction, Heart Failure, 

and Pneumonia Readmission and 

Mortality measures used in the Hospital 

IQR and VBP Programs. We therefore 

believe that facilities can be reliably 

scored on the proposed SRR measure. 

We convened a technical expert panel 

(TEP) in May 2012 for the purpose of 

evaluating this measure, but the TEP did 

not reach a final consensus and 

declined to support the measure. Some 

members of the TEP were concerned 

that we did not risk-adjust for the 

nephrologist treating the patients, 

because actions taken by nephrologists 

can impact readmission rates. After 

reviewing the TEP’s arguments, we 

determined that the suggested risk 

adjustment for nephrologist care would 

constitute a reversal of CMS policy not 

to risk adjust for factors related to care 

for which the provider is responsible. 

We do not think that it is appropriate to 

risk-adjust the measure for the 

nephrologist because the nephrologist is 

part of the facility’s multi-disciplinary 

team, and medical directors, as 

employees of the dialysis facilities, are 

responsible for ensuring that 

appropriate care is provided by a multidisciplinary team. The Measures 

Application Partnership reviewed this 

measure in February 2013 and 

supported the direction of the measure, 

advising CMS that the measure would 

require additional development prior to 

implementation. Subsequently, we 

released draft specifications for the 

measure to the public for a 30-day 

comment period and, based on 

comments received, finalized measure 

specifications in September 2013. We 

also, on a voluntary basis, provided 

individual dialysis facilities with a 

facility-specific report that calculated 

their SRR measure results and compared 

those results to SRR measure results at 

the state and national level, as well as 

discharge-level data upon request. 

Facilities also had an opportunity to 

submit questions to CMS regarding the 

measure and their reports. We therefore 

believe that the proposed SRR measure 

risk-adjusts appropriately for patient 

condition and comorbidities at the start 

of care for which the facility is not 

responsible. We also believe that the 

measure is ready for adoption because, 

as explained above, it achieves a 

moderate degree of reliability. 

Data Sources 

The data we will use to calculate the 

proposed SRR measure come from 

various CMS-maintained data sources 

for ESRD patients including the 

CROWNWeb database, the CMS Annual 

Facility Survey (Form CMS–2744), 

Medicare claims, the CMS Medical 

Evidence Form (Form CMS–2728), 

transplant data from the Organ 

Procurement and Transplant Network 

(OPTN), the Death Notification Form 

(Form CMS–2746), the Nursing Home 

Minimum Dataset, and the Social 

Security Death Master File. These data 

sources include all Medicare-covered 

patients with ESRD. Information on 

hospitalizations is obtained from 

Medicare Inpatient Claims Standard 

Analysis Files (SAFs) and past-year 

comorbidity is obtained from Medicare 

Claims SAFs (inpatient, outpatient, 

physician/supplier, home health, 

hospice, and skilled nursing facility 

claims). 

Outcome 

The outcome for this measure is 30- 

day all-cause, unplanned readmission 

defined as a hospital readmission for 

any cause beginning within 30 days of 

the discharge date of an index 

discharge, with the exclusion of 

planned readmissions. This 30-day 

readmission period is consistent with 

other publicly reported readmission 

measures endorsed by NQF and 

currently implemented in the Hospital 

Inpatient Quality Reporting Program 

and Hospital Readmission Reduction 

Program, and reflects an industry 

standard. 

Cohort 

All discharges of Medicare ESRD 

dialysis patients from an acute care 

hospital in a calendar year are 

considered eligible for this measure, 

with the exception of the exclusions 

listed in the next section. 

Inclusion and Exclusion Criteria 

The proposed SRR measure excludes 

from the measure cohort 

hospitalizations: (1) Where the patient 

died during the index hospitalization; 

(2) where the patient dies within 30 

days of the index discharge with no 

readmission; (3) where the patient is 

discharged against medical advice; (4) 

where the patient was admitted with a 

primary diagnosis of certain conditions 

related to cancers, mental health 

conditions, or rehabilitation procedures 

(because these patients possess radically 

different risk profiles, and therefore 

cannot reasonably be compared to other 

patients discharged from hospitals); (5) 

where the patient is discharged from a 

PPS-exempt cancer hospital (because 

these hospitals care for a unique 

population of patients that cannot 

reasonably be compared to the patients 

admitted to other hospitals); (6) where 

the patient is transferred to another 

acute care hospital; and (7) where the 

patient has already been discharged 12 

times during the same calendar year (to 

respond to concerns raised by the TEP 

that patients who are hospitalized this 

frequently during a calendar year could 

unduly skew the measure rates for small 

facilities). 

Risk Adjustment 

The measure adjusts for differences 

across facilities with regard to their 

patient case mix. Consistent with NQF 

guidelines, the model does not adjust 

for socioeconomic status or race, 

because risk adjusting for these 

characteristics would hold facilities 

with a large proportion of patients who 

are minorities and/or who have low 

socioeconomic status to a different 

standard of care than other facilities. 

One goal of this measure is to illuminate 

quality differences that such risk 

adjustment would obscure. As with the 

Hospital-Wide Readmission measure 

employed by the Hospital Readmissions 

Reduction program, the SRR employs a 

hierarchical logistic regression model to 

estimate the expected number of 

readmissions to an acute care hospital, 

taking into account the performance of 

all dialysis facilities, the discharging 

hospital, and the facility’s patient casemix. 

Although the SRR risk-adjustment 

model is generally aligned with the 

Hospital-Wide Readmission measure 

risk-adjustment methodology, we are 

proposing to modify it to account for 

comorbidities and patient 

characteristics relevant to the ESRD 

population. The proposed SRR measure 

includes the following patient 

characteristics as risk adjustors, which 

are obtained from the following data 

sources: 

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Risk adjustor Data source 

Sex ............................................................................................................ CMS Form 2728. 

Age ........................................................................................................... REMIS database. 

Years on ESRD ........................................................................................ CMS Form 2728. 

Diabetes as cause of ESRD .................................................................... CMS Form 2728. 

BMI at incidence of ESRD ....................................................................... CMS Form 2728. 

Days hospitalized during index admission ............................................... Part A Medicare Inpatient Claims SAFs. 

23 past-year comorbidities (e.g., cardiorespiratory failure/shock; drug 

and alcohol disorders).

Medicare Claims SAFs: Part A Inpatient, home health, hospice, and 

skilled nursing facility; and Part B Outpatient. 

Discharged with any of 11 high-risk conditions (for example, cystic fibrosis, and hepatitis).Part A Medicare Inpatient Claims SAFs. 

More details on the risk-adjustment 

calculations, and the rationale for 

selecting these risk adjustors and not 

others, can be found at: http://

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

Specifications.html. We are proposing 

to risk adjust the proposed SRR measure 

based on sex, because we have 

determined that patients’ sex affects the 

measure in ways that are beyond the 

control of dialysis facilities. We reached 

this determination by examining the 

effects of the risk adjusters, both 

independently and in combination, on 

rates of unplanned readmissions. This 

analysis yielded two conclusions. First, 

the analysis indicated that females are 

generally more likely than males to 

experience an unplanned readmission, 

even when accounting for the other risk 

adjustors. Second, the disparate effects 

of gender were substantially impacted 

by the effects of age: Females aged 15 to 

45 were much more likely to experience 

an unplanned readmission than males 

of the same age, but this disparity was 

significantly reduced for men and 

women younger than 15 and older than 

45. Based on these two conclusions, we 

believe that women in the 15–45 age 

range face a greater risk of experiencing 

an unplanned readmission, as compared 

to men of the same age with similar risk 

profiles. This does not appear to be a 

consequence of facility performance, 

however, because the disparity is not 

generally applicable to women, but only 

to a limited age group. We therefore 

believe it is essential to risk-adjust for 

sex to ensure that facilities with larger 

numbers of women aged 15 to 45 are not 

inappropriately disadvantaged, because 

not risk-adjusting for sex would 

potentially incentivize facilities to deny 

access to these individuals. 

As indicated in the table above, the 

measure is risk-adjusted, in part, based 

on 23 comorbidities that develop in the 

year prior to the index hospitalization, 

as well as 11 high-risk conditions that 

are present at the time of the index 

discharge. These data are taken from 

Medicare claims submitted by hospitals, 

dialysis facilities, and other types of 

long-term and post-acute care facilities. 

We believe that this proposed 

approach to risk-adjusting the SRR 

measure is consistent with NQF 

guidelines for measure developers. NQF 

evaluates measures on the basis of four 

criteria: Importance, scientific 

acceptability, feasibility, and usability. 

The validity and reliability of a 

measure’s risk-adjustment calculations 

fall under the ‘‘scientific acceptability’’ 

criterion, and Measure Evaluation 

Criterion 2b4 specifies NQF’s preferred 

approach for risk-adjusting outcome 

measures (http://www.qualityforum.org/ 

docs/measure_evaluation_

criteria.aspx#scientific). This criterion 

states that patient comorbidities should 

only be included in risk-adjustment 

calculations if they are (1) present at the 

start of care and (2) not indicative of 

disparities or deficiencies in the quality 

of care provided. As indicated in the 

‘‘Inclusion and Exclusion Criteria’’ 

subsection above, as well as the measure 

specifications that are currently under 

review at NQF, the start of care is 

defined as the index hospitalization. 

Accordingly, we believe that NQF 

Measure Evaluation Criterion 2b4 

supports risk adjusting the proposed 

SRR measure on the basis of patient 

comorbidity data collected in the year 

prior to the index hospitalization, 

because these comorbidities are likely 

present at the start of care (that is, the 

date(s) that the patient spends in the 

hospital during the index 

hospitalization). For these reasons, we 

believe that the risk-adjustment 

methodology for the proposed SRR 

measure is consistent with NQF 

guidelines for measure developers and 

is appropriate for this measure. 

Full documentation of the SRR riskadjustment methodology is available at: 

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

Specifications.html. 

Calculating the SRR Measure 

The SRR measure is calculated as the 

ratio of the number of observed 

unplanned readmissions to the number 

of expected unplanned readmissions. 

Facilities that have more unplanned 

readmissions than would be expected 

for an average facility with a similar 

case-mix would have a ratio greater than 

one. Facilities having fewer unplanned 

readmissions than would be expected 

for an average facility with a similar 

case-mix would have a ratio less than 

one. This ratio calculation is consistent 

with that employed by one NQFendorsed outcome measure for ESRD, 

the Standardized Hospitalization Ratio 

(NQF #1463). 

Hospitalizations are counted as events 

in the numerator if they meet the 

definition of unplanned readmission— 

which is that they (a) occurred within 

30 days of the index discharge and (b) 

are not preceded by a ‘‘planned’’ 

readmission that also occurred within 

30 days of the index discharge. Planned 

readmissions are defined as 

readmissions that do not bear on the 

quality of care furnished by the dialysis 

facility, that occur as a part of ongoing 

appropriate care of patients, or that 

involve elective care. Building on the 

algorithm developed for the HospitalWide Readmission measure (NQF 

#1789), the proposed planned 

readmission list incorporates minor 

changes appropriate to the ESRD 

population as suggested by technical 

experts. The full planned readmission 

list and algorithm are available at: 

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

Specifications.html. In general, a 

readmission is considered ‘‘planned’’ 

under two scenarios. 

1. The patient undergoes a procedure 

that is always considered planned 

(example, bone marrow transplant) or 

has a primary diagnosis that always 

indicates the hospitalization is planned 

(for example, maintenance 

chemotherapy). 

2. The patient undergoes a procedure 

that may be considered planned if it is 

not accompanied by an acute diagnosis. 

For example, a hospitalization involving 

a heart-valve procedure accompanied by 

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a primary diagnosis of acute myocardial 

infarction would be considered 

unplanned, whereas a hospitalization 

involving a heart-valve procedure 

accompanied by a primary diagnosis of 

diabetes would be considered planned 

(because acute myocardial infarction is 

a plausible alternative acute indication 

for hospitalization). 

The expected number of readmissions 

is calculated using hierarchical logistic 

modeling (HLM). This approach 

accounts for the hospital from which the 

patient was discharged and the patient 

case mix (as defined by factors such as 

age, sex, and patient comorbidities), as 

well as the national median 

performance of all dialysis facilities. 

The HLM is an appropriate statistical 

approach to measuring quality based on 

patient outcomes when patients are 

clustered within facilities (and therefore 

the patients’ outcomes are not 

statistically independent), and when the 

number of qualifying patients for the 

measure varies from facility to facility. 

The HLM approach is also currently 

used to calculate readmission and 

mortality measures that are used in 

several quality-reporting and VBP 

programs by CMS, such as the Heart 

Failure and Pneumonia Mortality 

measures in the Hospital IQR and 

Hospital VBP Programs. 

The proposed SRR measure is a point 

estimate—the best estimate of a facility’s 

readmission rate based on the facility’s 

case mix. For more information on the 

proposed calculation methodology, 

please refer to our Web site at: http://

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

Specifications.html. 

3. Proposed Performance Period for the 

PY 2017 ESRD QIP 

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

requires the Secretary to establish the 

performance period with respect to a 

payment year, and that the performance 

period occur prior to the beginning of 

such year. In the CY 2013 ESRD PPS 

Final Rule (77 FR 67500), we stated our 

belief that, for most measures, a 12- 

month performance period is the most 

appropriate for the program because this 

period accounts for any potential 

seasonal variations that might affect a 

facility’s score on some of these 

measures, and also provides adequate 

incentive and feedback for facilities and 

Medicare beneficiaries. CY 2015 is the 

latest period of time during which we 

can collect a full 12 months of data and 

still implement the PY 2017 payment 

reductions. Therefore, we propose to 

establish CY 2015 as the performance 

period for PY 2017 ESRD QIP. 

We seek comments on this proposal. 

4. Proposed Performance Standards, 

Achievement Thresholds, and 

Benchmarks for the PY 2017 ESRD QIP 

We are proposing to adopt 

performance standards for the PY 2017 

ESRD QIP measures similar to those we 

finalized for PY 2016 (78 FR 72211 

through 72213). Section 1881(h)(4)(A) of 

the Act provides that ‘‘the Secretary 

shall establish performance standards 

with respect to measures selected . . . 

for a performance period with respect to 

a year.’’ Section 1881(h)(4)(B) of the Act 

further provides that the ‘‘performance 

standards . . . shall include levels of 

achievement and improvement, as 

determined appropriate by the 

Secretary.’’ We use the performance 

standards to establish the minimum 

score a facility must achieve to avoid a 

Medicare payment reduction. We use 

achievement thresholds and 

benchmarks to calculate scores on the 

clinical measures. 


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a. Proposed Performance Standards, 

Achievement Thresholds, and 

Benchmarks for the Clinical Measures in 

the PY 2017 ESRD QIP 

With the exception of the NHSN 

Bloodstream Infection clinical measure, 

we propose to set the performance 

standards, achievement thresholds, and 

benchmarks for the PY 2017 clinical 

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

percentile, respectively, of national 

performance in CY 2013, because this 

will give us enough time to calculate 

and assign numerical values to the 

proposed performance standards for the 

PY 2017 program prior to the beginning 

of the performance period. We continue 

to believe that these standards will 

provide an incentive for facilities to 

continuously improve their 

performance, while not reducing 

incentives to facilities that score at or 

above the national performance rate for 

the clinical measures. As stated in the 

CY 2014 ESRD PPS Final Rule (78 FR 

72213 through 72215), CY 2014 is the 

first year for which we will have data 

for the NHSN Bloodstream Infection 

clinical measure. Accordingly, we 

propose to set the performance 

standard, achievement threshold, and 

benchmark for the NHSN Bloodstream 

Infection clinical measure based on the 

50th, 15th, and 90th percentiles, 

respectively, of national performance in 

CY 2014. 

We seek comments on these 

proposals. 

b. Estimated Performance Standards, 

Achievement Thresholds, and 

Benchmarks for the Clinical Measures 

Proposed for the PY 2017 ESRD QIP 

At this time, we do not have the 

necessary data to assign numerical 

values to the proposed performance 

standards, achievement thresholds, and 

benchmarks for the clinical measures, 

because we do not yet have complete 

data from CY 2013. Nevertheless, we are 

able to estimate these numerical values 

based on the most recent data available. 

For all of the proposed clinical 

measures except the proposed SRR 

measure, this partial data comes from 

the period of January through December 

2013. For the proposed SRR measure, 

this partial data comes from the period 

of January through December 2012. In 

Table 25, we have provided the 

estimated numerical values for all of the 

proposed PY 2017 ESRD QIP clinical 

measures except the NHSN Bloodstream 

Infection clinical measure. We will 

publish updated values for the clinical 

measures, using data from the first part 

of CY 2014, in the CY 2015 ESRD PPS 

final rule. 

TABLE 25—ESTIMATED NUMERICAL VALUES FOR THE PERFORMANCE STANDARDS FOR THE PY 2017 ESRD QIP CLINICAL

MEASURES USING THE MOST RECENTLY AVAILABLE DATA

Measure Performance standard Achievement threshold Benchmark 

Vascular Access Type: 

%Fistula .................................. 64.49% .......................................... 52.43% .......................................... 78.64% 

%Catheter ............................... 9.9% .............................................. 18.36% .......................................... 3.21% 

Kt/V: 

Adult Hemodialysis ................. 93.65% .......................................... 86.97% .......................................... 97.55% 

Adult Peritoneal Dialysis ......... 87.50% .......................................... 70.42% .......................................... 95.74% 

Pediatric Hemodialysis ........... 92.48% .......................................... 79.55% .......................................... 97.98% 

Hypercalcemia ............................... 1.32% ............................................ 4.78% ............................................ 0.00% 

NHSN Bloodstream Infection ......... 50th percentile of eligible facilities’ 

performance during CY 2014.

15th percentile of eligible facilities’ 

performance during CY 2014.

90th percentile of eligible facilities’ 

performance during CY 2014. 

Standardized Readmission Ratio .. 0.996 ............................................. 1.242 ............................................. 0.658 

We believe that the ESRD QIP should 

not have lower performance standards 

than in previous years. In accordance 

with our statements in the CY 2012 

ESRD PPS final rule (76 FR 70273), if 

the final numerical value for a 

performance standard, achievement 

threshold, and/or benchmark is worse 

than it was for that measure in the PY 

2016 ESRD QIP, then we propose to 

substitute the PY 2016 performance 

standard, achievement threshold, and/or 

benchmark for that measure. 

We seek comments on this proposal. 

c. Proposed Performance Standards for 

the PY 2017 Reporting Measures 

In the CY 2014 ESRD PPS Final Rule, 

we finalized performance standards for 

the Anemia Management, Mineral 

Metabolism, and ICH CAHPS reporting 

measures (78 FR 72213). We are 

proposing to continue to use these 

performance standards for these 

measures in the PY 2017 ESRD QIP. We 

seek comments on this proposal. 

5. Proposal for Scoring the PY 2017 

ESRD QIP Measures 

a. Scoring Facility Performance on 

Clinical Measures Based on 

Achievement 

In the CY 2014 ESRD PPS Final Rule, 

we finalized a policy for scoring 

performance on clinical measures based 

on achievement (78 FR 72215). In 

determining a facility’s achievement 

score for each measure under the PY 

2017 ESRD QIP, we propose to continue 

using this methodology for all clinical 

measures. Under this methodology, 

facilities receive points along an 

achievement range based on their 

performance during the proposed 

performance period for each measure, 

which we define as a scale between the 

achievement threshold and the 

benchmark. 

b. Scoring Facility Performance on 

Clinical Measures Based on 

Improvement 

In the CY 2014 ESRD PPS Final Rule, 

we finalized a policy for scoring 

performance on clinical measures based 

on improvement (78 FR 72215 through 

72216). In determining a facility’s 

improvement score for each measure 

under the PY 2017 ESRD QIP, we 

propose to continue using this 

methodology for all clinical measures. 

Under this methodology, facilities 

receive points along an improvement 

range, defined as a scale running 

between the improvement threshold and 

the benchmark. We propose to define 

the improvement threshold as the 

facility’s performance on the measure 

during CY 2014. The facility’s 

improvement score would be calculated 

by comparing its performance on the 

measure during CY 2015 (the proposed 

performance period) to its performance 

rate on the measure during CY 2014. 

6. Weighting the Total Performance 

Score 

We continue to believe that while the 

reporting measures are valuable, the 

clinical measures evaluate actual patient 

care and therefore justify a higher 

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combined weight (78 FR 72217). We are 

therefore not proposing to change our 

policy, finalized most recently in the CY 

2014 ESRD PPS (78 FR 72217), to 

weight clinical measures as 75 percent 

and reporting measures as 25 percent of 

the TPS. We are also not proposing any 

changes to the policy that facilities must 

be eligible to receive a score on at least 

one reporting measure and at least one 

clinical measure to be eligible to receive 

a TPS, or the policy that a facility’s TPS 

will be rounded to the nearest integer, 

with half of an integer being rounded 

up. 

7. Proposed Minimum Data for Scoring 

Measures for the PY 2017 ESRD QIP and 

Proposal for Changing Attestation 

Process for Patient Minimums 

For the same reasons described in the 

CY 2013 ESRD PPS final rule (77 FR 

67510 through 67512), for PY 2017 we 

propose to only score facilities on 

clinical and reporting measures for 

which they have a minimum number of 

qualifying patients during the 

performance period. Our current policy 

is that a facility must treat at least 11 

qualifying patients during the 

performance period in order to be 

scored on a clinical measure (77 FR 

67510 through 67511). We are not 

proposing any changes to this policy. 

However, with respect to the 

proposed SRR measure, we propose that 

facilities with fewer than 11 index 

discharges will not be eligible to receive 

a score on that measure. We considered 

proposing to adopt the 11 qualifying 

patient minimum that we use for the 

other clinical measures. We decided, 

however, to base facility eligibility for 

the measure on the number of index 

discharges attributed to a facility, 

because the measure calculations are 

determined by the number of index 

discharges, adjusted for patient casemix. We decided to set the minimum 

number of index discharges at 11 

because this is consistent with reporting 

for the proposed SRR measure during 

the dry run conducted earlier this year, 

as well as with the implementation of 

outcome measures in the Hospital 

Readmission Reduction Program, which 

base case minimums on the number of 

index discharges attributable to the 

facility. 

Additionally, for the proposed SRR 

measure, we propose to apply the smallfacility adjuster to facilities that treat 41 

or fewer index discharges because we 

determined that this was the minimum 

number of index discharges needed to 

achieve an IUR of 0.4 (that is, moderate 

reliability) for the proposed SRR 

measure. Because the small-facility 

adjuster gives facilities the benefit of the 

doubt when measure scores can be 

unduly influenced by a few outlier 

patients, we believe that setting the 

threshold at 41 index discharges will 

not unduly penalize facilities that treat 

small numbers of patients. 

In the CY 2014 ESRD PPS Final Rule, 

we finalized that the case minimum for 

the Mineral Metabolism and Anemia 

Management reporting measures is one, 

and that facilities that treat one 

qualifying patient could attest to this in 

CROWNWeb in order to avoid being 

scored on the measures (78 FR 72197 

through 72199 and 72220 through 

72221). In the process of responding to 

questions from facilities about the 

attestation requirements for the PY 2015 

program, however, we found that 

facilities were confused by this 

requirement. For this reason, we 

propose to remove the option for 

facilities to attest that they did not meet 

the case minimum for these measures. 

Accordingly, facilities that meet the case 

minimum of one qualifying patient 

would be scored on these measures, 

facilities with between 2 and 11 

qualifying patients would be required to 

report data for all but one qualifying 

patient, and facilities with 11 or more 

qualifying patients would be required to 

report data for all patients. Due to 

facility confusion with the attestation 

process, we also propose to remove the 

option for facilities to attest that they 

did not meet the case minimum for the 

ICH CAHPS survey reporting measure. 

As we stated above, we are not 

proposing any further changes to the 30 

survey-eligible case minimum for this 

measure. We are proposing that the 

ESRD QIP program will determine 

facility eligibility for these measures 

based on available data submitted to 

CROWNWeb, in Medicare claims, and 

to other CMS administrative data 

sources. 

We seek comments on this proposal. 

We are proposing to continue our 

policies that govern when a newly 

opened facility would be eligible to be 

scored on measures as follows. 

• Facilities with a CCN open date on 

or after July 1 of the performance period 

(for PY 2017, this would be July 1, 2015) 

are not eligible to be scored on any 

reporting measures except the ICH 

CAHPS reporting measure. 

• Facilities with a CCN open date on 

or after January 1 of the performance 

period (for PY 2017, this would be 

January 1, 2015) are not eligible to 

receive a score on the ICH CAHPS 

reporting measure in the PY 2017 

program, due to the time it takes to 

contract with a CMS-approved thirdparty vendor to administer the survey. 

• Facilities are eligible to receive a 

score on all of the clinical measures 

except the NHSN Bloodstream Infection 

clinical measure if they have a CCN 

open date at any time before the end of 

the performance period. 

• Facilities with a CCN open date 

after January 1 of the performance 

period (for PY 2017, this would be 

January 1, 2015) are not eligible to 

receive a score on the NHSN 

Bloodstream Infection clinical measure, 

due to the need to collect 12 months of 

data to accurately score the measure. 

We are also proposing to continue our 

policy that a facility will not receive a 

TPS unless it receives a score on at least 

one clinical measure and at least one 

reporting measure. We note that as a 

result, facilities will not be eligible for 

a payment reduction under the PY 2017 

ESRD QIP if they have a CCN open date 

on or after July 1, 2015. 

We seek comments on these 

proposals. 

Table 26 displays the proposed 

patient minimum requirements for each 

of the reporting measures, as well as the 

CCN open dates after which a facility 

will not be eligible to receive a score on 

a reporting measure. 

TABLE 26—PROPOSED MINIMUM DATA REQUIREMENTS FOR THE PY 2017 ESRD QIP 

Measure Minimum data requirements CCN Open date Small facility 

adjuster 

Adult Hemodialysis Adequacy (Clinical).11 qualifying patients .................................................... N/A ..................................... 11–25 patients. 

Adult Peritoneal Dialysis 

Adequacy (Clinical).

11 qualifying patients .................................................... N/A ..................................... 11–25 patients. 

Pediatric Hemodialysis Adequacy (Clinical).11 qualifying patients .................................................... N/A ..................................... 11–25 patients. 

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TABLE 26—PROPOSED MINIMUM DATA REQUIREMENTS FOR THE PY 2017 ESRD QIP—Continued 

Measure Minimum data requirements CCN Open date Small facility 

adjuster 

Vascular Access Type: 

Catheter (Clinical).

11 qualifying patients .................................................... N/A ..................................... 11–25 patients. 

Vascular Access Type: Fistula (Clinical).11 qualifying patients .................................................... N/A ..................................... 11–25 patients. 

Hypercalcemia (Clinical) ...... 11 qualifying patients .................................................... N/A ..................................... 11–25 patients. 

NHSN Bloodstream Infection 

(Clinical).

11 qualifying patients .................................................... On or before January 1, 

2015.

11–25 patients. 

SRR (Clinical) ...................... 11 index discharges ...................................................... N/A ..................................... 11–41 index discharges. 

ICH CAHPS (Reporting) ...... Facilities with 30 or more survey-eligible patients during the calendar year preceding the performance 

period must submit survey results. Facilities will not 

receive a score if they do not obtain a total of at 

least 30 completed surveys during the performance 

period.

Before January 1, 2015 ..... N/A. 

Anemia Management (Reporting).Facilities with 11 or more qualifying patients must report data for all patients. Facilities with between 2 

and 11 qualifying patients must report data on all 

but 1 qualifying patient. Facilities with 1 qualifying 

patient must report for that patient.

Before July 1, 2015 ........... N/A. 

Mineral Metabolism (Reporting).Facilities with 11 or more qualifying patients must report data for all patients. Facilities with between 2 

and 11 qualifying patients must report data on all 

but 1 qualifying patient. Facilities with 1 qualifying 

patient must report for that patient.

Before July 1, 2015 ........... N/A. 

8. Proposed Payment Reductions for the 

PY 2017 ESRD QIP 

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

requires the Secretary to ensure that the 

application of the scoring methodology 

results in an appropriate distribution of 

payment reductions across facilities, 

such that facilities achieving the lowest 

TPSs receive the largest payment 

reductions. For PY 2017, we are 

proposing that a facility will not receive 

a payment reduction if it achieves a 

minimum TPS that is equal to or greater 

than the total of the points it would 

have received if: 

• It performed at the performance 

standard for each clinical measure; 

• It received zero points for each 

clinical measure that does not have a 

numerical value for the performance 

standard established through the 

rulemaking process before the beginning 

of the PY 2017 performance period; and 

• It received 10 points (which is the 

50th percentile of facility performance 

on the PY 2015 reporting measures) for 

each reporting measure. 

We recognize that these conditions 

are more stringent than the conditions 

used to establish the minimum TPS in 

the PY 2016 ESRD QIP, because this 

proposal increases the number of points 

a facility would have to receive on each 

reporting measure from 5 to 10. The PY 

2015 program is the most recent year for 

which we will have calculated final 

measure scores before the beginning of 

the proposed performance period for PY 

2017 (i.e., CY 2015). We note that 

facility performance on the Anemia 

Management, Mineral Metabolism, 

NHSN Dialysis Event, and ICH CAHPS 

reporting measures in the PY 2015 

program is so high that the median score 

on each of the measures was 10 points. 

We are proposing to increase the 

number of points a facility would have 

to achieve for each reporting measure to 

the 50th percentile of facility 

performance on the PY 2015 reporting 

measures (i.e., the average of the median 

scores for each reporting measure), 

because a score of 5 on each of these 

reporting measures is indicative of a 

below-average performance, and we 

want to incentivize facilities to provide 

above-average care. 

We seek comments on this proposal. 

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

requires that facilities achieving the 

lowest TPSs receive the largest payment 

reductions. In the CY 2014 ESRD PPS 

Final Rule (78 FR 72223 through 72224), 

we finalized a payment reduction scale 

for PY 2016 and future payment years, 

such that for every 10 points a facility 

falls below the minimum TPS, the 

facility would receive an additional 0.5 

percent reduction on its ESRD PPS 

payments, with a maximum reduction 

of 2.0 percent. We are not proposing any 

changes to this policy at this time. 

Because we are not yet able to 

calculate the performance standards for 

each of the clinical measures, we are 

likewise not able to calculate the 

minimum TPS at this time. Based on the 

estimated performance standards listed 

above, we estimate that a facility must 

meet or exceed a minimum TPS of 58 

for PY 2017. For all of the clinical 

measures except the NHSN Bloodstream 

Infection clinical measure, these data 

come from CY 2013. For the NHSN 

Bloodstream Infection clinical measure, 

we set the performance standard to zero 

for purposes of this estimate, because 

we are not able to establish a numerical 

value for the performance standard 

through the rulemaking process before 

the beginning of the PY 2017 

performance period. We are proposing 

that facilities failing to meet the 

minimum TPS, as established in the CY 

2015 ESRD PPS Final Rule, will receive 

payment reductions based on the 

estimated TPS ranges indicated in Table 

27 below. 

TABLE 27—ESTIMATED PAYMENT REDUCTION SCALE FOR PY 2017 

BASED ON THE MOST RECENTLY

AVAILABLE DATA FROM CY 2013 

Total performance score Reduction 

(%) 

100—58 .................................... 0 

57—48 ...................................... 0.5 

47—38 ...................................... 1.0 

37—28 ...................................... 1.5 

27—0 ........................................ 2.0 

9. Proposal for Data Validation 

One of the critical elements of the 

ESRD QIP’s success is ensuring that the 

data submitted to calculate measure 

scores and TPSs are accurate. We began 

a pilot data-validation program in CY 

2013 for the ESRD QIP, and we have 

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procured the services of a datavalidation contractor that is tasked with 

validating a national sample of facilities’ 

records as they report CY 2014 data to 

CROWNWeb. Our first priority was to 

develop a methodology for validating 

data submitted to CROWNWeb under 

the pilot data-validation program, and 

this continues to be our goal. Once this 

methodology has been fully developed, 

we will propose to adopt it through the 

rulemaking process. For the PY 2016 

ESRD QIP (78 FR 72223 through 72224), 

we finalized a requirement to sample 

approximately 10 records from 300 

randomly selected facilities; these 

facilities will have 60 days to comply 

once they receive requests for records. 

We are proposing to continue this pilot 

for the PY 2017 ESRD QIP. Under this 

continued validation study, we will 

sample the same number of records 

(approximately 10 per facility) from the 

same number of facilities (that is, 300) 

during CY 2015. If a facility is randomly 

selected to participate in the pilot 

validation study but does not provide 

CMS with the requisite medical records 

within 60 days of receiving a request, 

then we propose to deduct 10 points 

from the facility’s TPS. Once we have 

developed and adopted a methodology 

for validating the CROWNWeb data, we 

intend to consider whether payment 

reductions under the ESRD QIP should 

be based, in part, on whether a facility 

has met our standards for data 

validation. 

We seek comments on this proposal. 

We are also proposing a feasibility 

study for validating data reported to 

CDC’s NHSN Dialysis Event Module for 

the NHSN Bloodstream Infection 

clinical measure. HAIs are relatively 

rare, and we are proposing that the 

feasibility study would target records 

with a higher probability of including a 

dialysis event, because this would 

enrich the validation sample while 

reducing the burden on facilities. The 

methodology for this proposed 

feasibility study would resemble the 

methodology used by the Hospital 

Inpatient Quality Reporting Program to 

validate the central line-associated 

bloodstream infection measure, the 

catheter-associated urinary tract 

infection measure, and the surgical site 

infection measure (77 FR 53539 through 

535553). 

Specifically, we propose to randomly 

select nine facilities to participate in the 

feasibility study. A CMS contractor will 

send these facilities quarterly requests 

for lists of all positive blood cultures 

drawn from its patients during the 

quarter, including any positive blood 

cultures that were collected from the 

facility’s patients on the day of, or the 

day following, their admission to a 

hospital. Facilities will have 60 days to 

respond to quarterly requests for lists of 

positive blood cultures. A CMS 

contractor will then develop a 

methodology for determining when a 

positive blood culture qualifies as a 

‘‘candidate dialysis event,’’ and is 

therefore appropriate for further 

validation. Once the contractor 

determines a methodology for 

identifying candidate dialysis events, 

the contractor will analyze the records 

of patients who had a positive blood 

culture in order to determine if the 

facility reported dialysis events for 

those patients in accordance with the 

NHSN Dialysis Event Protocol. If the 

contractor determines that additional 

medical records are needed from a 

facility to validate whether the facility 

accurately reported the dialysis events, 

then the contractor will send a request 

for additional information to the facility, 

and the facility will have 60 days from 

the date of the letter to respond to the 

request. Overall, we estimate that, on 

average, quarterly lists will include two 

positive blood cultures per facility, but 

we recognize these estimates may vary 

considerably from facility to facility. If 

a facility is randomly selected to 

participate in the feasibility study but 

does not provide CMS with the requisite 

lists of positive blood cultures or the 

requisite medical records within 60 

days of receiving a request, then we 

propose to deduct 10 points from the 

facility’s TPS. 

The goals of the proposed feasibility 

study will be five-fold: (1) To estimate 

the burden and associated costs to 

facilities of validating the NHSN 

Bloodstream Infection clinical measure; 

(2) to assess the costs to CMS to validate 

this measure; (3) to develop a 

methodology for identifying candidate 

dialysis events from lists of positive 

blood cultures; (4) to develop a 

methodology for determining whether a 

facility accurately reported dialysis 

events under the NHSN Bloodstream 

Infection clinical measure; and (5) to 

reach some preliminary conclusions 

about whether facilities are accurately 

reporting data under the NHSN 

Bloodstream Infection clinical measure. 

Based on the results of this study, we 

will consider the feasibility of proposing 

in future rulemaking to validate the 

NHSN Bloodstream Infection clinical 

measure for all facilities. 

We seek comments on this proposal. 

10. Proposal To Monitor Access to 

Dialysis Facilities 

Public comments on the proposal to 

adopt the Standardized Hospitalization 

Ratio measure in the PY 2014 ESRD QIP 

(76 FR 70267) expressed concerns that 

‘‘the measure may lead to ‘cherrypicking’ of patients based on their risk 

of hospitalizations, causing access to 

care issues for patients with more severe 

illness.’’ We share commenters’ 

concerns about the SHR measure, and 

we believe that these concerns equally 

apply to other outcome measures 

proposed for the ESRD QIP. We 

recognize that, in general, inadequate 

risk adjustment in outcome measure 

calculations can create an incentive for 

facilities to deny services to sicker 

patients, because these patients’ 

illnesses would not be properly 

accounted for in the risk-adjustment 

calculations. We believe that outcome 

measures proposed and adopted for the 

ESRD QIP properly risk adjust for 

patients with severe illnesses, but we 

remain concerned that misperceptions 

to the contrary might negatively impact 

access to dialysis therapy. 

Since we are proposing to adopt the 

SRR clinical measure for the PY 2017 

program, and below we are proposing to 

adopt the STrR clinical measure for the 

PY 2018 program, we propose to initiate 

a monitoring program focused on access 

to dialysis therapy. This program would 

compare dialysis data before and after 

the adoption of an outcome measure, 

looking for changes in admission and 

discharge practices, as well as changes 

in rates and patterns of involuntary 

discharges. Specifically, this program 

would assess and analyze the 

characteristics of beneficiaries admitted 

to dialysis centers (stratified by location, 

size, and setting) in order to determine 

when and if selective admission and 

discharge practices are coupled with 

negative patient attributes and trends 

over time. We believe this program will 

enable us to identify patterns that are 

indicative of diminished access to 

dialysis therapy. 

We seek comments on this proposal. 

11. Proposed Extraordinary 

Circumstances Exception 

Many comments on the CY 2014 

ESRD PPS proposed rule included the 

recommendation to exempt a facility 

from all the requirements of the ESRD 

QIP clinical and reporting measures 

during the time the facility was forced 

to close temporarily due to a natural 

disaster or other extraordinary 

circumstances. In response to these 

comments, we agreed that ‘‘there are 

times when facilities are unable to 

submit required quality data due to 

extraordinary circumstances that are not 

within their control, and we do not wish 

to penalize facilities for such 

circumstances or unduly increase their 

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burden during these times’’ (78 FR 

72209). 

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

states, ‘‘[T]he Secretary shall develop a 

methodology for assessing the total 

performance of each provider of services 

and renal dialysis facility based on 

performance standards with respect to 

the measures selected under paragraph 

(2) for a performance period established 

under paragraph (4)(D).’’ Given the 

possibility that facilities could be 

unfairly penalized for circumstances 

that are beyond their control, we believe 

the best way to implement an 

extraordinary circumstances exception 

is under the authority of this section. 

We are therefore proposing to interpret 

section 1881(h)(3)(A)(i) of the Act to 

enable us to configure the methodology 

for assessing facilities’ total performance 

such that we will not require a facility 

to submit, nor penalize a facility for 

failing to submit, data on any ESRD QIP 

quality measure data from any month in 

which a facility is granted an 

extraordinary circumstances exception. 

Under this policy, we propose that, in 

the event of extraordinary 

circumstances not within the control of 

the facility (such as a natural disaster), 

for the facility to receive consideration 

for an exception from all ESRD QIP 

requirements during the period in 

which the facility was closed, the 

facility would need to submit a CMS 

Disaster Extension/Exception Request 

Form through www.qualitynet.org 

within 90 calendar days of the date of 

the disaster or extraordinary 

circumstance. We are proposing that the 

facility would need to provide the 

following information on the form: 

• Facility CCN; 

• Facility name; 

• CEO name and contact information; 

• Additional contact name and 

contact information; 

• Reason for requesting an exception; 

• Dates affected; 

• Date facility will start submitting 

data again, with justification for this 

date; and 

• Evidence of the impact of the 

extraordinary circumstances, including 

but not limited to photographs, 

newspaper, and other media articles. 

Incomplete forms will be returned to 

the facility without further review of 

their content. We will evaluate the 

request and provide the facility with a 

response. If we determine that the 

facility was, in fact, closed for a period 

of time due to extraordinary 

circumstances, then we will exempt the 

facility from the ESRD QIP requirements 

for any month during which the facility 

was closed due to the extraordinary 

circumstances. As such, a facility 

granted a temporary exception will be 

scored on each measure only for the 

months during a performance period not 

covered by the exception. For example, 

if a facility is granted an extraordinary 

circumstances exception for the time 

period between January 15 and February 

15, 2015, then the facility will not be 

required to report, and will not be 

penalized for not reporting, data on any 

ESRD QIP measure data for January and 

February of CY 2015. The effect of this 

proposal is that if a facility, because it 

has been granted an exception, cannot 

meet the reporting requirements that 

apply to a measure, the facility will not 

receive a score on the measure. For 

example, if a facility is granted an 

extraordinary circumstances exception 

for February 2015, then that facility 

would not be scored on the NHSN 

Bloodstream Infection clinical measure 

for the applicable payment year, 

because this measure requires facilities 

to submit 12 months of data in order to 

avoid receiving zero points on the 

measure. 

This policy does not preclude us from 

granting exceptions to facilities that 

have not requested them when we 

determine that an extraordinary 

circumstance (for example, a hurricane 

or other act of nature) affects an entire 

region or locale. If we make the 

determination to grant an exception to 

facilities in a region or locale, then we 

propose to communicate this decision 

through routine communication 

channels to facilities, vendors, and 

Networks, including but not limited to 

issuing memoranda, emails, and notices 

on a CMS-approved Web site. 

We seek comments on this proposal. 

G. Proposed Requirements for the PY 

2018 ESRD QIP 

1. Proposal To Modify the Mineral 

Metabolism Reporting Measure 

Beginning in PY 2018 

In the CY 2013 ESRD QIP, we adopted 

a reporting measure focused on mineral 

metabolism, which was based in part on 

NQF #0255 (77 FR 67487 through 

67487). In the CY 2014 ESRD PPS, we 

finalized two revisions to the Mineral 

Metabolism reporting measure: (1) To 

include home peritoneal dialysis 

patients in the measure; and (2) to 

remove serum calcium reporting from 

the measure because of its reporting 

under the Hypercalcemia clinical 

measure (78 FR 72197 through 72198). 

Accordingly, in order to meet the 

requirements for the Mineral 

Metabolism reporting measure, facilities 

currently must report serum phosphorus 

values for each qualifying patient 

treated at the facility on a monthly 

basis. 

Since the publication of the CY 2014 

ESRD PPS final rule, members of the 

renal community requested an ad hoc 

NQF review of measure #0255, focusing 

in particular on whether the measure 

should be updated to allow for the 

reporting of plasma phosphorus data. 

The NQF Consensus Standards 

Approval Committee (CSAC) reviewed 

the measure and recommended that the 

phosphorus reporting measure (NQF 

#0255) be modified to allow for the 

reporting of plasma phosphorus data as 

an alternative to serum phosphorus 

data. Although our TEP reviewed this 

issue and concluded that measure #0255 

should remain unchanged, we concur 

with the CSAC’s recommendation due 

to the CSAC’s ad hoc review of lab data 

demonstrating the equivalency of 

plasma and serum measurements of 

phosphorus, as well as an additional 

concurrent internal review of the data 

by CMS and our measure development 

contractor. We are in agreement with 

the CSAC that readings of phosphorus 

using either plasma or serum are 

appropriate for the measure. As the 

measure developer for NQF #255, we 

are also in the process of revising the 

specifications for that measure and plan 

to submit the revised measure 

specifications to the NQF for 

endorsement. We believe the change to 

these specifications is non-substantive 

because plasma readings are an 

alternative method of reporting on 

phosphorus data and, as we state above, 

are roughly equivalent to serum 

phosphorus readings. 

We considered proposing to allow 

facilities to report plasma phosphorus 

data for the Mineral Metabolism 

reporting measure in the PY 2017 

program, but we have determined that it 

is not operationally feasible to configure 

the relevant data fields in CROWNWeb 

to accept plasma phosphorus readings 

prior to January 1, 2015, the beginning 

of the performance period for that 

program year. For this reason, we 

propose to modify the measure 

specifications for the Mineral 

Metabolism reporting measure to allow 

facilities to report either serum 

phosphorus data or plasma phosphorus 

data, beginning with the PY 2018 

program. We further clarify that we are 

not proposing any other changes to the 

measure specifications for the Mineral 

Metabolism reporting measure. 

2. Proposed New Measures for the PY 

2018 ESRD QIP and Future Payment 

Years 

For the PY 2018 ESRD QIP, we are 

proposing to continue to use all of the 

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measures proposed for the PY 2017 

ESRD QIP, with the exception of the 

ICH CAHPS reporting measure, which 

we are proposing to convert to a clinical 

measure. We are also proposing to adopt 

five new measures. The proposed new 

measures include one new outcome 

measure evaluating transfusions in the 

ESRD population, one measure on 

pediatric peritoneal dialysis adequacy, 

one measure on pain assessment, one 

measure on clinical depression 

screening, and one measure on 

healthcare personnel influenza 

vaccination (see Table 28). 

TABLE 28—NEW MEASURES PROPOSED FOR THE PY 2018 ESRD QIP 

NQF# Measure title 

N/A ............................. Pediatric Peritoneal Dialysis Adequacy, a clinical measure. 

Percentage of pediatric peritoneal dialysis patient-months with spKt/V greater than or equal to 1.8 (dialytic + residual). 

0258 ........................... In-Center Hemodialysis Consumer Assessment of Providers and Systems Survey,1 a clinical measure. 

Proportion of responses to rating items grouped into three composite measures and three global ratings. 

N/A ............................. Standardized Transfusion Ratio, a clinical measure. 

Risk-adjusted standardized transfusion ratio for dialysis facility patients. 

N/A2 ........................... Pain Assessment and Follow-Up, a reporting measure. 

Percentage of adult patients with documentation of pain assessment through discussion with the patient including the 

use of a standardized tool(s) on each visit and documentation of a follow-up place when pain is present. 

N/A3 ........................... Depression Screening and Follow-Up, a reporting measure. 

Percentage of adult patients screened for clinical depression using a standardized tool and follow-up plan is documented. 

N/A4 ........................... NHSN Healthcare Personnel Influenza Vaccination, a reporting measure. 

1The proposed dimensions of the ICH CAHPS survey for use in the PY 2018 ESRD QIP are: Nephrologists’ Communication and Caring, Quality of Dialysis Center Care and Operations, Providing Information to Patients, Overall Rating of the Nephrologists, Overall Rating of the Dialysis 

Center Staff, and Overall Rating of the Dialysis Facility. 2We note that the NQF has previously endorsed a pain measure (NQF #0420) upon which this measure is based. 

3We note that the NQF has previously endorsed a depression measure (NQF #0418) upon which this measure is based. 

4We note that the NQF has previously endorsed a vaccination measure (NQF #0431) upon which this measure is based. 

a. Proposed Standardized Transfusion 

Ratio (STrR) Clinical Measure 

Background 

We are concerned that the inclusion 

of erythropoiesis-stimulating agents 

(ESAs) in the ESRD PPS and the 

removal of the Hemoglobin Less than 10 

g/dL clinical measure from the ESRD 

QIP measure set could result in the 

underutilization of ESAs to manage 

anemia in ESRD patients, with the result 

that these patients have lower achieved 

hemoglobin levels and more frequently 

need red-blood-cell transfusions. 

In addition, patients with ESRD who 

are eligible to receive a kidney 

transplant and are transfused risk 

becoming sensitized to the donor pool, 

thereby making it less likely that a 

transplant will be successful. Blood 

transfusions also carry a small risk of 

transmitting blood-borne infections to 

the patient, and the patient could 

additionally develop a transfusion 

reaction. Furthermore, using infusion 

centers or hospitals to transfuse patients 

is expensive, inconvenient, and could 

compromise future vascular access. 

Overview of Measure 

The Standardized Transfusion Ratio 

(STrR) for all adult Medicare ESRD 

patients is a ratio of the number of 

observed eligible blood transfusion 

events occurring in patients dialyzing at 

a facility to the number of eligible 

transfusions that would be expected 

from a predictive model that accounts 

for patient characteristics within each 

facility. Eligible transfusions are those 

that do not have any claims pertaining 

to the comorbidities identified for 

exclusion in the 12 months immediately 

prior to the transfusion date. 

We plan to submit the STrR measure 

to NQF for review at the next available 

call for measures. Section 

1881(h)(2)(B)(i) of the Act requires that, 

unless the exception set forth in section 

1881(h)(2)(B)(ii) of the Act applies, the 

measures specified for the ESRD QIP 

under section 1881(h)(2)(A)(iv) of the 

Act must have been endorsed by the 

entity with a contract under section 

1890(a) of the Act (which is currently 

NQF). Under the exception set forth in 

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

the case of a specified area or medical 

topic determined appropriate by the 

Secretary for which a feasible and 

practical measure has not been endorsed 

by the entity with a contract under 

section 1890(a) of the Act, the Secretary 

may specify a measure that is not so 

endorsed, so long as due consideration 

is given to measures that have been 

endorsed or adopted by a consensus 

organization identified by the Secretary. 

We have given due consideration to 

endorsed measures, as well as those 

adopted by a consensus organization, 

and we are proposing this measure 

under the authority of 1881(h)(2)(B)(ii) 

of the Act. NQF has not endorsed and 

a consensus organization has not 

adopted a measure on transfusions. 

Because the proposed STrR measure has 

the potential to decrease transfusions 

resulting from underutilization of 

anemia medications, we believe it is 

appropriate to adopt the STrR in the PY 

2018 ESRD QIP. We considered 

proposing to adopt the measure for the 

PY 2017, but we recognized that this is 

a new measure, and wanted to give 

facilities more time to familiarize 

themselves with it. The Measure 

Application Partnership, in its February 

1, 2013 Pre-Rulemaking Report, 

supported the direction of the measure, 

stating that it ‘‘addresses an important 

concept, but the establishment of 

guidelines for hemoglobin range is 

needed.’’ We have received public 

comments and input from a TEP that we 

convened on a prototype STrR measure, 

and finalized development of the 

proposed STrR measure in September 

2013. The resulting measure 

specifications did not include 

hemoglobin thresholds, as no input 

from the TEP or public comments 

supported moving forward with 

thresholds included in the measure. We 

therefore believe these efforts meet the 

requirements for further development of 

the STrR prior to implementation in the 

ESRD QIP. 

In the process of preparing to submit 

the measure for NQF review, we 

conducted analyses on the reliability of 

the STrR measure. The full analysis is 

available at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/ESRDQIP/061_

TechnicalSpecifications.html. The STrR 

is not a simple average; instead, we 

estimate the IUR using a bootstrap 

approach, which uses a resampling 

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Federal Register / Vol. 79, No. 133 / Friday, July 11, 2014 / Proposed Rules 40257 

scheme to estimate the within facility 

variation that cannot be directly 

estimated by ANOVA. A small IUR 

(near 0) reveals that most of the 

variation of the measures between 

facilities is driven by ‘‘random noise,’’ 

indicating the measure would not be a 

reliable characterization of the 

differences among facilities, whereas a 

large IUR (near 1) indicates that most of 

the variation between facilities is due to 

the real difference between facilities. 

We have determined that the average 

IUR for the STrR measure is 0.54, 

meaning that about half of the variation 

in the measure can be attributed to 

between-facility differences, and about 

half to within-facility variation. This 

value of IUR indicates a moderate 

degree of reliability and is consistent 

with the reliability of other outcome 

measures in CMS quality reporting and 

VBP programs. We therefore believe that 

facilities can be reliably scored on the 

proposed STrR measure. 

Data Sources 

Data for the measure come from 

various CMS-maintained data sources 

for ESRD patients including Program 

Medical Management and Information 

System (PMMIS/REMIS), Medicare 

claims, the CROWNWeb database, the 

CMS Annual Facility Survey (Form 

CMS–2744), Medicare dialysis and 

hospital payment records, the CMS 

Medical Evidence Form (Form CMS– 

2728), transplant data from the OPTN, 

the Death Notification Form (Form 

CMS–2746), the Nursing Home 

Minimum Dataset, and the Social 

Security Death Master File. These data 

sources include all Medicare patients. 

Information on transfusions is obtained 

from Medicare Inpatient and Outpatient 

Claims SAFs. 

Outcome 

The outcome of interest for the STrR 

is blood transfusion events (defined as 

the transfer of one or more units of 

blood or blood products into the 

recipient’s blood stream) among 

Medicare ESRD patients dialyzing at the 

facility during the inclusion time 

periods. 

Cohort 

The cohort for the STrR includes all 

adult Medicare ESRD dialysis patients 

who have been documented as having 

had ESRD for at least 90 days. 

Inclusion and Exclusion Criteria 

Patients will not be included in the 

STrR during the first 90 days of ESRD 

dialysis treatment. Starting with day 91 

after onset of ESRD, a patient is 

attributed to a facility once he or she has 

been receiving dialysis there for 60 

days. When a patient transfers from one 

facility to another, we are proposing that 

the patient would continue to be 

attributed to the original facility for 60 

days from the date of the transfer. 

Starting on day 61, the patient would be 

attributed to the transferee facility. 

Patients would be excluded from the 

measure for three days prior to the date 

they receive a transplant to avoid 

including transfusions associated with 

the transplant hospitalization. 

We are also proposing to require that 

patients reach a certain level of 

Medicare-paid dialysis bills to be 

included in the STrR, or that patients 

have Medicare-paid inpatient claims 

during the period. This requirement is 

intended to assure completeness of 

transfusion information for all patients 

included in the measure calculation by 

excluding non-Medicare patients and 

patients for whom Medicare is a 

secondary payer, because they are not 

expected to have complete information 

on transfusion available in the claims 

data. For each patient, a month is 

included as a month at risk for 

transfusion if that month in the period 

is considered ‘‘eligible.’’ A month is 

considered eligible if it is within two 

months of a month in which a patient 

has $900 of Medicare-paid claims or at 

least one Medicare-paid inpatient claim. 

The $900 amount represents 

approximately the tenth percentile of 

monthly dialysis claims per patient. 

In addition, a transfusion event is 

eligible for inclusion in the STrR 

measure if the patient did not present 

with certain comorbid conditions 

during the 12 month period 

immediately prior to the date of the 

transfusion event. We are proposing to 

exclude these transfusion events 

because the identified comorbid 

conditions are associated with a higher 

risk of transfusion and require different 

anemia management practices that the 

measure is not intended to address. 

Specifically, we are proposing that a 

transfusion event will be excluded from 

the measure if the patient, during the 12 

month look back period, had a Medicare 

claim for: hemolytic and aplastic 

anemia; solid organ cancer (breast, 

prostate, lung, digestive tract and 

others); lymphoma; carcinoma in situ; 

coagulation disorders; multiple 

myeloma; myelodysplastic syndrome 

and myelofibrosis; leukemia; head and 

neck cancer; other cancers (connective 

tissue, skin, and others); metastatic 

cancer; or sickle cell anemia. The 

specific diagnoses used to identify each 

of these conditions are listed in the 

proposed measure specifications, which 

are available at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/ESRDQIP/061_

TechnicalSpecifications.html. 

Risk Adjustment 

The denominator of the STrR uses 

expected transfusions calculated from a 

Cox model that is extended to handle 

repeated events. For computational 

purposes, the proposed STrR measure 

adopts a model with piecewise-constant 

baseline rates. A stage 1 model is fitted 

to the national data with piecewiseconstant baseline rates across facilities. 

Transfusion rates are adjusted for: 

patient age; diabetes as a cause of ESRD; 

duration of ESRD; nursing home status; 

BMI at incidence; comorbidity index at 

incidence; and calendar year. This 

model allows baseline transfusion rates 

to vary between facilities, and applies 

the regression coefficients for the riskadjustment model to each facility 

identically. This approach is robust to 

possible differences between facilities in 

the patient mix being treated. The 

second stage uses the risk-adjustment 

factor from the first stage as an offset. 

The stage 2 model then calculates the 

national baseline transfusion rate. 

The STrR measure includes the 

following risk adjustors, which are 

obtained from the following data 

sources: 

Risk adjustor Data source 

Age ................................................................................................................................................................ REMIS database. 

Diabetes as cause of ESRD ......................................................................................................................... CMS Form 2728. 

BMI at incidence of ESRD ............................................................................................................................ CMS Form 2728. 

Comorbidity index ......................................................................................................................................... CMS Form 2728. 

Nursing home status ..................................................................................................................................... Nursing Home Minimum Dataset. 

Duration of ESRD ......................................................................................................................................... CMS Form 2728. 

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5U.S. Renal Data System, USRDS 2012 Annual 

Data report: Atlas of Chronic Kidney Disease and 

End-stage Renal Disease in the United States, 

National Institutes of Health, National Institute of 

Diabetes and Digestive and Kidney Diseases, 

Bethesda, MD, 2012. 

6U.S. Renal Data System, USRDS 2012 Annual 

Data report: Atlas of Chronic Kidney Disease and 

End-stage Renal Disease in the United States, 

National Institutes of Health, National Institute of 

Diabetes and Digestive and Kidney Diseases, 

Bethesda, MD, 2012. 

7Paniagua R, Amato D, Vonesh E, et al. ‘‘Effects 

of increased peritoneal clearance on mortality rates 

in peritoneal dialysis: ADEMEX, a prospective, 

randomized, controlled trial.’’ Journal of the 

American Society of Nephrology: JASN (2002) 

13:1307–1320. PMID: 11961019; See also Lo WK, 

Lui SL, Chan TM, et al. ‘‘Minimal and optimal 

peritoneal Kt/V targets: Results of anuric peritoneal 

dialysis patient’s survival analysis.’’ Kidney 

international (2005) 67:2032–2038. PMID: 

15840054. 

More details on the risk-adjustment 

calculations, and the rationale for 

selecting these risk adjustors and not 

others, can be found at: http://

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

Specifications.html. 

As indicated in the table above, the 

proposed STrR measure risk adjusts 

predominantly on the basis of patient 

characteristics collected on CMS Form 

2728, and we believe that this riskadjustment methodology is reliable and 

valid. 

NQF evaluates measures on the basis 

of four criteria: importance, scientific 

acceptability, feasibility, and usability. 

The validity and reliability of a 

measure’s risk-adjustment calculations 

fall under the ‘‘scientific acceptability’’ 

criterion, and Measure Evaluation 

Criterion 2b4 specifies NQF’s preferred 

approach for risk adjusting outcome 

measures (http://www.qualityforum.org/ 

docs/measure_evaluation_

criteria.aspx#scientific). This criterion 

states that patient comorbidities should 

only be included in risk-adjustment 

calculations if they are (1) present at the 

start of care and (2) not indicative of 

disparities or deficiencies in the quality 

of care provided. As indicated in the 

‘‘Inclusion and Exclusion Criteria’’ 

subsection above, the proposed STrR 

clinical measure includes Medicare 

patients who have been documented as 

having had ESRD for at least 90 days 

and are not excluded for other reasons. 

Accordingly, we believe that NQF 

Measure Evaluation Criterion 2b4 

supports risk-adjusting the proposed 

STrR measure on the basis of incident 

patient comorbidity data collected on 

CMS Form 2728, because these 

comorbidities are likely present at the 

start of care. Moreover, comorbidities 

that develop after the 90th day of 

chronic dialysis treatment, and are 

statistically associated with 

transfusions, can be reflective of the 

quality of care provided by the facility. 

Therefore, we do not believe that NQF 

Measure Evaluation Criterion 2b4 

supports risk adjusting the proposed 

STrR measure on the basis of updated 

comorbidity data, because doing so may 

mask disparities or deficiencies in the 

quality of care provided, thereby 

obscuring assessments of facility 

performance. For these reasons, we 

believe that the risk-adjustment 

methodology for the proposed STrR 

measure is consistent with NQF 

guidelines for measure developers. 

Testing that we have undertaken has 

confirmed the validity and reliability of 

the proposed STrR measure using these 

data. We anticipate submitting the 

measure to the NQF for endorsement in 

CY 2015. 

Full documentation of the STrR riskadjustment methodology is available at: 

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

Specifications.html. 

Calculating the STrR Measure 

The STrR measure is calculated as the 

ratio of the number of observed 

transfusions to the number of expected 

transfusions. The ratio is greater than 

one for facilities that have more 

transfusions than would be expected for 

an average facility with similar cases, 

and less than one if the facility has 

fewer transfusions than would be 

expected for an average facility with 

similar cases. This ratio is calculated in 

terms of patient-years at risk. ‘‘Patientyear at risk’’ means that the 

denominator of the rate calculation is 

obtained by adding exposure times of all 

patients until a censoring event (that is, 

death, transplant, or end of the time 

period) because each patient’s time at 

risk varies based on these censoring 

events. Time at risk is the time period 

in which each patient is eligible to have 

the transfusion event occur for the 

purposes of the measure calculation, 

exclusive of all days that have claims 

pertaining to the exclusionary 

comorbidities identified within the 

previous 12 months. 

The predicted value from stage 1 of 

the model and the baseline rate from 

stage 2 of the model, as described above, 

are then used to calculate the expected 

number of transfusion events for each 

patient over the period during which 

the patient is seen to be at risk for a 

transfusion event. 

The STrR is a point estimate—the best 

estimate of a facility’s transfusion rate 

based on the facility’s case mix. For 

more detailed information on the 

calculation methodology, please refer to 

our Web site at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/ESRDQIP/061_

TechnicalSpecifications.html. 

We seek comments on this proposal to 

adopt the proposed STrR clinical 

measure. 

b. Proposal To Adopt the Pediatric 

Peritoneal Dialysis Adequacy Clinical 

Measure and Add the Proposed Measure 

to the Dialysis Adequacy Measure Topic 

Section 1881(h)(2)(A)(i) states that the 

ESRD QIP must evaluate facilities based 

on measures of dialysis adequacy. 

Beginning with the PY 2018 ESRD QIP, 

we propose to add a new measure of 

pediatric peritoneal dialysis adequacy to 

the Dialysis Adequacy measure topic. If 

this proposal is finalized, then the 

modified Dialysis Adequacy measure 

topic would include four clinical 

measures on dialysis adequacy—(1) 

Adult Hemodialysis Adequacy; (2) 

Adult Peritoneal Dialysis Adequacy; 

and (3) Pediatric Hemodialysis 

Adequacy; and (4) Pediatric Peritoneal 

Dialysis Adequacy. 

Approximately 900 pediatric patients 

in the United States receive peritoneal 

dialysis.5 Although recent studies 

suggest improvement in mortality rates 

among pediatric patients receiving 

maintenance dialysis over time, 

mortality in this patient population 

remains high.6 Despite a lack of longterm outcome studies on pediatric 

peritoneal dialysis patients, outcome 

studies performed in the adult ESRD 

population have shown an association 

between the dose of peritoneal dialysis 

and clinical outcomes,7 which could 

suggest that improved quality of dialysis 

care in the fragile pediatric patient 

population may further improve 

survival in those patients. 

Section 1881(h)(2)(A)(iv) gives the 

Secretary authority to adopt measures 

for the ESRD QIP that cover a wide 

variety of topics. Section 

1881(h)(2)(B)(ii) of the Act states that 

‘‘In the case of a specified area or 

medical topic determined appropriate 

by the Secretary for which a feasible and 

practical measure has not been endorsed 

by the entity with a contract under 

section 1890(a) of Act [in this case 

NQF], the Secretary may specify a 

measure that is not so endorsed so long 

as due consideration is given to 

measures that have been endorsed or 

adopted by a consensus organization 

identified by the Secretary.’’ We have 

given due consideration to endorsed 

measures, as well as those adopted by 

a consensus organization. Because no 

NQF-endorsed measures or measures 

adopted by a consensus organization on 

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8 Kimmel PL, Cuckor D, Cohen SD, Peterson RA. 

Depression in end-stage renal disease patients: a 

critical review. Advances in Chronic Kidney 

Disease. 2007:14(4):328–34. 

pediatric peritoneal dialysis adequacy 

currently exist, we are proposing to 

adopt the Pediatric Peritoneal Dialysis 

Adequacy clinical measure under the 

authority of section 1881(h)(2)(B)(ii) of 

the Act. 

The Measure Application Partnership 

expressed conditional support for 

measure XCBMM, ‘‘Pediatric Peritoneal 

Dialysis Adequacy: Achievement of 

Target Kt/V’’ in its January 2014 PreRulemaking Report, noting it would 

‘‘consider this measure for inclusion in 

the program once it has been reviewed 

for endorsement.’’ However, we believe 

the measure is ready for adoption in the 

ESRD QIP because it has been fully 

tested for reliability and has received 

consensus support from the TEP that 

was tasked with developing it. We 

intend to submit this measure to the 

NQF for endorsement in late 2014 or 

early 2015. 

For PY 2018 and future payment 

years, we propose to adopt the Pediatric 

Peritoneal Dialysis Adequacy clinical 

measure, which assesses the percentage 

of eligible pediatric peritoneal dialysis 

patient-months in which a Kt/V of 

greater than or equal to 1.8 was 

achieved during the performance 

period. Qualifying patient-months are 

defined as months in which a peritoneal 

dialysis patient is under the age of 18 

and has been receiving peritoneal 

dialysis treatment for 90 days or longer. 

Performance on this measure will be 

expressed as a proportion of patientmonths meeting the measure threshold 

of 1.8, and the measure will be scored 

based on Kt/V data entered on Medicare 

72x claims. The measure is a 

complement to the existing Kt/V 

dialysis adequacy measures previously 

adopted in the ESRD QIP. Technical 

specifications for the proposed pediatric 

peritoneal dialysis adequacy clinical 

measure can be found at: http://www.

cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/

ESRDQIP/061_Technical

Specifications.html. 

We seek comments on this proposal to 

adopt the Pediatric Peritoneal Dialysis 

Adequacy measure. 

c. Proposed ICH CAHPS Clinical 

Measure 

Section 1881(h)(2)(A)(ii) of the Act 

states that the Secretary shall specify, to 

the extent feasible, measures of patient 

satisfaction. Patients with ESRD are an 

extremely vulnerable population: They 

are completely reliant on ESRD 

providers for life-saving care, and they 

are often reluctant to express concerns 

about the care they receive from an 

array of staff, both professional and nonprofessional. Patient-centered 

experience is an important measure of 

the quality of patient care, and it is a 

component of the 2013 NQS, which 

emphasizes patient-centered care by 

rating patient experience as a means for 

empowering patients and improving the 

quality of their care. 

Following a rigorous process, the ICH 

CAHPS Survey was developed to 

capture the experience of in-center 

hemodialysis patients. The NQF 

endorsed and the Measures Application 

Partnership supported this quality 

measure (NQF #0258: CAHPS In-Center 

Hemodialysis Survey). The ICH CAHPS 

Survey captures the experience of incenter hemodialysis patients on three 

dimensions: ‘‘nephrologists’ 

communication and caring;’’ ‘‘quality of 

dialysis center care and operations;’’ 

and ‘‘providing information to 

patients.’’ Three global ratings are also 

part of the standardized ICH CAHPS 

Survey: Rating of the nephrologist; 

rating of the staff; and rating of the 

facility. 

We believe that this measure enables 

patients to rate their experience of incenter dialysis treatment without fear of 

retribution. Public reporting of results 

from the ICH CAHPS survey, once 

enough data are available, will satisfy 

requests to provide consumers (patients 

and family members alike) with desired 

information on viewpoints from 

patients. In addition, collecting and 

reporting ICH CAHPS survey results 

assists facilities with their internal 

quality improvement efforts and 

external benchmarking with other 

facilities, and it provides CMS with 

information that can be used to monitor 

the experience of patients with ESRD. 

Starting with the PY 2014 program, 

we have taken steps to develop the 

baseline data necessary to propose and 

implement NQF #0258 as a clinical 

measure in PY 2018. In the PY 2014 and 

PY 2015 programs, we adopted a 

reporting measure related to the ICH 

CAHPS survey, which required that 

facilities attest they had administered 

the survey according to the 

specifications set by the Agency for 

Healthcare Research and Quality 

(AHRQ). In the CY 2014 ESRD PPS final 

rule, we: (1) Expanded the ICH CAHPS 

reporting measure to require facilities to 

submit (via CMS-approved vendors) 

their survey results to CMS; (2) 

increased the patient minimum for the 

measure from 11 to 30 survey-eligible 

patients; (3) required that facilities (via 

CMS-approved vendors) administer the 

survey according to specifications set by 

CMS; and (4) required facilities (via 

CMS-approved vendors) to administer 

the survey twice during each 

performance period, and to report both 

sets of survey results by the date 

specified on http://ichcahps.org, 

starting in PY 2017 (78 FR 72193 

through 72196). 

By CY 2016 (the proposed 

performance period for the PY 2018 

ESRD QIP), we will have worked with 

dialysis facilities for four years to help 

them become familiar with the ICH 

CAHPS survey. By that time, we believe 

that facilities will be sufficiently versed 

in the survey administration process to 

be reliably evaluated on the NQFendorsed ICH CAHPS measure (NQF 

#0258). Because facilities (and CMSapproved vendors) will be familiar 

enough with the ICH CAHPS survey 

instrument to be reliably scored on the 

basis of their survey results, we believe 

it is reasonable to expand the ICH 

CAHPS reporting measure into a clinical 

measure for the PY 2018 ESRD QIP. 

For these reasons, and because a 

clinical measure would have a greater 

impact on clinical practice by holding 

facilities accountable for their actual 

performance, we propose to replace the 

ICH CAHPS reporting measure that we 

adopted in the CY 2014 ESRD PPS Final 

Rule with a new clinical measure for PY 

2018 and future payment years. This 

proposed ICH CAHPS clinical measure 

is NQF #0258: CAHPS In-Center 

Hemodialysis Survey. We are not 

proposing to change the semiannual 

survey administration and reporting 

requirements. The proposed scoring 

methodology for the ICH CAHPS 

clinical measure is discussed below in 

section III.G.4.c. Technical 

specifications for the ICH CAHPS 

clinical measure can be found at: 

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

Specifications.html. 

We seek comments on this proposal. 

d. Proposed Screening for Clinical 

Depression and Follow-Up Reporting 

Measure 

Depression is the most common 

psychological disorder in patients with 

ESRD. Depression causes suffering, a 

decrease in quality of life, and 

impairment in social and occupational 

functions; it is also associated with 

increased health care costs. Current 

estimates put the depression prevalence 

rate as high as 20 percent to 25 percent 

in patients with ESRD.8 Studies have 

also shown that depression and anxiety 

are the most common comorbid 

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40260 Federal Register / Vol. 79, No. 133 / Friday, July 11, 2014 / Proposed Rules 

9Feroze, U., Martin, D., Reina-Patton, A., 

Kalantar-Zadeh, K., & Kopple, J. D. (2010). Mental 

health, depression, and anxiety in patients on 

maintenance dialysis. Iranian Journal of Kidney 

Diseases, 4(3), 173–80. 

10Cukor, D., Cohen, S. D., Peterson, R. A., & 

Kimmel, P. L. (2007). Psychosocial aspects of 

chronic disease: ESRD as a paradigmatic illness. 

Journal of the American Society of Nephrology, 

18(12), 3042–3055; and Kimmel, P. L., Peterson, R. 

A., Weihs, K. L., Simmens, S. J., Alleyne, S., Cruz, 

I., & Veis, J. H. (2000). Multiple measurements of 

depression predict mortality in a longitudinal study 

of chronic hemodialysis outpatients. Kidney 

International, 57(5), 2093–2098. 

11Preljevic, V. T., ;sthus, T. B. H., Sandvik, L., 

Opjordsmoen, S., Nordhus, I. H., Os, I., & Dammen, 

T. (2012). Screening for anxiety and depression in 

dialysis patients: Comparison of the Hospital 

Anxiety and Depression Scale and the Beck 

Depression Inventory. Journal of Psychosomatic 

Research, 73(2), 139–144. 

12Cohen, S. D., Patel, S. S., Khetpal, P., Peterson, 

R. A., & Kimmel, P. L. (2007). Pain, sleep 

disturbance, and quality of life in patients with 

chronic kidney disease. Clinical Journal of the 

American Society of Nephrology, 2(5), 919–925. 

13 Davison SN. Pain in hemodialysis patients: 

prevalence, cause, severity, and management. 

American Journal of Kidney Disease. 2003; 

42:1239–1247 

14 Davison, S. N. (2007). The prevalence and 

management of chronic pain in end-stage renal 

disease. Journal of Palliative Medicine, 10(6), 1277– 

1287. 

15 De Castro C. (2013). Pain assessment and 

management in hemodialysis patients. CANNT 

Journal; 23(3):29–32; Weisbord SD, Fried LF, 

Arnold RM, Fine MJ, Levenson DJ, et al. Prevalence, 

severity, and importance of physical and emotional 

symptoms in chronic hemodialysis patients. (2005) 

Journal of the American Society of Nephrology; 

16(8):2487–2494. 

16 De Castro C. (2013). Pain assessment and 

management in hemodialysis patients. CANNT 

Journal; 23(3):29–32; Wyne A, Rai R, Cuerden M, 

Clark WF, Suri RS. (2011). Opioid and 

benzodiazepine use in end-stage renal disease: a 

systematic review. Clinical Journal of the American 

Society of Nephrology. 6(2):326–333. 

illnesses in patients with ESRD.9

Moreover, depressive affect and 

decreased perception of social support 

have been associated with higher rates 

of mortality in the ESRD population, 

and some studies suggest that this 

association is as strong as that between 

medical risk factors and mortality.10

Nevertheless, depression and anxiety 

remain under-recognized and undertreated, despite the availability of 

reliable screening instruments.11

Therefore, a measure that assesses 

whether facilities screen patients for 

depression, and develop follow-up 

plans when appropriate, offers an 

opportunity to improve the health of 

patients with ESRD. 

We are proposing to adopt a 

depression measure that is based on an 

NQF-endorsed measure (NQF #0418: 

Screening for Clinical Depression). NQF 

#0418 assesses the percentage of 

patients screened for clinical depression 

using an age-appropriate standardized 

tool and documentation of a follow-up 

plan where necessary. The Measures 

Application Partnership supported the 

use of NQF #0418 in the ESRD QIP in 

its January 2014 Pre-Rulemaking Report, 

because the measure ‘‘addresses a 

National Quality Strategy [NQS] aim not 

adequately addressed in the program 

measure set’’ and promotes person- and 

family-centered care. We are proposing 

to adopt a reporting measure based on 

this NQF-endorsed measure so that we 

can collect data that we can use in the 

future to calculate both achievement 

and improvement scores, should we 

propose to adopt the clinical version of 

this measure in future rulemaking. 

Although we recognize that we recently 

adopted the NHSN Bloodstream 

Infection clinical measure despite a lack 

of baseline data to calculate 

achievement and improvement scores, 

we believe that measure warranted 

special treatment in light of the fact that 

it addresses patient safety. Because the 

proposed screening for clinical 

depression measure addresses quality of 

life and patient well-being, and not 

patient safety, we think it is appropriate 

to adopt it as a reporting measure until 

such time that we can collect the 

baseline data needed to score it as a 

clinical measure. 

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

states that ‘‘In the case of a specified 

area or medical topic determined 

appropriate by the Secretary for which 

a feasible and practical measure has not 

been endorsed by the entity with a 

contract under section 1890(a) [in this 

case NQF], the Secretary may specify a 

measure that is not so endorsed as long 

as due consideration is given to 

measures that have been endorsed or 

adopted by a consensus organization 

identified by the Secretary.’’ Because we 

have given due consideration to 

endorsed measures as well as those 

adopted by a consensus organization 

and determined it is not practical or 

feasible to adopt NQF #0418 as a 

clinical measure in the ESRD QIP at this 

time, we are proposing to adopt the 

Screening for Clinical Depression and 

Follow-Up Plan reporting measure 

under the authority of section 

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

For PY 2018 and future payment 

years, we propose that facilities must 

report one of the following conditions in 

CROWNWeb, at least once per 

performance period, for each qualifying 

patient (defined below): 

1. Screening for clinical depression is 

documented as being positive, and a 

follow-up plan is documented. 

2. Screening for clinical depression 

documented as positive, and a followup plan not documented, and the 

facility possess documentation stating 

the patient is not eligible. 

3. Screening for clinical depression 

documented as positive, the facility 

possesses no documentation of a followup plan, and no reason is given. 

4. Screening for clinical depression is 

documented as negative, and a followup plan is not required. 

5. Screening for clinical depression 

not documented, but the facility 

possesses documentation stating the 

patient is not eligible. 

6. Clinical depression screening not 

documented, and no reason is given. 

For this proposed measure, qualifying 

patients are defined as patients 12 years 

or older who have been treated at the 

facility for 90 days or longer. This 

proposed measure will collect the same 

data described in NQF #0418, but we 

are proposing to score facilities based on 

whether they successfully report the 

data, and not the measure results. More 

specifically, facilities will be scored on 

whether they report one of the above 

conditions for each qualifying patient 

once before February 1 of the year 

directly following the performance 

period. Technical specifications for the 

Screening for Clinical Depression and 

Follow-Up reporting measure can be 

found at: http://www.cms.gov/Medicare/ 

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

Specifications.html. 

We seek comments on these 

proposals. 

e. Proposed Pain Assessment and 

Follow-Up Reporting Measure 

Pain is one of the most common 

symptoms in patients with ESRD.12

Studies have shown that pain is a 

significant problem for more than 50 

percent of patients with ESRD, and up 

to 82 percent of those patients report 

moderate to severe chronic pain.13 Pain 

is commonly associated with quality of 

life in early- and late-stage chronic 

kidney disease patients, but it is not 

effectively managed in the ESRD patient 

population and chronic pain often goes 

untreated.14 Observational studies 

suggest that under-managed pain has 

the potential to induce or exacerbate 

comorbid conditions in ESRD, which 

may in turn adversely affect dialysis 

treatment.15 Patients with ESRD 

frequently experience pain that has a 

debilitating impact on their daily lives, 

and research has shown a lack of 

effective pain management strategies 

currently in place in dialysis facilities.16

Therefore, a measure that assesses 

whether facilities regularly assess their 

patients’ pain, and develop follow-up 

plans as necessary, offers the possibility 

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17Soni R, Horowitz B, Unruh M. Immunization in 

end-stage renal disease: Opportunity to improve 

outcomes. Semin, Dial. 2013 Jul–Aug;26(4):416–26. 

18Fiore AE, Shay DK, Haber P, et al. Prevention 

and control of influenza. Recommendations of the 

Advisory Committee on Immunization Practices 

(ACIP). MMWR Recomm Rep. 2007;56:1–54. 

19Pearson ML, Bridges CM, Harper SA. Influenza 

vaccination of health-care personnel: 

Recommendations of the Healthcare Infection 

Control Practices Advisory Committee (HICPAC) 

and the Advisory Committee on Immunization 

Practices (ACIP). MMWR. 2006:55:1–16. 

20Talbot TR, Bradley SE., Cosgrove SE., et al. 

Influenza vaccination of healthcare workers and 

vaccine allocation for healthcare workers during 

vaccine shortages. Infect Control Hosp Epidemiol. 

2005;26(11):882–90. 

21Carman WF, Elder AG, Wallace LA, et al. 

Effects of influenza vaccination of health-care 

workers on mortality of elderly people in long-term 

care: a randomized controlled trial. Lancet. 

2000;355(9198):93–7; see also Potter J, Stott DJ, 

Roberts MA, et al. Influenza vaccination of health 

care workers in long-term-care hospitals reduces the 

mortality of elderly patients. J infect Dis. 

1997;175(1):1–6. 

of improving the health and well-being 

of patients with ESRD. 

We are proposing to adopt a pain 

measure that is based on an NQFendorsed measure (NQF #0420: Pain 

Assessment and Follow-Up). NQF 

#0420 assesses the percentage of 

patients with documentation of a pain 

assessment using a standardized tool, 

and documentation of a follow-up plan 

when pain is present. The Measures 

Application Partnership supported the 

use of NQF #0420 in the ESRD QIP in 

its January 2014 Pre-Rulemaking Report, 

because the measure ‘‘addresses a 

National Quality Strategy [NQS] aim not 

adequately addressed in the program 

measure set’’ and promotes person- and 

family-centered care. We are proposing 

to adopt a reporting measure based on 

this NQF-endorsed measure so that we 

can collect data that we can use in the 

future to calculate both achievement 

and improvement scores, should we 

propose to adopt the clinical version of 

this measure in future rulemaking. 

Although we recognize that we recently 

adopted the NHSN Bloodstream 

Infection clinical measure despite a lack 

of baseline data to calculate 

achievement and improvement scores, 

we believe that measure warranted 

special treatment in light of the fact that 

it addresses patient safety. Because the 

proposed screening for pain measure 

addresses quality of life and patient 

well-being, and not patient safety, we 

think it is appropriate to adopt it as a 

reporting measure until such time that 

we can collect the baseline data needed 

to score it as a clinical measure. 

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

states that ‘‘In the case of a specified 

area or medical topic determined 

appropriate by the Secretary for which 

a feasible and practical measure has not 

been endorsed by the entity with a 

contract under section 1890(a) of the 

Act [in this case NQF], the Secretary 

may specify a measure that is not so 

endorsed so long as due consideration is 

given to measures that have been 

endorsed or adopted by a consensus 

organization identified by the 

Secretary.’’ Because we have given due 

consideration to endorsed measures, as 

well as those adopted by a consensus 

organization, and determined it is not 

practical or feasible to adopt those 

measures in the ESRD QIP, we are 

proposing to adopt the Pain Assessment 

and Follow-Up reporting measure under 

the authority of section1881(h)(2)(B)(ii) 

of the Act. 

For PY 2018 and future payment 

years, we propose that facilities must 

report one of the following conditions in 

CROWNWeb, once every six months per 

performance period, for each qualifying 

patient (defined below): 

1. Pain assessment using a 

standardized tool is documented as 

positive, and a follow-up plan is 

documented. 

2. Pain assessment documented as 

positive, a follow-up plan is not 

documented, and the facility possesses 

documentation that the patient is not 

eligible. 

3. Pain assessment documented as 

positive using a standardized tool, a 

follow-up plan is not documented, and 

no reason is given. 

4. Pain assessment using a 

standardized tool is documented as 

negative, and no follow-up plan 

required. 

5. No documentation of pain 

assessment, and the facility possesses 

documentation the patient is not eligible 

for a pain assessment using a 

standardized tool. 

6. No documentation of pain 

assessment, and no reason is given. 

For this measure, a qualifying patient 

is defined as a patient aged 18 years or 

older who has been treated at the 

facility for 90 days or longer. This 

proposed measure will collect the same 

data described in NQF #0420, but we 

are proposing a few modifications to the 

NQF-endorsed version. First, we are 

proposing that facilities must report 

data for each patient once every six 

months, whereas NQF #0420 requires 

facilities to report the data based on 

each visit. We are proposing this 

modification because we agree with 

public comments reflected on the 

Measures Application Partnership’s 

January 2014 Pre-Rulemaking Report, 

which stated that conducting a pain 

assessment every time a patient receives 

dialysis would be unduly burdensome 

for facilities. Second, we are proposing 

that conditions covering the first six 

months of the performance period must 

be reported in CROWNWeb before 

August 1 of the performance period, and 

that conditions covering the second six 

months of the performance period must 

be reported in CROWNWeb before 

February 1 of the year directly following 

the performance period. We believe this 

reporting schedule will ensure regular 

monitoring and follow-up of patients’ 

pain without imposing an undue burden 

on facilities. Third, we are proposing to 

score facilities based on whether they 

successfully report the data, and not 

based on the measure results. Technical 

specifications for the Pain Assessment 

and Follow-Up reporting measure can 

be found at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/ESRDQIP/061_

TechnicalSpecifications.html. 

We seek comments on this proposal. 

f. Proposed NHSN Healthcare Personnel 

Influenza Vaccination Reporting 

Measure 

Infection is the second most common 

cause of death in patients with ESRD, 

following cardiovascular causes,17 and 

influenza accounts for significant 

morbidity and mortality in patients 

receiving hemodialysis.18 Healthcare 

personnel (HCP) can acquire influenza 

from patients and transmit influenza to 

patients and other HCP; decreasing 

transmission of influenza from HCP to 

persons at high risk likely reduces 

influenza-related deaths among persons 

at high risk for complications from 

influenza, including patients with 

ESRD.19 Vaccination is an effective 

preventive measure against influenza 

that can prevent many illnesses, deaths, 

and losses in productivity.20 In 

addition, HCP are considered high 

priorities for vaccine use. Achieving and 

sustaining high influenza vaccination 

coverage among HCP is intended to help 

protect HCP and their patients, and to 

reduce disease burden and healthcare 

costs. Results of studies in post-acute 

care settings similar to the ESRD facility 

setting indicate that higher vaccination 

coverage among HCP is associated with 

lower all-cause mortality.21 We 

therefore propose to adopt an NHSN 

HCP Influenza Vaccination reporting 

measure for PY 2018 and future 

payment years. 

We are proposing to use a measure 

that is based on an NQF-endorsed 

measure (NQF #0431: Influenza 

Vaccination Coverage Among 

Healthcare Personnel) of the percentage 

of qualifying HCP who (a) received an 

influenza vaccination; (b) were 

determined to have a medical 

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contraindication; (c) declined influenza 

vaccination; or (d) were of an unknown 

vaccination status. A ‘‘qualifying HCP’’ 

is defined as an employee, licensed 

independent practitioner, or adult 

student/trainee/volunteer who works in 

a facility for at least one day between 

October 1 and March 31. The Measures 

Application Partnership supported the 

use of NQF #0431 in the ESRD QIP in 

its January 2014 Pre-Rulemaking Report 

because the measure is NQF-endorsed 

for use in the dialysis facility care 

setting. We are proposing to adopt a 

reporting measure based on this NQFendorsed measure so that we can collect 

data that we can use in the future to 

calculate both achievement and 

improvement scores, should we propose 

to adopt the clinical version of this 

measure in future rulemaking. Although 

we recognize that we recently adopted 

the NHSN Bloodstream Infection 

clinical measure despite a lack of 

baseline data to calculate achievement 

and improvement scores, we believe 

that measure warranted special 

treatment in light of the fact that it 

addresses patient safety. Because the 

proposed NHSN HCP Influenza 

Vaccination reporting measure 

addresses population health, and not 

patient safety, we think it is appropriate 

to adopt it as a reporting measure until 

such time that we can collect the 

baseline data needed to score it as a 

clinical measure. 

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

states that ‘‘In the case of a specified 

area or medical topic determined 

appropriate by the Secretary for which 

a feasible and practical measure has not 

been endorsed by the entity with a 

contract under section 1890(a) [in this 

case, NQF], the Secretary may specify a 

measure that is not so endorsed as long 

as due consideration is given to 

measures that have been endorsed or 

adopted by a consensus organization 

identified by the Secretary.’’ Because we 

have given due consideration to 

endorsed measures as well as those 

adopted by a consensus organization, 

and determined it is not practical or 

feasible to adopt this measure in the 

ESRD QIP, we are proposing to adopt 

the NHSN Healthcare Personnel 

Influenza Vaccination reporting 

measure under the authority of section 

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

For PY 2018 and future payment 

years, we propose that facilities must 

submit, on an annual basis, an HCP 

Influenza Vaccination Summary Form 

to CDC’s NHSN system, according to the 

specifications available in the NHSN 

Healthcare Personnel Safety Component 

Protocol (http://www.cdc.gov/nhsn/

PDFs/HPS-manual/vaccination/HPSflu-vaccine-protocol.pdf). This proposed 

measure differs from NQF #0431 in that 

we are proposing to collect the same 

data but will score facilities on the basis 

of whether they submit this data, rather 

than on the percentage of HCP 

vaccinated. We propose that the 

deadline for reporting this information 

to NHSN be May 15th of each year. This 

date is consistent with the reporting 

deadline established by CMS for other 

provider types reporting HCP 

vaccination data to NHSN. Because the 

flu season typically spans from October 

to April, NHSN protocols submitted by 

May 15 would document vaccinations 

received during the preceding flu 

season. For example, NHSN HCP 

Influenza Vaccination Summary Forms 

submitted by May 15, 2016, would 

contain data from October 1, 2015 to 

March 31, 2016, and would be used for 

the PY 2018 ESRD QIP; NHSN protocols 

submitted by May 15, 2017, would 

contain data from October 1, 2016 to 

March 31, 2017, and would be used for 

the PY 2019 ESRD QIP, and so on. 

Technical specifications for this 

measure can be found at: http://www.

cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/

ESRDQIP/061_Technical

Specifications.html. 

We request comments on this 

proposal. 

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2. Proposed Performance Period for the 

PY 2018 ESRD QIP 

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

requires the Secretary to establish the 

performance period with respect to a 

year, and that the performance period 

occur prior to the beginning of such 

year. In accordance with our proposal to 

adopt CY 2015 as the performance 

period for the PY 2017 ESRD QIP, as 

well as our policy goal to collect 12 

months of data on each measure when 

feasible, we are proposing to adopt CY 

2016 as the performance period for the 

PY 2018 ESRD QIP. With respect to the 

NHSN Healthcare Personnel Influenza 

Vaccination Reporting measure, we are 

proposing that the performance period 

will be from October 1, 2015 through 

March 31, 2016, which is consistent 

with the length of the 2015–2016 

influenza season. 

We seek comments on these 

proposals. 

3. Proposed Performance Standards, 

Achievement Thresholds, and 

Benchmarks for the PY 2018 ESRD QIP 

a. Proposed Performance Standards, 

Achievement Thresholds, and 

Benchmarks for the Clinical Measures in 

the PY 2018 ESRD QIP 

For the same reasons stated in the CY 

2013 ESRD PPS final rule (77 FR 67500 

through 76502), we are proposing for PY 

2018 to set the performance standards, 

achievement thresholds, and 

benchmarks based on the 50th, 15th, 

and 90th percentile, respectively, of 

national performance in CY 2014 for all 

the clinical measures except for the 

proposed ICH CAHPS clinical measure. 

As finalized in the CY 2014 ESRD PPS 

Final Rule (78 FR 72213), facilities are 

not required to administer the ICH 

CAHPS survey (via a CMS-approved 

third-party vendor) on a semiannual 

basis until CY 2015, the proposed 

performance period for the PY 2017 

ESRD QIP. We believe that ICH CAHPS 

data collected during CY 2014 will not 

be reliable enough to use for the 

purposes of establishing performance 

standards, achievement thresholds, and 

benchmarks, because facilities are only 

required to administer the survey once 

in CY 2014. Therefore, we propose to set 

the performance standards, achievement 

thresholds, and benchmarks based on 

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

respectively, of national performance in 

CY 2015 for the proposed ICH CAHPS 

clinical measure. 

We seek comments on these 

proposals. 

b. Estimated Performance Standards, 

Achievement Thresholds, and 

Benchmarks for the Clinical Measures 

Proposed for the PY 2018 ESRD QIP 

At this time, we do not have the 

necessary data to assign numerical 

values to the proposed performance 

standards for the clinical measures, 

because we do not yet have data from 

CY 2014 or the first portion of CY 2015. 

We will publish values for the clinical 

measures, using data from CY 2014 and 

the first portion of CY 2015, in the CY 

2016 ESRD PPS Final Rule. 

c. Proposed Performance Standards for 

the PY 2018 Reporting Measures 

In the CY 2014 ESRD PPS Final Rule, 

we finalized performance standards for 

the Anemia Management and Mineral 

Metabolism reporting measures (78 FR 

72213). We are not proposing any 

changes to this policy beyond the 

proposal to modify the reporting 

requirements for the Mineral 

Metabolism reporting measure, which 

appears above in Section III.G.1. 

For the Screening for Clinical 

Depression and Follow-Up reporting 

measure, we propose to set the 

performance standard as successfully 

reporting one of the above-listed clinical 

depression and follow-up screening 

conditions for each qualifying patient in 

CROWNWeb before the February 1st 


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directly following the performance 

period. 

For the Pain Assessment and FollowUp reporting measure, we propose to set 

the performance standard as 

successfully reporting one of the abovelisted pain assessment and follow-up 

conditions for each qualifying patient in 

CROWNWeb twice annually: once 

before August 1st for the first 6 months 

of the performance period, and once 

before the February 1st directly 

following the performance period for 

the last six months of the performance 

period. 

For the NHSN Healthcare Provider 

Influenza Vaccination reporting 

measure, we propose to set the 

performance standard as successfully 

submitting the HCP Influenza 

Vaccination Summary Form to CDC’s 

NHSN system by May 15, 2017. 

We seek comments on these 

proposals. 

4. Proposal for Scoring the PY 2018 

ESRD QIP Measures 

a. Scoring Facility Performance on 

Clinical Measures Based on 

Achievement 

In the CY 2014 ESRD PPS Final Rule, 

we finalized a policy for scoring 

performance on clinical measures based 

on achievement (78 FR 72215). In 

determining a facility’s achievement 

score for each measure under the PY 

2018 ESRD QIP, we propose to continue 

using this methodology for all clinical 

measures except the ICH CAHPS 

clinical measure. Under this 

methodology, facilities receive points 

along an achievement range based on 

their performance during the proposed 

performance period for each measure, 

which we define as a scale between the 

achievement threshold and the 

benchmark. 

b. Scoring Facility Performance on 

Clinical Measures Based on 

Improvement 

In the CY 2014 ESRD PPS Final Rule, 

we finalized a policy for scoring 

performance on clinical measures based 

on improvement (78 FR 72215 through 

72216). In determining a facility’s 

improvement score for each measure 

under the PY 2018 ESRD QIP, we 

propose to continue using this 

methodology for all clinical measures 

except the ICH CAHPS clinical measure. 

Under this methodology, facilities 

receive points along an improvement 

range, defined as a scale running 

between the improvement threshold and 

the benchmark. We propose to define 

the improvement threshold as the 

facility’s performance on the measure 

during CY 2015. The facility’s 

improvement score would be calculated 

by comparing its performance on the 

measure during CY 2016 (the proposed 

performance period) to its performance 

rate on the measure during CY 2015. 

c. Proposal for Scoring the ICH CAHPS 

Clinical Measure 

For PY 2018 and future payment 

years, we propose the following scoring 

methodology for the ICH CAHPS 

clinical measure. We propose to score 

the measure on the basis of three 

composite measures and three global 

ratings. 

Composite Measures: 

• Nephrologists’ Communication and 

Caring; 

• Quality of Dialysis Center Care and 

Operations; and 

• Providing Information to Patients. 

Global Ratings: 

• Overall rating of the nephrologists 

(Question 8) 

• Overall rating of the dialysis center 

staff (Question 32) 

• Overall rating of the dialysis facility 

(Question 35) 

The composite measures are groupings 

of questions that measure the same 

dimension of healthcare. (Groupings of 

questions and composite measures can 

be found at https://ichcahps.org/

Portals/0/ICH_Composites_English.pdf.) 

Global ratings questions employ a scale 

of 0 to 10, worst to best; each of the 

questions within a composite measure 

use either ‘‘Yes’’ or ‘‘No’’ responses, or 

response categories ranging from 

‘‘Never’’ to ‘‘Always,’’ to assess the 

patient’s experience of care at a facility. 

Facility performance on each composite 

measure will be determined by the 

percent of patients who choose ‘‘topbox’’ responses (i.e., most positive or 

‘‘Always’’) to the ICH CAHPS survey 

questions in each domain. Examples of 

questions and top-box responses are 

displayed below: 

Q11: In the last 3 months, how often did 

the dialysis center staff explain things in a 

way that was easy for you to understand? 

Top-box response: ‘‘Always’’ 

Q19: The dialysis center staff can connect 

you to the dialysis machine through a graft, 

fistula, or catheter. Do you know how to take 

care of your graft, fistula or catheter? 

Top-box response: ‘‘Yes’’ 

We propose that a facility will receive 

an achievement score and an 

improvement score for each of the 

composite measures and global ratings 

in the ICH CAHPS survey instrument. 

For purposes of calculating achievement 

scores for the ICH CAHPS clinical 

measure, we propose to base the score 

on where a facility’s performance rate 

falls relative to the achievement 

threshold and the benchmark for that 

measure. We propose that facilities will 

earn between 0 to 10 points for 

achievement based on where its 

performance for the measure falls 

relative to the achievement threshold. If 

a facility’s performance rate during the 

performance period is: 

• Equal to or greater than the 

benchmark, then the facility would 

receive 10 points for achievement; 

• Less than the achievement 

threshold, then the facility would 

receive 0 points for achievement; or 

• Equal to or greater than the 

achievement threshold, but below the 

benchmark, then the following formula 

would be used to derive the 

achievement score: [9 * ((Facility’s 

performance period rate ¥ achievement 

threshold)/(benchmark ¥ achievement 

threshold))] + .5, with all scores 

rounded to the nearest integer, with half 

rounded up. 

For the purposes of calculating 

improvement scores for the ICH CAHPS 

clinical measure, we propose that the 

improvement threshold will be defined 

as facility performance in CY 2015, and 

further propose to base the score on 

where a facility’s performance rate falls 

relative to the improvement threshold 

and the benchmark for that measure. We 

propose that a facility can earn between 

0 to 9 points based on how much its 

performance on the measure during the 

performance period improves from its 

performance on the measure during the 

baseline period. If a facility’s 

performance rate during the 

performance period is: 

• Less than the improvement 

threshold, then the facility would 

receive 0 points for improvement; or 

• Equal to or greater than the 

improvement threshold, but below the 

benchmark, then the following formula 

would be used to derive the 

improvement score: [10 * ((Facility 

performance period rate ¥ 

Improvement threshold)/(Benchmark ¥ 

Improvement threshold))] ¥ .5, with all 

scores rounded to the nearest integer, 

with half rounded up. 

We further propose that a facility’s 

ICH CAHPS score will be based on the 

higher of the facility’s achievement or 

improvement score for each of the 

composite measures and global ratings. 

Additionally, we propose that 

achievement and/or improvement 

scores on the three composite measures 

and the three global ratings will be 

averaged together to yield an overall 

score on the ICH CAHPS clinical 

measure. 

The timing and frequency of 

administering the ICH CAHPS survey is 

critical to obtaining reliable results. For 

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example, if a facility did not conduct 

two semiannual surveys during a given 

performance period, then patient 

experiences during the 6-month 

period(s) covered by the missed 

survey(s) would not be captured. 

Additionally, if facilities (via CMSapproved vendors) do not report their 

ICH CAHPS survey results to CMS, then 

these results cannot be taken into 

account when establishing national 

performance standards for the measure, 

thereby diminishing the measure’s 

reliability. Because timely survey 

administration and data reporting is 

critical to reliably scoring ICH CAHPS 

as a clinical measure in the ESRD QIP, 

we propose that a facility will receive a 

score of 0 on the measure if it does not 

meet the survey administration and 

reporting requirements finalized in the 

CY 2014 ESRD PPS Final Rule (78 FR 

72193 through 72196). 

We seek comments on these proposals 

to score the ICH CAHPS clinical 

measure. 

d. Proposals for Calculating Facility 

Performance on Reporting Measures 

In the CY 2014 ESRD PPS Final Rule, 

we finalized policies for scoring 

performance on the Anemia 

Management and Mineral Metabolism 

reporting measures in the ESRD QIP (78 

FR 72216). We are not proposing any 

changes to these policies beyond the 

proposals that were made beginning 

with the PY 2017 program, which 

appear in section III.F.7 above. 

With respect to the Screening for 

Clinical Depression and Follow-up, Pain 

Assessment and Follow-Up, and NHSN 

Healthcare Provider Influenza 

Vaccination reporting measures, we 

propose that facilities will receive a 

score of 10 on the measures if they meet 

the proposed performance standards for 

the measures, and a score of 0 on the 

measure if they do not. We are 

proposing to score these reporting 

measures differently than the Anemia 

Management and Mineral Metabolism 

reporting measures because they require 

annual or semiannual reporting, and 

therefore scoring based on monthly 

reporting rates is not feasible. 

We seek comments on these 

proposals. 

5. Proposed Minimum Data for Scoring 

Measures for the PY 2018 ESRD QIP 

With the following exceptions 

discussed below, we are not proposing 

to change the minimum data policies for 

the PY 2018 ESRD QIP from that 

proposed above for the PY 2017 ESRD 

QIP. We are also proposing that the 30 

survey-eligible patient minimum during 

the eligibility period and 30 survey 

complete minimum during the 

performance period that we proposed to 

adopt for the ICH CAHPS reporting 

measure will also apply to the ICH 

CAHPS clinical measure. We have 

determined that the ICH CAHPS survey 

is satisfactorily reliable when a facility 

obtains a total of at least 30 completed 

surveys during the performance period. 

Therefore, even if a facility meets the 30 

survey-eligible patient minimum during 

the eligibility period and the survey 

administration and reporting 

requirements, if the facility is only able 

to obtain 29 or fewer survey completes 

during the performance period, the 

facility will not be eligible to receive a 

score on the ICH CAHPS clinical 

measure. 

We further propose the facilities with 

fewer than 10 patient-years at risk will 

not be eligible to receive a score on the 

proposed STrR clinical measure. We 

considered adopting the 11-patient 

minimum requirement that we use for 

the other clinical measures. We decided, 

however, to base facilities’ eligibility for 

the measure in terms of the number of 

patient-years at risk, because facility 

performance rates are based on the 

number of patient-years at risk, not the 

number of patients. Additionally, we 

decided to set the minimum data 

requirements at 10 patient-years at risk 

because, based on national average 

event rates, this is the time required to 

achieve an average of 5 transfusion 

events. The 5 expected transfusion 

events requirement translates to a 

standard deviation of approximately 

0.45 if the facility has rates exactly 

corresponding to the national average. 

In addition, 10 patient-years at risk is 

the threshold used in the Dialysis 

Facility Compare program, and we 

believe that public-reporting and VBP 

programs for ESRD should adopt 

consistent measure specifications where 

feasible. 

For the proposed STrR measure, we 

propose to apply the small-facility 

adjuster to facilities with 21 or fewer 

patient-years at risk. We decided to base 

the threshold for applying the smallfacility adjuster on the number of 

patient-years at risk, because facility 

performance rates are based on the 

number of patient-years at risk, not the 

number of patients. We are proposing to 

set the threshold at 21 patient-years at 

risk, because we determined that this 

was the minimum number of patientyears at risk needed to achieve an IUR 

of 0.4 (that is, moderate reliability) for 

the proposed STrR measure. Because 

the small-facility adjuster gives facilities 

the benefit of the doubt when measure 

scores can be unduly influenced by a 

few outlier patients, we believe that 

setting the threshold at 21 qualifying 

patient-years at risk will not unduly 

penalize facilities that treat small 

numbers of patients on the proposed 

STrR clinical measure. 

With these exceptions, we are not 

proposing to change the policy, 

finalized most recently in the CY 2014 

ESRD PPS Final Rule (78 FR 72220 

through 72221), that facilities must have 

at least 11 qualifying patients for the 

entire performance period in order to be 

scored on a clinical measure. 

We currently have a policy, most 

recently finalized in the CY 2014 ESRD 

PPS final rule (78 FR 72197 through 

72198 and 72220 through 72221), to 

score facilities on reporting measures 

only if they have a minimum number of 

qualifying patients during the 

performance period. As discussed in 

Section III.F.7 above, we are proposing 

to modify the case minimum 

requirements for the Anemia 

Management and Mineral Metabolism 

reporting measures beginning with the 

PY 2017 ESRD QIP. We are not 

proposing any additional changes in the 

patient minimum requirements for the 

Anemia Management and Mineral 

Metabolism reporting measures in the 

PY 2018 program. 

For the Screening for Clinical 

Depression and Follow-Up and the Pain 

Assessment and Follow-Up reporting 

measures, we propose a case minimum 

of one qualifying patient. We believe 

this patient minimum requirement will 

enable us to gather a sufficient amount 

of data to calculate future performance 

standards, benchmarks, and 

achievement thresholds, should we 

propose to adopt clinical versions of 

these measures in the future. 

As discussed in Section III.G.2.f, we 

are not proposing that a facility will 

have to meet a patient minimum in 

order to receive a score on the NHSN 

Healthcare Provider Influenza 

Vaccination reporting measure. We 

believe it is standard practice for all 

HCP to receive influenza vaccinations 

and, as discussed above, HCP 

vaccination is likely to reduce 

influenza-related deaths and 

complications among the ESRD 

population. Accordingly, we are 

proposing that all facilities, regardless of 

patient population size, will be scored 

on the influenza vaccination measure. 

Under our current policy, we begin 

counting the number of months for 

which a facility is open on the first day 

of the month after the facility’s CCN 

open date. Only facilities with a CCN 

open date before July 1, 2016, are 

eligible to be scored on the Anemia 

Management and Mineral Metabolism 

reporting measures in the PY 2018 

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program. We are proposing to apply this 

finalized policy to the proposed 

Screening for Depression and FollowUp and the Pain Assessment and 

Follow-Up reporting measures. We 

further propose that facilities with a 

CCN open date after January 1, 2016, 

will not be eligible to receive a score on 

the NHSN Healthcare Personnel 

Influenza Vaccination reporting 

measure in the PY 2018 program. Due 

to the time it takes for facilities to 

register with NHSN and become familiar 

with the NHSN Healthcare Personnel 

Safety Component Protocol, we do not 

believe it is reasonable to expect 

facilities with CCN open dates after 

January 1, 2016, to submit an HCP 

Influenza Vaccination Summary Form 

to CDC’s NHSN system before the May 

15, 2016, deadline. 

As finalized in the CY 2014 ESRD PPS 

Final Rule (78 FR 72220), facilities are 

generally eligible to receive a score on 

the clinical measures if their CCN open 

date occurs before the end of the 

performance period. However, facilities 

with a CCN open date after January 1 of 

the performance period are not eligible 

to receive a score on the NHSN 

Bloodstream Infection clinical measure, 

due to the need to collect 12 months of 

data to accurately score the measure. We 

are now proposing that facilities with a 

CCN open date after January 1, 2016, 

will also not be eligible to receive a 

score on the ICH CAHPS clinical 

measure in the PY 2018 program. Due 

to the additional time needed to arrange 

to contract with CMS-approved thirdparty vendors, and for vendors to 

administer the survey twice and report 

the results to CMS, we do not believe 

facilities with CCN open dates after 

January 1, 2016, can reasonably be 

expected to meet the requirements 

associated with the proposed ICH 

CAHPS clinical measure for that 

performance period. 

As discussed in the Section III.G.7 

below, we are continuing our policy that 

a facility will not receive a TPS unless 

it receives a score on at least one 

clinical measure and at least one 

reporting measure. We note that 

finalizing the above proposals would 

result in facilities not being eligible for 

a payment reduction for the PY 2018 

ESRD QIP if they have a CCN open date 

on or after July 1, 2016. 

We seek comments on these 

proposals. 

Table 29 displays the proposed 

patient minimum requirements for each 

of the measures, as well as the proposed 

CCN open dates after which a facility 

will not be eligible to receive a score on 

a reporting measure. 

TABLE 29—PROPOSED MINIMUM DATA REQUIREMENTS FOR THE PY 2018 ESRD QIP 

Measure Minimum data requirements CCN Open date Small facility adjuster 

Adult Hemodialysis Adequacy (Clinical).11 qualifying patients .................................................... N/A ..................................... 11–25 patients. 

Adult Peritoneal Dialysis 

Adequacy (Clinical).

11 qualifying patients .................................................... N/A ..................................... 11–25 patients. 

Pediatric Hemodialysis Adequacy (Clinical).11 qualifying patients .................................................... N/A ..................................... 11–25 patients. 

Pediatric Peritoneal Dialysis 

Adequacy (Clinical).

11 qualifying patients .................................................... N/A ..................................... 11–25 patients. 

Vascular Access Type: 

Catheter (Clinical).

11 qualifying patients .................................................... N/A ..................................... 11–25 patients. 

Vascular Access Type: Fistula (Clinical).11 qualifying patients .................................................... N/A ..................................... 11–25 patients. 

Hypercalcemia (Clinical) ...... 11 qualifying patients .................................................... N/A ..................................... 11–25 patients. 

NHSN Bloodstream Infection 

(Clinical).

11 qualifying patients .................................................... Before January 1, 2016 ..... 11–25 patients. 

SRR (Clinical) ...................... 11 index discharges ...................................................... N/A ..................................... 11–41 index discharges. 

STrR (Clinical) ..................... 10 patient-years at risk .................................................. N/A ..................................... 10–21 patient-years at risk. 

ICH CAHPS (Clinical) .......... Facilities with 30 or more survey-eligible patients during the calendar year preceding the performance 

period must submit survey results. Facilities will not 

receive a score if they do not obtain a total of at 

least 30 completed surveys during the performance 

period.

Before January 1, 2016 ..... N/A. 

Anemia Management (Reporting).Facilities with 11 or more qualifying patients must report data for all patients. Facilities with between 2 

and 11 qualifying patients must report data on all 

but 1 qualifying patient. Facilities with 1 qualifying 

patient must report for that patient.

Before July 1, 2016 ........... N/A. 

Mineral Metabolism (Reporting).Facilities with 11 or more qualifying patients must report data for all patients. Facilities with between 2 

and 11 qualifying patients must report data on all 

but 1 qualifying patient. Facilities with 1 qualifying 

patient must report for that patient.

Before July 1, 2016 ........... N/A. 

Depression Screening and 

Follow-Up (Reporting).

One qualifying patient ................................................... Before July 1, 2016 ........... N/A. 

Pain Assessment and Follow-Up (Reporting).One qualifying patient. .................................................. Before July 1, 2016 ........... N/A. 

NHSN HCP Influenza Vaccination (Reporting).N/A ................................................................................. Before January 1, 2016 ..... N/A. 

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6. Proposal for Calculating the Clinical 

Measure Domain Score 

As the ESRD QIP evolves and we 

continue to adopt new clinical measures 

that track the goals of the NQS, we do 

not believe that the current scoring 

methodology provides the program with 

enough flexibility to strengthen 

incentives for quality improvement in 

areas where quality gaps continue to 

exist. Therefore, under the authority of 

Section 1881(h)(3)(A)(i) of the Act, we 

are proposing to revise the scoring 

methodology beginning with the PY 

2018 ESRD QIP so that we assign 

measure scores on the basis of two 

domains: a Clinical Measure Domain 

and a Reporting Measure Domain. 

First, we propose to establish a 

Clinical Measure Domain, which we 

define as an aggregated metric of facility 

performance on the clinical measures 

and measure topics in the ESRD QIP. 

Under this proposed approach, we 

would score individual clinical 

measures and measure topics using the 

methodology we finalize for that 

measure or measure topic. Clinical 

measures and measure topics would 

then be grouped into subdomains 

within the Clinical Measure Domain, 

according to quality categories. Within 

these subdomains, measure scores 

would be multiplied by a weighting 

coefficient, weighted measure scores 

would be summed together to determine 

subdomain scores, and then subdomain 

scores would be summed together to 

determine a facility’s Clinical Measure 

Domain score. This scoring 

methodology provides more flexibility 

to focus on quality improvement efforts, 

because it makes it possible to group 

measures according to quality categories 

and to weight each category according 

to opportunities for quality 

improvement. 

We further propose to divide the 

clinical measure domain into three 

subdomains for the purposes of 

calculating the Clinical Measure 

Domain score: 

• Safety 

• Patient and Family Engagement/Care 

Coordination 

• Clinical Care 

We took several considerations into 

account when selecting these particular 

subdomains. First, safety, patient 

engagement, care coordination, and 

clinical care are all NQS goals for which 

the ESRD QIP has proposed and/or 

finalized measures. We are attempting 

to align all CMS quality improvement 

efforts with the NQS because its patientcentered approach prioritizes measures 

across our quality reporting and pay-forperformance programs to ensure that the 

measurement approaches in these 

programs, as a whole, can make 

meaningful improvements in the quality 

of care furnished in a variety of settings. 

We also believe that adopting an NQSbased subdomain structure for the 

clinical measures in the ESRD QIP is 

responsive to stakeholder requests that 

we align our measurement approaches 

across HHS programs. 

Second, we are proposing to combine 

the NQS goals of Care Coordination and 

Patient- and Caregiver-Centered 

Experience of Care into one subdomain 

because we believe the two goals 

complement each other. ‘‘Care 

Coordination’’ refers to the NQS goal of 

promoting effective communication and 

coordination of care. ‘‘Patient- and 

Caregiver-Centered Experience of Care’’ 

refers to the NQS goal of ensuring that 

each patient and family is engaged as a 

partner in care. In order to engage 

patients and families as partners, we 

believe that effective communication 

and coordination of care must coexist, 

and that patient and family engagement 

cannot occur independently of effective 

communication and care coordination. 

We therefore believe that it is 

appropriate to combine measures of care 

coordination with those of patient and 

family engagement for the purposes of 

calculating a facility’s clinical measure 

domain score. 

For PY 2018 and future payment 

years, we propose to include the 

following measures in the following 

subdomains of the proposed clinical 

measure domain (see Table 30): 

TABLE 30—PROPOSED SUBDOMAINS IN THE CLINICAL MEASURE DOMAIN

Subdomain Measures and measure topics 

Safety Subdomain ............................................................................................................................. NHSN Bloodstream Infection measure. 

Patient and Family Engagement/Care Coordination Subdomain ..................................................... ICH CAHPS measure. 

SRR measure. 

Clinical Care Subdomain ................................................................................................................... STrR measure. 

Dialysis Adequacy measure topic. 

Vascular Access Type measure topic. 

Hypercalcemia measure. 

We seek comments on these proposals 

to adopt a Clinical Measure Domain that 

includes three subdomains (safety, 

patient and family engagement/care 

coordination, and clinical care) for the 

purpose of calculating a facility’s 

clinical measure domain score for PY 

2018. 

In deciding how to weight the 

proposed subdomains that comprise the 

clinical measure domain score, we took 

the following considerations into 

account: (1) the number of measures and 

measure topics in a proposed 

subdomain; (2) how much experience 

facilities have had with the measures 

and measure topics in a proposed 

subdomain; and (3) how well the 

measures align with CMS’s highest 

priorities for quality improvement for 

patients with ESRD. Because the 

proposed Clinical Care subdomain 

contains the largest number of 

measures, and facilities have the most 

experience with the measures in this 

subdomain, we are proposing to weight 

the Clinical Care subdomain 

significantly higher than the other 

subdomains. Facilities have more 

experience with the NHSN Bloodstream 

Infection measure in the proposed 

Safety subdomain than they do with the 

SRR measure in the proposed Patient 

and Family Engagement/Care 

Coordination subdomain, but we are 

proposing to include a larger number of 

measures in the Patient and Family 

Engagement/Care Coordination 

subdomain. We are proposing to give 

the Patient and Family Engagement/

Care Coordination subdomain slightly 

more weight than the Safety subdomain, 

because it includes two measures, 

whereas only one measure appears in 

the proposed Safety subdomain. In 

future rulemaking, we will consider 

revising these weights based on facility 

experience with the measures contained 

within these proposed subdomains. 

For these reasons, we propose the 

following weights for the three 

subdomains in the clinical measure 

domain score for PY 2018: 

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Subdomain 

Weight in the 

clinical 

measure 

domain score 

(%) 

Safety .................................... 20 

Patient and Family Engagement/Care Coordination .... 30 

Clinical Care ......................... 50 

We seek comments on this proposal. 

In deciding how to weight measures 

and measure topics within a proposed 

subdomain, we took into account the 

same considerations we considered 

when deciding how to weight the 

proposed subdomains. Because the 

NHSN Bloodstream Infection clinical 

measure is the only measure in the 

proposed Safety subdomain, we are 

proposing to assign the entire 

subdomain weight to that measure. We 

additionally note that improving patient 

safety and reducing bloodstream 

infections in patients with ESRD is one 

of our highest priorities for quality 

improvement, so we believe it is 

appropriate to weight the NHSN 

Bloodstream Infection clinical measure 

at 20 percent of a facility’s Clinical 

Measure Domain Score. Because 

facilities have substantially more 

experience with the ICH CAHPS clinical 

measure, as compared with the SRR 

clinical measure, we are proposing to 

give the proposed ICH CAHPS measure 

twice as much weight as the proposed 

SRR measure. Additionally, we note 

that improving patients’ experience of 

care is as high a priority for CMS quality 

improvement efforts as improving 

patient safety, so we believe it is 

appropriate to assign the ICH CAHPS 

clinical measure the same weight as the 

NHSN Bloodstream Infection clinical 

measure. We are proposing to give the 

Dialysis Adequacy and Vascular Access 

Type measure topics the most weight in 

the Clinical Care subdomain because 

facilities have substantially more 

experience with these measure topics, 

as compared to the other measures in 

the Clinical Care subdomain. We are 

proposing to assign equal weights to the 

STrR and Hypercalcemia measures 

because PY 2018 would be the first 

program year in which facilities are 

measured on the STrR measure, and 

because the clinical significance of the 

Hypercalcemia measure is diminished 

in the absence of other information 

about mineral metabolism (for example, 

a patient’s phosphorus and plasma 

parathyroid hormone levels), which 

would provide a more comprehensive 

assessment of mineral metabolism (78 

FR 72217). For these reasons, we 

propose to use the following weighting 

system for calculating a facility’s 

Clinical Measure domain score: 

Measures/measure topics by subdomain 

Measure weight in 

the clinical 

measure domain 

score 

(%) 

Safety Subdomain ......................................................................................................................................................................... 20 

NHSN Bloodstream Infection measure .................................................................................................................................. 20 

Patient and Family Engagement/Care Coordination Subdomain ................................................................................................. 30 

ICH CAHPS measure ............................................................................................................................................................. 20 

SRR measure ......................................................................................................................................................................... 10 

Clinical Care Subdomain ........................................................................................................................................................ 50 

STrR measure ........................................................................................................................................................................ 7 

Dialysis Adequacy measure topic .......................................................................................................................................... 18 

Vascular Access Type measure topic .................................................................................................................................... 18 

Hypercalcemia measure ......................................................................................................................................................... 7 

We seek comments on this proposal for 

weighting individual measures within 

the Clinical Measure Domain. 

7. Proposal for Calculating the Reporting 

Measure Domain Score, the Reporting 

Measure Adjuster, and the TPS for the 

PY 2018 ESRD QIP 

Starting with the PY 2014 program, 

the ESRD QIP has used a scoring 

methodology in which the clinical 

measures receive substantially more 

weight than the reporting measures in 

the TPS, and the weighting coefficients 

for the two types of measures total 100 

percent of the TPS. We continue to 

believe it is appropriate to incorporate 

reporting measure scores in the TPS 

calculations because ‘‘reporting is an 

important component in quality 

improvement’’ (76 FR 70274); we also 

continue to believe that clinical 

measures should carry substantially 

more weight than reporting measures 

because clinical measures ‘‘score 

providers/facilities based upon actual 

outcomes’’ (76 FR 70275). These 

statements reflect the fact that clinical 

and reporting measures serve different 

functions in the ESRD QIP. Clinical 

measures provide a direct assessment of 

the quality of care a facility provides, 

relative to either the facility’s past 

performance or standards of care 

nationwide. Reporting measures create 

an incentive for facilities to monitor 

significant indicators of health and 

illness, and they help facilities become 

familiar with CMS data systems. In 

addition, they allow the ESRD QIP to 

collect the robust clinical data needed to 

establish performance standards for 

clinical measures. 

As we continue to add reporting 

measures to the ESRD QIP measure set, 

it becomes increasingly challenging to 

not weight them so heavily that they 

dilute the significance of the clinical 

measures, while still ensuring that we 

do not weight the reporting measures so 

lightly that facilities are not 

incentivized to meet the reporting 

measure requirements. 

Although we considered the 

possibility of abandoning the use of 

reporting measures, we determined that 

this is not feasible because doing so 

would make it impossible to calculate 

performance standards for many clinical 

measures that promise to promote highquality care. We also considered the 

possibility of weighting the reporting 

measures such that each reporting 

measure comprised a smaller percentage 

of the TPS. We believe, however, that 

doing so would result in the reporting 

measures not carrying enough weight to 

provide facilities with an incentive to 

meet the reporting requirements, 

particularly if additional reporting 

measures were added to the program. 

For example, if 5 reporting measures 

were adopted in the ESRD QIP, and the 

reporting measures collectively were 

weighted at 5 percent of a facility’s TPS 

(in order to preserve the significance of 

the clinical measures), then each 

reporting measure would only comprise 

1 percent of a facility’s TPS. Under such 

conditions, we believe that facilities 

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may choose not to meet the reporting 

measure requirements, because not 

doing so would have a negligible impact 

on their overall TPS. If enough facilities 

reached this determination, then we 

would not be able to establish reliable 

baselines, should we propose to adopt 

clinical measure versions of the 

reporting measures. For these reasons, 

we are proposing the following scoring 

methodology for determining the impact 

of reporting measure scores on a 

facility’s payment reductions. 

For PY 2018 and future payment 

years, we propose to establish a new 

Reporting Measure Domain. We further 

propose that a facility’s reporting 

measure domain score will be the sum 

of all the reporting measure scores that 

the facility receives. We strive to expand 

reporting measures into clinical 

measures in the ESRD QIP as quickly as 

measure development and 

administrative processes permit. 

Therefore, unlike the case with clinical 

measures in the Clinical Domain Score, 

we do not intend to continue to use any 

particular reporting measure in the 

ESRD QIP for an indefinite period of 

time. For this reason, we believe that it 

would be unnecessarily opaque and 

confusing to group reporting measures 

into subdomains, as we are proposing 

for the clinical measures in the Clinical 

Measure Domain. 

Additionally, we propose to establish 

a Reporting Measure Adjuster (RMA), 

which will provide the ESRD QIP with 

an index of facility performance on 

reporting measures within the Reporting 

Measure Domain. We propose to use the 

following general formula to determine 

a facility’s RMA, based on its reporting 

measure domain score: 

This formula is constructed such that a 

high RMA is indicative of low 

performance on the reporting measures, 

and a low RMA is indicative of high 

performance. A facility’s Reporting 

Measure Domain score (that is, the sum 

of its scores on the reporting measures) 

is subtracted from the total number of 

points a facility could earn on the 

reporting measures for which it was 

eligible. This result is then multiplied 

by ‘‘C,’’ which is a coefficient used to 

translate reporting measure points into 

TPS points. As C increases, so too does 

the TPS ‘‘value’’ of a reporting measure 

point. For example, if C is set to 2, then 

1 reporting measure point is worth 2 

TPS points. If C is set to 0.5, then 1 

reporting measure point is worth onehalf of a TPS point. The value of C is 

in not tied to the number of reporting 

measures in the ESRD QIP; rather, it 

represents how much value we place on 

the reporting measures’ contribution to 

the quality goals of the ESRD QIP. We 

will use the rulemaking process to set 

the value for C for each program year. 

For the PY 2018 ESRD QIP, we 

propose to use the following formula to 

determine a facility’s RMA: 

We set coefficient C at five-sixths for the 

PY 2018 program because each 

reporting measure point in the PY 2016 

program, and the proposed PY 2017 

program, is equivalent to five-sixths of 

a TPS point (that is, 30 points for three 

reporting measures comprised 25 TPS 

points). We believe it is important to 

maintain as much consistency as 

possible in the transition to the 

proposed scoring methodology. 

Therefore, we are proposing that the 

‘‘value’’ of a reporting measure point in 

the TPS, as finalized in the PY 2016 

program and proposed for the PY 2017 

program, will remain constant in PY 

2018. 

For the reasons described above, we 

continue to believe that the clinical 

measures are considerably more 

important than the reporting measures 

in the ESRD QIP. We therefore believe 

that a facility’s TPS should be 

predominantly determined by its 

Clinical Measure Domain score, and that 

a facility’s TPS should be downwardly 

adjusted in the case of noncompliance 

with the reporting measure 

requirements. The RMA, as described 

above, is constructed such that a high 

RMA value indicates low reporting 

measure scores and a low RMA value 

indicate high reporting measure scores. 

As a result, a facility’s TPS would be 

entirely determined by its Clinical 

Measure Domain score if it receives full 

credit on the reporting measures; the 

TPS would be slightly decreased if the 

facility received high (but not perfect) 

scores on the reporting measures; and 

the TPS would be significantly 

decreased if it performed poorly on the 

reporting measures. For these reasons, 

we propose to calculate a facility’s TPS 

by subtracting the facility’s RMA from 

its Clinical Measure Domain score. 

Additionally, we propose to continue 

our policy to require a facility to be 

eligible for a score on at least one 

reporting and one clinical measure in 

order to receive a TPS (78 FR 72217). 

In an effort to estimate the impact of 

this proposed change for the ESRD QIP’s 

scoring methodology, we conducted an 

analysis of how the proposed scoring 

methodology affected payment 

reduction distributions, based on data 

from CY 2012 and CY 2013. This 

analysis compared the scoring 

methodology proposed in this section 

and the previous section to the scoring 

methodology finalized for the PY 2016 

program. In order to ensure that the 

analysis reliably estimated the impact 

on facilities’ payment reductions, the 

proposed scoring methodology and the 

methodology finalized for the PY 2016 

program were each applied to the PY 

2016 measure set. The full analysis is 

available at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/ESRDQIP/061_

TechnicalSpecifications.html. The 

results of this analysis are presented 

below in Table 31. 


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TABLE 31—EXPECTED IMPACT OF PROPOSED SCORING METHODOLOGY ON THE DISTRIBUTION OF PAYMENT REDUCTIONS, 

USING MEASURES AND MEASURE WEIGHTS FINALIZED FOR THE PY 2016 ESRD QIP AND DATA FROM CY 2012 AND

CY 2013 

Payment reduction 

(%) 

Finalized scoring methodology 

for PY 2016, applied to 

measures and measure 

weights finalized in the 

PY 2016 program 

Proposed scoring methodology 

for PY 2018, applied to 

measures and measure 

weights finalized in the 

PY 2016 program 

Number of 

facilities Percent Number of facilities Percent 

0 ....................................................................................................................... 4,828 79.4 4,606 75.7 

0.5 .................................................................................................................... 884 14.5 739 12.2 

1.0 .................................................................................................................... 242 4.0 306 5.0 

1.5 .................................................................................................................... 69 1.1 108 1.8 

2.0 .................................................................................................................... 59 1.0 323 5.3 

As illustrated in Table 31, we expect 

that 4.3 percent more facilities (222 

overall) would receive a payment 

reduction under the proposed 

methodology for PY 2018, as compared 

with the scoring methodology that we 

will use for the PY 2016 program. We 

therefore believe that adopting the 

scoring methodology proposed in this 

section and the previous section will 

not appreciably change the distribution 

of facility payment reductions, as is our 

intention. 

We seek comments on these proposals 

for calculating a facility’s reporting 

measure domain score, to calculate the 

RMA, and to determine the TPS. 

Although we believe advantages are 

afforded by adopting the scoring 

methodology proposed in this section 

and the previous section, we also 

recognize that there may be advantages 

associated with maintaining consistency 

with previous years’ scoring 

methodology. Accordingly, as an 

alternative to the scoring methodology 

proposed in this section and the 

previous section, we are also seeking 

public comments on whether we should 

continue to use the same methodology 

we currently use to weight measures in 

the ESRD QIP and calculate a facility’s 

TPS, with the exception that the clinical 

and reporting measures would be 

weighted at 90 percent and 10 percent, 

respectively, of a facility’s TPS. 

8. Example of the Proposed PY 2018 

ESRD QIP Scoring Methodology 

In this section, we provide an 

example to illustrate the proposed 

scoring methodology for PY 2018 and 

future payment years. Figures 3–7 

illustrate how to calculate the clinical 

measure domain score, the reporting 

measure domain score, the RMA, and 

the TPS. Note that for this example, 

Facility A, a hypothetical facility, has 

performed very well. Figure 1 illustrates 

the general methodology used to 

calculate domain scores for the clinical 

measure domain, as well as the example 

calculations for Facility A. 

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Figure 2 illustrates the general 

methodology for weighting subdomains 

in the clinical measure domain, as well 

as the example calculations for Facility 

A’s clinical measure domain score. 


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Figure 3 illustrates the general 

methodology for calculating a facility’s 

reporting measure domain score, as well 

as the example calculations for Facility 

A. 

Figure 4 illustrates the general 

methodology for calculating a facility’s 

RMA, as well as the example 

calculations for Facility A. 


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Figure 5 illustrates the general 

methodology for calculating a facility’s 

TPS, as well as the example calculations 

for Facility A. 

9. Proposed Payment Reductions for the 

PY 2018 ESRD QIP 

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

requires the Secretary to ensure that the 

application of the scoring methodology 

results in an appropriate distribution of 

payment reductions across facilities, 

such that facilities achieving the lowest 

TPSs receive the largest payment 

reductions. For the same reasons 

described in Section III.F.8 above, we 

propose that a facility would not receive 

a payment reduction for PY 2018 if it 

achieves a minimum TPS that is equal 

to or greater than the total of the points 

it would have received if: 

• It performed at the performance 

standard for each clinical measure; 

• It received the number of points for 

each reporting measure that corresponds 

to the 50th percentile of facility 

performance on each of the PY 2016 

reporting measures. 

The PY 2016 program is the most 

recent year for which we will have 

calculated final measure scores before 

the beginning of the proposed 

performance period for PY 2018 (i.e., CY 

2016). Because we have not yet 

calculated final measure scores, we are 

unable to determine the 50th percentile 

of facility performance on the PY 2016 

reporting measures. We will publish 

that value in the CY 2016 ESRD PPS 

final rule once we have calculated final 

measure scores for the PY 2016 

program. 

We seek comments on this proposal. 

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

requires that facilities achieving the 

lowest TPSs receive the largest payment 

reductions. In the CY 2014 ESRD PPS 

Final Rule (78 FR 72223 through 72224), 

we finalized a payment reduction scale 

for PY 2016 and future payment years: 

For every 10 points a facility falls below 

the minimum TPS, the facility would 

receive an additional 0.5 percent 

reduction on its ESRD PPS payments for 

PY 2016 and future payment years, with 

a maximum reduction of 2.0 percent. 

We are not proposing any changes to 

this policy at this point. 

Because we are not yet able to 

calculate the performance standards for 

each of the clinical measures, we are 

also not able to calculate a proposed 

minimum TPS at this time. We will 

publish the minimum TPS, based on 

data from CY 2014 and the first part of 


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CY 2015, in the CY 2016 ESRD PPS 

Final Rule. 

We seek comments on this proposal. 

H. Future Considerations for Stratifying 

ESRD QIP Measures for Dual-Eligible 

Beneficiaries 

CMS recognizes that individuals with 

both Medicare and Medicaid (also 

known as ‘‘dual-eligible beneficiaries’’), 

comprise a relatively large proportion of 

Medicare enrollees with ESRD. Because 

ESRD programs have a long history of 

performance measurement linked with 

public reporting, and because there are 

a large number of dual-eligible 

beneficiaries receiving ESRD care, we 

are considering stratifying ESRD QIP 

measures for Medicare-Medicaid 

enrollees. 

Measure reporting under the ESRD 

QIP does not currently allow us to 

separately review results for dualeligible beneficiaries or compare those 

results with results achieved by other 

patients with ESRD, so it is not 

currently known if their experiences are 

better, worse, or the same as other 

patients. Even the basic demographics 

of dual-eligible beneficiaries receiving 

ESRD care are not well understood. 

After discussion of the pros and cons 

that included input from the ESRD 

provider community, the Measures 

Application Partnership’s dual-eligible 

workgroup recommended that CMS take 

the first step in exploring the feasibility 

of requiring facilities to separately 

report ESRD QIP measures for MedicareMedicaid enrollees by analyzing the 

composition of the dual-eligible 

beneficiary population receiving ESRD 

care and determining potential ways in 

which stratified reporting may further 

quality improvement efforts. 

Furthermore, the Measures Application 

Partnership recommended, in the 

context of measure development, that 

CMS explore whether other risk factors 

unique to the dual-eligible population 

receiving ESRD care would present 

significant hurdles to measure 

stratification along these lines. We are 

therefore seeking comments on whether 

it would be feasible to stratify ESRD QIP 

measures based on whether the 

beneficiary is a dual eligible. We are 

interested in whether stakeholders 

recommend stratification and, if so, for 

what specific measures stakeholders 

would find stratification most 

compelling. 

We are particularly interested in 

public comments on whether MedicareMedicaid stratified quality measures 

under the ESRD QIP should be reported 

publicly, and how we should factor 

those measures into our scoring 

methodology. We seek comments on the 

meaningfulness of stratifying measures, 

and the feasibility and burden 

associated with reporting stratified 

measures. 

IV. Technical Corrections for 42 Part 

405 

In the April 15, 2008, final rule 

‘‘Conditions for Coverage for End-Stage 

Renal Disease Facilities,’’ (73 FR 20370) 

we revised the health and safety 

standards for Medicare-participating 

End-Stage Renal Disease (ESRD) 

facilities. This rule made the first 

comprehensive revisions to the ESRD 

Conditions for Coverage (CfCs) since 

they were adopted in 1976. The original 

ESRD CfCs at 42 CFR Part 405 Subpart 

U were deleted and new conditions 

were issued at 42 CFR Part 494. Subpart 

U now only addresses certain 

requirements for ESRD networks. 

As a part of these revisions, we 

intended to delete most of the terms and 

definitions set out in Part 405 Subpart 

U, and create new definitions in Part 

494. This is discussed in the 2008 final 

rule and in the corresponding proposed 

rule (70 FR 6184), and is laid out in the 

final rule crosswalk (comparing the old 

CfCs with the new ones) at 73 FR 20451. 

While we intended to delete most of 

the definitions at Part 405 Subpart U, 

we inadvertently omitted the 

regulations text that would have made 

those changes. Subpart U, at § 405.2102, 

still has 32 definitions, most of them 

unnecessary and several of them 

obsolete. This creates confusion for 

ESRD stakeholders, patients, and 

suppliers. 

We propose to make a technical 

correction that deletes the outdated 

terms and definitions at § 405.2102. 

Specifically, we propose to delete these 

terms and definitions: agreement, 

arrangement, dialysis, end-stage renal 

disease (ESRD), ESRD facility, renal 

dialysis center, renal dialysis facility, 

self-dialysis unit, special purpose renal 

dialysis facility, ESRD service, dialysis 

service, inpatient dialysis, outpatient 

dialysis, staff-assisted dialysis, selfdialysis, home dialysis, self-dialysis and 

home dialysis training, furnishes 

directly, furnishes on the premises, 

medical care criteria, medical care 

norms, medical care standards, medical 

care evaluation study (MCE), qualified 

personnel, chief executive officer, 

dietitian, medical record practitioner, 

nurse responsible for nursing service, 

physician-director, and social worker. 

We also propose to delete the term and 

definition for ‘‘ESRD network 

organization,’’ as it is duplicated within 

§ 405.2102 as ‘‘network organization.’’ 

We would retain the terms and 

definitions for ‘‘network, ESRD,’’ and 

‘‘network organization.’’ These changes 

are also outlined in Table 32 below.’’ 

TABLE 32—TECHNICAL CORRECTIONS TO § 405.2102 

Term Proposed action Other FR 

location 

Agreement ........................................................................................................................ Delete 

Arrangement .................................................................................................................... Delete 

Dialysis ............................................................................................................................. Delete 

End-Stage Renal Disease (ESRD) .................................................................................. Delete ......................................................... 406.13(b). 

ESRD facility introductory text ......................................................................................... Delete 

Renal dialysis center ................................................................................................ Delete 

Renal dialysis facility ................................................................................................. Delete ......................................................... 494.10. 

Self-dialysis unit ........................................................................................................ Delete 

Special purpose renal dialysis facility ....................................................................... Delete ......................................................... 494.120. 

ESRD Network organization ............................................................................................ Delete 

ESRD service introductory text ........................................................................................ Delete 

Dialysis service ......................................................................................................... Delete

Inpatient dialysis ....................................................................................................... Delete

Outpatient dialysis .................................................................................................... Delete 

Staff-assisted dialysis ............................................................................................... Delete 

Self-dialysis ............................................................................................................... Delete ......................................................... 494.10. 

Home dialysis ........................................................................................................... Delete ......................................................... 494.10. 

Self-dialysis and home dialysis training .................................................................... Delete 

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TABLE 32—TECHNICAL CORRECTIONS TO § 405.2102—Continued 

Term Proposed action Other FR 

location 

Furnishes directly ............................................................................................................. Delete ......................................................... 494.10. 

Furnishes on the premises .............................................................................................. Delete ......................................................... 494.180(d) 

Medical care criteria ......................................................................................................... Delete 

Medical care norms .......................................................................................................... Delete 

Medical care standards .................................................................................................... Delete 

Medical care evaluation study (MCE) .............................................................................. Delete 

Network, ESRD ................................................................................................................ Retain ......................................................... N/A. 

Network organization ....................................................................................................... Retain ......................................................... N/A. 

Qualified personnel .......................................................................................................... Delete 

Chief executive officer .............................................................................................. Delete 

Dietitian ..................................................................................................................... Delete ......................................................... 494.140(c). 

Medical record practitioner ....................................................................................... Delete 

Nurse responsible for nursing service ...................................................................... Delete ......................................................... 494.140(b). 

Physician-director ..................................................................................................... Delete ......................................................... 494.140(a). 

Social worker ............................................................................................................ Delete ......................................................... 494.140(d). 

V. Methodology for Adjusting DMEPOS 

Payment Amounts Using Information 

From Competitive Bidding Programs 

A. Background 

1. Payment Basis for Certain DMEPOS 

Section 1834(a) of the Act governs 

payment for durable medical equipment 

(DME) covered under Part B and under 

Part A for a home health agency and 

provides for the implementation of a fee 

schedule payment methodology for 

DME furnished on or after January 1, 

1989. Sections 1834(a)(2) through (a)(7) 

of the Act set forth separate payment 

categories of DME and describe how the 

fee schedule for each of the following 

categories is established: 

• Inexpensive or other routinely 

purchased items, 

• Items requiring frequent and 

substantial servicing, 

• Customized items, 

• Oxygen and oxygen equipment, 

• Other covered items (other than 

DME), and 

• Other items of DME (capped rental 

items). 

Section 1834(h) of the Act governs 

payment for prosthetic devices, 

prosthetics, and orthotics (P&O) and sets 

forth fee schedule payment rules for 

P&O. Effective for items furnished on or 

after January 1, 2002, payment is also 

made on a national fee schedule basis 

for parenteral and enteral nutrition 

(PEN) in accordance with the authority 

under section 1842(s) of the Act. The 

term ‘‘enteral nutrition’’ will be used 

throughout this document to describe 

enteral nutrients supplies and 

equipment covered as prosthetic devices 

in accordance with section 1861(s)(8) of 

the Act and paid for on a fee schedule 

basis and enteral nutrients under 

DMEPOS Competitive Bidding Program 

(CBP), as authorized under section 

1847(a)(2)(B) of the Act. Section 

1842(o)(1)(D) of the Act mandates that 

payment for infusion drugs furnished 

through a covered item of DME on or 

after January 1, 2004, is equal to 95 

percent of the average wholesale price 

for such drug in effect on October 1, 

2003. 

For DMEPOS items subject to 

payment under 1834 of the Act (not 

subject to the CBP), the Medicare’s 

allowed payment amount is equal to the 

lesser of the actual charge for the item 

or the fee schedule amount for the item. 

The fee schedule amounts are based on 

average payments made under the 

previous payment methodology of 

reasonable charges, which utilized 

supplier charges for furnishing items 

and services in local areas throughout 

the nation to establish the Medicare 

allowed payment amounts for the items 

and services. The reasonable charge data 

used is from a specific period of time 

that varies slightly by payment class (for 

example, July 1986 through June 1987 

for inexpensive DME). The fee schedule 

amounts for most items are updated on 

an annual basis by covered item update 

factors provided in the statute for DME 

under section 1834(a)(14) of the Act, for 

P&O under section 1834(h)(4)(A) of the 

Act, and for enteral nutrition under 

section 1842(s)(1)(B) of the Act. 

The rules pertaining to the calculation 

of reasonable charges are located at 42 

CFR Part 405, Subpart E of our 

regulations. Under this general 

methodology, several factors were taken 

into consideration in determining the 

reasonable charge for an item. Each 

supplier’s ‘‘customary charge’’ for an 

item, or the 50th percentile of charges 

for an item over a 12-month period, was 

one factor used in determining the 

reasonable charge. The ‘‘prevailing 

charge’’ in a local area, or the 75th 

percentile of suppliers’ customary 

charges for the item in the locality, was 

also used in determining the reasonable 

charge. For PEN items and services 

only, the ‘‘lowest charge level (LCL)’’ 

was also taken into consideration and 

was based on the 25th percentile of all 

charges for an item. For the purpose of 

calculating prevailing charges, a 

‘‘locality’’ is defined at 42 CFR 405.505 

and ‘‘may be a State (including the 

District of Columbia, a territory, or a 

Commonwealth), a political or 

economic subdivision of a state, or a 

group of states.’’ The regulation further 

specifies that the locality ‘‘should 

include a cross section of the population 

with respect to economic and other 

characteristics.’’ For PEN items and 

services only, the entire nation was used 

as the locality for the purpose of 

calculating the LCL and prevailing 

charges. 

Effective for items furnished on or 

after October 1, 1985, an additional 

factor, the inflation-indexed charge (IIC) 

as cited at 42 CFR 405.509, was added 

to the factors taken into consideration in 

determining the reasonable charge for 

an item. The IIC is equal to the lowest 

of the customary charge, prevailing 

charge, LCL (if applicable), and IIC from 

the previous year updated by an 

inflation adjustment factor. To 

summarize, the reasonable charges for 

each item that were used to calculate 

the fee schedule amounts are equal to 

the lower of: 

• the supplier’s actual charge on the 

claim; 

• the supplier’s customary charge for 

the item; 

• the prevailing charge in the locality 

for the item; 

• the LCL in the locality for the item, 

if applicable; or 

• the IIC. 

Under the reasonable charge payment 

methodology, it is assumed that 

suppliers took all of their costs of 

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furnishing various items and services in 

various localities throughout the nation 

into account in setting the prices they 

charge for covered items and services. 

We implemented the fee schedule 

payment methodologies for PENs at 42 

CFR Part 414, Subparts C, and for DME 

prosthetic devices, prosthetics, 

orthotics, and surgical dressings at 42 

CFR Part 414, Subpart D of our 

regulations. In accordance with section 

1834(a)(10) of the Act, the Secretary 

may adjust DMEPOS fee schedule 

amounts in situations where it is 

determined that the amounts are not 

inherently reasonable. This ‘‘inherent 

reasonableness’’ authority for adjusting 

fee schedule payment amounts is 

governed by paragraphs (8) and (9) of 

section 1842(b) of the Act and 

implemented at 42 CFR Part 405, 

Subpart E of our regulations. Finally, in 

the case of DMEPOS furnished on or 

after January 1, 2011, under section 

1834(a)(1)(F)(ii) of the Act, the Secretary 

may (in beginning January 1, 2016, 

must) use information on the payment 

determined under the CBP in 

accordance with section 1847 of the Act 

to adjust the fee schedule payment 

amounts for DME that are not in a 

competitive bidding area (CBA), and the 

inherent reasonableness authority does 

not apply. Adjustment of fee schedule 

amounts based on CBP payment 

information (and the limitation on using 

inherent reasonableness) is also 

authorized under section 

1834(h)(1)(H)(ii) of the Act for certain 

orthotics and section 1842(s)(3)(B) of the 

Act for enteral nutrition in noncompetitive bid areas. 

2. Fee Schedule Payment Methodologies 

Section 4062(b) of the Omnibus 

Budget Reconciliation Act of 1987 

(OBRA 87), Public Law 100–203, added 

section 1834(a) of the Act and mandated 

the implementation of local fee 

schedule amounts in 1989 for DME and 

P&O based on the average of reasonable 

charges for items and services furnished 

in carrier service areas throughout the 

United States. The carriers were (now 

Medicare administrative contractors) 

responsible for processing claims for 

Part B items and services in accordance 

with section 1842(a) of the Act. The 

carrier service areas used in establishing 

the fee schedule amounts could not 

exceed an entire state. A few states were 

made up of two carrier service areas and 

the State of New York had three carrier 

service areas. A carrier service area is 

not to be confused with a locality 

established for the purpose of 

calculating reasonable charges as 

described above. For example, although 

claims for items furnished in the State 

of Texas were processed by a single 

carrier, for reasonable charge calculation 

purposes, Texas was divided into more 

than 50 different localities. In 1993, the 

local fee schedule amounts for states 

with more than one carrier service areas 

were transitioned to statewide fee 

schedule amounts. The reasonable 

charge data used to calculate the 

statewide fee schedule amounts 

therefore reflected the average payment 

made under the supplier charge based 

reasonable charge payment 

methodology for items and services 

furnished throughout the state, 

including both rural and urban areas of 

the state. 

Section 4062(b) of OBRA 87 

mandated that local fee schedule 

amounts for both DME and P&O be 

transitioned to regional fee schedule 

amounts as part of a multi-year phase in 

ending in 1993. Section 4152(b) of the 

Omnibus Budget Reconciliation Act of 

1990 (OBRA 90), Public Law 101–508, 

eliminated the regional fee schedule 

transition for DME and amended section 

1834(a) of the Act to mandate that the 

local (statewide) fee schedule amounts 

be limited by a national ceiling (upper) 

limit, based on the median of the 

statewide fee schedule amounts, and a 

national floor (lower limit), based on 85 

percent of the median of the statewide 

fee schedule amounts. The fee schedule 

ceiling and floor limits for DME were 

phased in from 1991 through 1993. The 

conversion to regional fee schedule 

amounts therefore never took place for 

DME and instead the statewide fee 

schedule amounts were limited so that 

they could not vary by more than 15 

percent from the national ceiling to the 

national floor. The fee schedule 

amounts for areas outside the 

contiguous United States are not subject 

to the national ceiling and floor limits. 

The transition to regional fee schedule 

amounts was retained for P&O, although 

OBRA 90 changed the phase in schedule 

so that the regional fee schedule 

amounts were not fully phased in until 

January 1, 1994, rather than January 1, 

1993. As explained in more detail 

below, the regional fee schedule 

methodology allows for regional 

geographic variation in fee schedule 

payment amounts and a wider range in 

fees across the nation than the fee 

schedule methodology used for DME 

which caps the local, statewide fee 

schedule amounts at the national 

median. That being said, we have not 

seen any problems associated with 

access to either P&O or DME in rural 

areas or any areas of the country since 

payments have been made based on 

these fee schedule methodologies. This 

has been the case even though the 

average reasonable charges used to 

compute the statewide fee schedule 

amounts include a comingling of 

reasonable charge data for items and 

services furnished in both urban and 

rural areas. In addition, we have not 

seen any problems with access to PEN 

in rural areas or any areas of the country 

since payments have been made based 

on national fee schedule amounts. 

3. Regional Fee Schedule Payment 

Methodology for P&O 

The regional fee schedules for P&O 

are mandated by section 1834(h)(2)(B) of 

the Act. The regional fee schedule 

amounts only apply to areas within the 

contiguous United States. The regional 

fee schedule amounts are calculated 

based on the weighted average 

(weighted by total Part B claims volume) 

of statewide fee schedule amounts for 

states in each of the ten CMS Regional 

Office boundaries identified below. The 

statewide fee schedule amounts are 

based on average reasonable charges 

(statewide fees) for items furnished from 

July 1, 1986 through June 30, 1987. 

The ten CMS Regional Office 

boundaries are: 

• Boston (Region One), including the 

six states of Connecticut, Maine, 

Massachusetts, New Hampshire, Rhode 

Island and Vermont; 

• New York (Region Two), including 

the two states of New Jersey and New 

York; 

• Philadelphia (Region Three), 

including the five states of Delaware, 

Maryland, Pennsylvania, Virginia, West 

Virginia and the District of Columbia; 

• Atlanta (Region Four), including the 

eight states of Alabama, North Carolina, 

South Carolina, Florida, Georgia, 

Kentucky, Mississippi, and Tennessee; 

• Chicago (Region Five), including 

the six states of Illinois, Indiana, 

Michigan, Minnesota, Ohio and 

Wisconsin; 

• Dallas (Region Six), including the 

five states of Arkansas, Louisiana, New 

Mexico, Oklahoma and Texas; 

• Kansas City (Region Seven), 

including the four states of Iowa, 

Kansas, Missouri and Nebraska; 

• Denver (Region Eight), including 

the six states of Colorado, Montana, 

North Dakota, South Dakota, Utah and 

Wyoming; 

• San Francisco (Region Nine), 

including the three states of Arizona, 

California and Nevada; and 

• Seattle (Region Ten), including the 

three states of Idaho, Oregon and 

Washington. 

As an example, the regional fee 

schedule amounts for Region Nine are 

based on the weighted average of the 

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statewide fees for Arizona, California, 

and Nevada. Since California accounts 

for the largest volume of Part B claims 

in the region, the California statewide 

fees are weighted more heavily in 

determining the regional fee schedule 

amounts than the statewide fees for 

Arizona or Nevada. Once all of the 

regional fee schedule amounts are 

established, the regional fee schedule 

amounts are further limited by a 

national ceiling equal to 120 percent of 

the average of the regional fee schedule 

amounts for all the states and a national 

floor equal to 90 percent of the average 

of the regional fee schedule amounts for 

all the states. 

The national ceiling and floor limits 

for DME and P&O set national 

parameters on how much the statewide 

or regional fee schedule amounts can 

vary. For DME, the upper payment limit 

or ceiling is based on the national 

median of the statewide fees, essentially 

bringing half of the state fees down to 

the national median. The lower limit or 

floor is based on 85 percent of the 

national median and brings those state 

fees below the floor amount up to the 

floor amount. In contrast, the national 

ceiling and floor parameters for P&O are 

based on 120 percent and 90 percent, 

respectively, of the average of the 

various regional fee schedule amounts. 

Differences in reasonable charge based 

fees in various geographic regions of the 

country are maintained within the 

parameters of the national ceilings and 

floors for P&O. 

4. DMEPOS Competitive Bidding 

Programs Payment Rules 

Section 1847(a) of the Act, as 

amended by section 302(b)(1) of the 

Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (MMA) (Pub. L. 108–173), requires 

the Secretary to establish and 

implement CBPs in CBAs throughout 

the United States for contract award 

purposes for the furnishing of certain 

competitively priced DMEPOS items 

and services. The programs mandated 

by section 1847(a) of the Act are 

collectively referred to as the ‘‘Medicare 

DMEPOS Competitive Bidding 

Program.’’ Section 1847(a)(2) of the Act 

provides that the items and services to 

which competitive bidding applies are: 

• Off-the-shelf (OTS) orthotics for 

which payment would otherwise be 

made under section 1834(h) of the Act; 

• Enteral nutrients, equipment and 

supplies described in section 

1842(s)(2)(D) of the Act; and 

• Certain DME and medical supplies, 

which are covered items (as defined in 

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

payment would otherwise be made 

under section 1834(a) of the Act. 

The DME and medical supplies 

category includes items used in infusion 

and drugs (other than inhalation drugs) 

and supplies used in conjunction with 

DME, but excludes class III devices 

under the Federal Food, Drug, and 

Cosmetics Act and Group 3 or higher 

complex rehabilitative power 

wheelchairs and related accessories 

when furnished with such wheelchairs. 

Sections 1847(a) and (b) of the Act 

specify certain requirements and 

conditions for implementation of the 

Medicare DMEPOS CBP. 

On July 15, 2008, the Medicare 

Improvements for Patients and 

Providers Act (MIPPA) was enacted. 

Section 154 of the MIPPA amended 

section 1847 of the Act to make certain 

limited changes to the Medicare 

DMEPOS CBP, including a revised 

timeframe for phasing in the programs. 

On March 23, 2010, the Affordable 

Care Act was enacted. Section 6410(a) of 

the Affordable Care Act amended 

section 1847(a)(1) of the Act, mandating 

the phase in of 21 additional 

Metropolitan Statistical Areas (MSAs). 

Section 1847(a) of the Act requires 

that the DMEPOS CBP be phased in so 

that competition under the programs 

occurs in 9 of the largest Metropolitan 

Statistical Areas (MSAs) in 2009, 91 

additional large MSAs in 2011, and 

additional areas after 2011 (or, in the 

case of national mail order for items and 

services, after 2010). Section 

1847(a)(1)(D)(ii) of the Act provides 

discretion to subdivide MSAs and 

through notice and comment 

rulemaking we subdivided the New 

York-Northern New Jersey-Long Island, 

NY-NJ-PA; Los Angeles-Long BeachSanta Ana, CA; and Chicago-NapervilleJoliet, IL-IN-WI MSAs. The final rule 

was published in the Federal Register 

on November 29, 2010 (75 FR 73454) 

and divided the New York-Northern 

New Jersey-Long Island, NY-NJ-PA MSA 

into six CBAs. In addition, the Los 

Angeles-Long Beach-Santa Ana, CA 

MSA was divided into two CBAs and 

the Chicago-Naperville-Joliet, IL-IN-WI 

MSA was divided into four CBAs (75 FR 

73460). Altogether this created a total of 

100 CBAs for the competitions 

occurring in the 91 MSAs in 2011, or a 

total of 109 CBAs for the competitions 

occurring in 100 MSAs in 2009 and 

2011. 

Finally, section 1847(a)(1)(D)(iii) of 

the Act specifies that competitions 

occurring before 2015 for items and 

services other than national mail order, 

may not include rural areas or MSAs 

with a population of less than 250,000. 

In addition to the national mail order 

program for diabetic supplies, the 

product categories (PCs) that have been 

phased in thus far in 100 Round 2 CBAs 

and 9 Round 1 CBAs include the 

following: 

Round 2 CBAs (Contract Period July 1, 

2013, Thru June 30, 2016) 

• Oxygen, oxygen equipment, and 

supplies 

• Standard (Power and Manual) 

wheelchairs, scooters, and related 

accessories 

• Enteral nutrients, equipment, and 

supplies 

• Continuous Positive Airway Pressure 

(CPAP) devices and Respiratory Assist 

Devices (RADs) and related supplies 

and accessories 

• Hospital beds and related accessories 

• Walkers and related accessories 

• Negative Pressure Wound Therapy 

pumps and related supplies and 

accessories 

• Support surfaces (Group 2 mattresses 

and overlays) 

Round 1 CBAs (Contract Period January 

1, 2014, Thru December 31, 2016) 

• Respiratory Equipment and Related 

Supplies and Accessories 

Æ includes oxygen, oxygen equipment, 

and supplies; CPAP devices and 

RADs and related supplies and 

accessories; and standard nebulizers 

• Standard Mobility Equipment and 

Related Accessories 

Æ includes walkers, standard power and 

manual wheelchairs, scooters, and 

related accessories 

• General Home Equipment and Related 

Supplies and Accessories 

Æ includes hospital beds and related 

accessories, group 1 and 2 support 

surfaces, transcutaneous electrical 

nerve stimulation (TENS) devices, 

commode chairs, patient lifts, and 

seat lifts 

• Enteral Nutrients, Equipment and 

Supplies 

• Negative Pressure Wound Therapy 

Pumps and Related Supplies and 

Accessories 

• External Infusion Pumps and 

Supplies 

In addition, contracts and SPAs were in 

effect in the 9 Round 1 CBAs from 

January, 1 2011 thru December 31, 2013, 

for the items listed below which are not 

included in current Round 1 or 2 PCs: 

• Complex Rehabilitative Power 

Wheelchairs and Related Accessories 

(Group 2) 

• Adjustable Wheelchair Seat Cushions 

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5. Adjusting Payment Amounts Using 

Information From the DMEPOS 

Competitive Bidding Program 

Section 1834(a)(1)(F)(ii) of the Act 

provides authority for using information 

from the DMEPOS CBPs to adjust the 

DME payment amounts for covered 

items furnished on or after January 1, 

2011, in areas where competitive 

bidding is not implemented for the 

items. Similar authority exists at section 

1834(h)(1)(H)(ii) of the Act for OTS 

orthotics, and at section 1842(s)(3)(B) of 

the Act for enteral nutrition. Section 

1834(a)(1)(F) also requires adjustments 

to the payment amounts for all DME 

items subject to competitive bidding 

furnished in areas where CBPs have not 

been implemented on or after January 1, 

2016. 

For items furnished on or after 

January 1, 2016, section 

1834(a)(1)(F)(iii) requires us to continue 

to make such adjustments to DME 

payment amounts where CBPs have not 

been implemented, as additional 

covered items are phased in or 

information is updated as contracts are 

recompeted. 

Section 1834(a)(1)(G) of the Act 

requires that the methodology used to 

adjust payment amounts for DME and 

OTS orthotics using information from 

the CBPs be promulgated through notice 

and comment rulemaking, which is the 

purpose of this proposed rule. Section 

1834(a)(1)(G) of the Act also requires 

that we consider the ‘‘costs of items and 

services in areas in which such 

provisions [sections 1834(a)(1)(F)(ii) and 

1834(h)(1)(H)(ii)] would be applied 

compared to the payment rates for such 

items and services in competitive 

acquisition [competitive bidding] 

areas.’’ We are proposing to apply the 

same methodology for making 

adjustments to the payment amounts for 

enteral nutrition as authorized by 

section 1842(s)(3)(B) of the Act. 

6. Diversity of Costs 

As mentioned above, under section 

1834(a)(1)(G) of the Act we must 

consider the costs of furnishing items 

and services in areas where prices will 

be adjusted compared to the payment 

rates for the items and services 

furnished in CBAs. We believe that the 

methodology for using the single 

payment amounts (SPAs) as a basis for 

adjusting payment rates in other areas 

needs to ensure that adjusted payment 

amounts in an area are adequate to 

cover the unique costs of furnishing the 

items and services in those areas. 

The SPAs are based on the median of 

successful bids for furnishing items and 

services in MSAs, which are mainly 

urban areas, from suppliers with costs 

and characteristics that may or may not 

be similar to suppliers in other areas. In 

addition, under the DMEPOS CBP, 

many low population density areas 

within MSAs were excluded from the 

CBAs as authorized by statute, making 

the geographic bidding areas smaller 

and more densely populated than they 

would have been if the initial MSA 

boundaries had been retained for 

bidding purposes. 

Regarding the size of suppliers 

submitting the bids used to generate the 

SPAs compared to the size of suppliers 

in areas where price adjustments based 

on the SPAs would occur, it is 

important to note that small suppliers 

are given special considerations under 

the CBP and that a majority of contracts 

are offered to small suppliers. Section 

1847(b)(6)(D) of the Act requires that, in 

developing procedures relating to 

bidding and the awarding of contracts, 

CMS ‘‘take appropriate steps to ensure 

that small suppliers of items and 

services have an opportunity to be 

considered for participation in the 

program.’’ We have established a 

number of provisions to ensure that 

small suppliers are given an opportunity 

to participate in the DMEPOS CBP. For 

example, under 42 CFR 414.414(g)(1)(i), 

we have established a 30 percent target 

for small supplier participation; thereby, 

ensuring efforts are made to award at 

least 30 percent of contracts to small 

suppliers. Also, CMS worked in 

coordination with the Small Business 

Administration (SBA) to develop an 

appropriate definition of a ‘‘small 

supplier’’ for this program. Under 42 

CFR 414.402, a small supplier is one 

that generates gross revenues of $3.5 

million or less in annual receipts, 

including Medicare and non-Medicare 

revenue. Under 42 CFR 414.418, small 

suppliers may join together in 

‘‘networks’’ in order to submit bids that 

meet the various program requirements. 

For contracts taking effect on July 1, 

2013 in Round 2, in 100 CBAs 

throughout the country, 63 percent of all 

contract suppliers are small suppliers, 

with only 10 percent of contract 

suppliers being new to the areas. In 

addition, for contracts taking effect on 

January 1, 2014 in the Round 1 

Recompete, in the 9 initial CBAs, 58 

percent of all contract suppliers are 

small suppliers, with only 3 percent of 

contract suppliers being new to the 

areas. Therefore, the majority of bids 

used in establishing the SPAs come 

from small suppliers with a history of 

furnishing the items in the CBAs. 

Prior to awarding contracts, each 

supplier is carefully screened to ensure 

that it is accredited under applicable 

Medicare quality standards and meets 

rigid financial standards, specific 

Medicare supplier enrollment 

requirements, and applicable state 

licensing standards. Each bid is 

screened to ensure that it is a bona fide 

bid, and those that fail are excluded 

from the competition. Approximately 94 

percent of bids screened as part of the 

Round 2 and Round 1 Recompete 

competitions were determined to be 

bona fide. The invoices and purchase 

orders submitted by bidding suppliers 

to support their bids reflected prices 

already paid by the supplier (that is, 

prior to becoming a contract supplier) 

and for the most part did not reflect 

large volume purchasing discounts. 

Once non-bona fide bids are excluded, 

suppliers are ranked in order based on 

bid amounts, and the median of bids 

from the number of suppliers 

determined to be necessary to meet 

projected demand are used to establish 

the SPAs. The projected demand for 

items and services in a CBA is 

intentionally overstated for the purpose 

of ensuring that contracts are awarded 

to more than a sufficient number of 

suppliers to serve the beneficiaries in 

the area. The establishment of the 

demand level is explained in detail in 

the competitive bidding final rule 

(Medicare Program; Competitive 

Acquisition for Certain DMEPOS and 

Other issue) published April 10, 2007 

(72 FR 18039). Thus, the SPAs are 

higher than they would otherwise be if 

demand was not overstated because the 

high demand generally results in an 

increase in the number of contract 

suppliers which in most cases increases 

the median bid amount. CMS also 

conducts its review of supplier capacity 

and expansion plans during the bid 

evaluation process. If a supplier is new 

to an area, new to a PC, or submits 

estimated capacity that represents 

substantial growth over current levels, 

CMS may conduct a more detailed 

evaluation of that supplier’s expansion 

plan to verify the supplier’s ability to 

provide items and services in the CBA 

on day one of the contract period. If a 

bidder’s financial data and expansion 

plan do not support the supplier’s 

estimated capacity, CMS will adjust the 

capacity to the supplier’s historic level, 

which would be zero for a new supplier. 

CMS uses the estimated capacity 

information and the bid amounts to 

determine the array of winning 

suppliers in a CBA. 

Under Round 2 and the Round 1 

Recompete competitions, 92 percent of 

suppliers accepted contract offers at the 

SPAs set through the competitions. In 

addition, CMS reviewed all contract 

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suppliers based on financial standards 

when evaluating their bids. This process 

includes review of tax records, credit 

reports, and other financial data, which 

leads to the calculation of a score, 

similar to processes used by lenders 

when evaluating the viability of a 

company. All contract suppliers met the 

financial standards established for the 

program. 

From January 1, 2011, when the 

initial Round 1 contracts and SPAs took 

effect, to present, we have seen no 

indication that beneficiaries have been 

denied access to necessary items and 

services subject to the programs in CBAs 

as a result of the SPAs. In addition, we 

have been closely monitoring inquiries 

as well as real time claims and health 

outcomes data and have seen no 

negative impacts on access to items and 

services under the program. Therefore, 

the SPAs appear to be sufficient to cover 

the costs of the suppliers furnishing 

items in the 109 CBAs. 

In previous legislation, which we will 

discuss below, the Congress mandated 

that the costs of furnishing DME in 

different geographic regions of the 

country be studied. Section 135 of the 

Social Security Act Amendments of 

1994, Public Law 103–432, required an 

examination of the geographic 

variations in DME supplier costs in 

order to determine whether the fee 

schedules are reasonably adjusted to 

account for any geographic differences. 

Jing Xing Health and Safety Resources, 

Inc. provided assistance to the Health 

Care Financing Administration, now 

CMS, in conducting this study. The 

project entitled ‘‘Durable Medical 

Equipment Supplier Product and 

Service Cost Study’’, was completed 

under Contract Number HCFA 500–95– 

0044 and submitted to the agency in 

June 1996. As part of the study, a 

Federal Advisory Panel was convened, 

a formal meeting with representatives of 

the DME industry was held, and a 

literature review was conducted. The 

general consensus among industry 

representatives and government 

agencies that participated in the study 

was that there is no conclusive evidence 

that urban and rural costs differed 

significantly or that the costs of 

furnishing DME items and services were 

higher in urban areas versus rural areas 

or vice versa. 

The 109 CBAs where competitive 

bidding has been phased in include a 

wide range of different size urban areas 

with surrounding counties, and 

suppliers take the costs of furnishing 

items and services in these different 

areas into account when submitting bids 

under the programs. They include one 

CBA (Honolulu, HI) that is not within 

the contiguous Unites States and CBAs 

that range in population size from 

approximately 300 thousand to 10 

million (See Table 33). There are 7 

CBAs with a population of less than 

500,000, 42 CBAs with a population of 

more than 500,000, but less than 1 

million, 27 CBAs with a population of 

more than 1 million, but less than 2 

million, 19 CBAs with a population of 

2 to 4 million, and 14 CBAs with a 

population of over 4 million. 

TABLE 33—CBA POPULATION SIZE

CBA Population 

Los Angeles County CBA .................................................................................................................................................................... 9,453,357 

Nassau-Brooklyn-Queens-Richmond County Metro CBA ................................................................................................................... 6,630,278 

Dallas-Fort Worth-Arlington, TX .......................................................................................................................................................... 6,554,334 

Central-Chicago Metro CBA ................................................................................................................................................................ 6,179,455 

Houston-Sugar Land-Baytown, TX ...................................................................................................................................................... 6,152,650 

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD .............................................................................................................................. 5,995,992 

Washington-Arlington-Alexandria, DC-VA-MD-WV ............................................................................................................................. 5,662,358 

Miami-Fort Lauderdale-Pompano Beach, FL ...................................................................................................................................... 5,604,979 

Atlanta-Sandy Springs-Marietta, GA ................................................................................................................................................... 5,293,136 

Boston-Cambridge-Quincy, MA-NH ..................................................................................................................................................... 4,595,431 

San Francisco-Oakland-Fremont, CA ................................................................................................................................................. 4,407,286 

Detroit-Warren-Livonia, MI ................................................................................................................................................................... 4,256,579 

Phoenix-Mesa-Glendale, AZ ................................................................................................................................................................ 4,251,146 

Riverside-San Bernardino-Ontario, CA ............................................................................................................................................... 4,157,332 

Seattle-Tacoma-Bellevue, WA ............................................................................................................................................................. 3,522,509 

Northern NJ Metro CBA ...................................................................................................................................................................... 3,473,815 

Minneapolis-St. Paul-Bloomington, MN-WI ......................................................................................................................................... 3,326,864 

San Diego-Carlsbad-San Marcos, CA ................................................................................................................................................. 3,118,844 

Orange County CBA ............................................................................................................................................................................ 3,067,829 

Southern NY Metro CBA ..................................................................................................................................................................... 3,015,460 

Bronx-Manhattan NY CBA ................................................................................................................................................................... 2,983,009 

St. Louis, MO-IL ................................................................................................................................................................................... 2,844,160 

Tampa-St. Petersburg-Clearwater, FL ................................................................................................................................................ 2,810,479 

Baltimore-Towson, MD ........................................................................................................................................................................ 2,751,529 

Denver-Aurora-Broomfield, CO ........................................................................................................................................................... 2,568,221 

Pittsburgh, PA ...................................................................................................................................................................................... 2,361,317 

Portland-Vancouver-Hillsboro, OR-WA ............................................................................................................................................... 2,259,089 

San Antonio-New Braunfels, TX .......................................................................................................................................................... 2,223,779 

Orlando-Kissimmee-Sanford, FL ......................................................................................................................................................... 2,176,846 

Sacramento-Arden-Arcade-Roseville, CA ........................................................................................................................................... 2,174,556 

Cincinnati-Middletown, OH-KY-IN ....................................................................................................................................................... 2,121,660 

Cleveland-Elyria-Mentor, OH ............................................................................................................................................................... 2,074,790 

Kansas City, MO-KS ............................................................................................................................................................................ 2,050,306 

Las Vegas-Paradise, NV ..................................................................................................................................................................... 1,967,341 

San Jose-Sunnyvale-Santa Clara, CA ................................................................................................................................................ 1,898,173 

Columbus, OH ..................................................................................................................................................................................... 1,844,571 

Charlotte-Gastonia-Rock Hill, NC-SC .................................................................................................................................................. 1,832,391 

Austin-Round Rock-San Marcos, TX .................................................................................................................................................. 1,813,495 

Indianapolis-Carmel, IN ....................................................................................................................................................................... 1,764,136 

Virginia Beach-Norfolk-Newport News, VA-NC ................................................................................................................................... 1,673,547 

Nashville-Davidson-Murfreesboro-Franklin, TN ................................................................................................................................... 1,607,708 

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TABLE 33—CBA POPULATION SIZE—Continued 

CBA Population 

Providence-New Bedford-Fall River, RI-MA ........................................................................................................................................ 1,603,029 

Milwaukee-Waukesha-West Allis, WI .................................................................................................................................................. 1,570,548 

Suffolk County CBA ............................................................................................................................................................................. 1,488,017 

South-West-Chicago-Metro CBA ......................................................................................................................................................... 1,464,818 

Jacksonville, FL ................................................................................................................................................................................... 1,371,407 

North East NY CBA Metro ................................................................................................................................................................... 1,363,882 

Memphis, TN-MS-AR ........................................................................................................................................................................... 1,309,806 

Louisville/Jefferson County, KY-IN ...................................................................................................................................................... 1,277,282 

Oklahoma City, OK .............................................................................................................................................................................. 1,276,642 

Richmond, VA ...................................................................................................................................................................................... 1,262,088 

Hartford-West Hartford-East Hartford, CT ........................................................................................................................................... 1,214,313 

Raleigh-Cary, NC ................................................................................................................................................................................. 1,190,534 

Northern-Chicago Metro CBA .............................................................................................................................................................. 1,187,661 

New Orleans-Metairie-Kenner, LA ....................................................................................................................................................... 1,182,382 

Salt Lake City, UT ............................................................................................................................................................................... 1,158,617 

Buffalo-Niagara Falls, NY .................................................................................................................................................................... 1,133,325 

Birmingham-Hoover, AL ...................................................................................................................................................................... 1,121,219 

Rochester, NY ..................................................................................................................................................................................... 1,062,561 

Tucson, AZ .......................................................................................................................................................................................... 1,004,374 

Honolulu, HI ......................................................................................................................................................................................... 962,112 

Fresno, CA ........................................................................................................................................................................................... 949,093 

Tulsa, OK ............................................................................................................................................................................................. 945,366 

Bridgeport-Stamford-Norwalk, CT ....................................................................................................................................................... 922,063 

Albuquerque, NM ................................................................................................................................................................................. 896,202 

Omaha-Council Bluffs, NE-IA .............................................................................................................................................................. 883,233 

Albany-Schenectady-Troy, NY ............................................................................................................................................................ 866,077 

New Haven-Milford, CT ....................................................................................................................................................................... 862,551 

Dayton, OH .......................................................................................................................................................................................... 839,984 

Oxnard-Thousand Oaks-Ventura, CA ................................................................................................................................................. 830,680 

Allentown-Bethlehem-Easton, PA-NJ .................................................................................................................................................. 826,740 

El Paso, TX .......................................................................................................................................................................................... 826,163 

Baton Rouge, LA ................................................................................................................................................................................. 811,243 

Bakersfield-Delano, CA ....................................................................................................................................................................... 810,348 

Worcester, MA ..................................................................................................................................................................................... 800,404 

McAllen-Edinburg-Mission, TX ............................................................................................................................................................ 799,023 

Grand Rapids-Wyoming, MI ................................................................................................................................................................ 783,733 

Columbia, SC ....................................................................................................................................................................................... 767,793 

Greensboro-High Point, NC ................................................................................................................................................................. 746,685 

Little Rock-North Little Rock-Conway, AR .......................................................................................................................................... 710,371 

North Port-Bradenton-Sarasota, FL ..................................................................................................................................................... 708,687 

Indiana-Chicago Metro CBA ................................................................................................................................................................ 706,110 

Knoxville, TN ........................................................................................................................................................................................ 705,446 

Springfield, MA .................................................................................................................................................................................... 698,926 

Akron, OH ............................................................................................................................................................................................ 687,788 

Stockton, CA ........................................................................................................................................................................................ 685,542 

Greenville-Mauldin-Easley, SC ............................................................................................................................................................ 683,793 

Charleston-North Charleston-Summerville, SC ................................................................................................................................... 682,539 

Syracuse, NY ....................................................................................................................................................................................... 671,076 

Poughkeepsie-Newburgh-Middletown, NY .......................................................................................................................................... 665,524 

Colorado Springs, CO ......................................................................................................................................................................... 665,484 

Toledo, OH .......................................................................................................................................................................................... 649,956 

Wichita, KS .......................................................................................................................................................................................... 634,116 

Boise City-Nampa, ID .......................................................................................................................................................................... 634,037 

Cape Coral-Fort Myers, FL .................................................................................................................................................................. 631,611 

Lakeland-Winter Haven, FL ................................................................................................................................................................. 602,671 

Augusta-Richmond County, GA-SC .................................................................................................................................................... 570,656 

Scranton-Wilkes-Barre, PA .................................................................................................................................................................. 556,282 

Youngstown-Warren-Boardman, OH-PA ............................................................................................................................................. 553,382 

Palm Bay-Melbourne-Titusville, FL ...................................................................................................................................................... 550,416 

Jackson, MS ........................................................................................................................................................................................ 544,285 

Chattanooga, TN-GA ........................................................................................................................................................................... 533,309 

Deltona-Daytona Beach-Ormond Beach, FL ....................................................................................................................................... 501,906 

Visalia-Porterville, CA .......................................................................................................................................................................... 439,968 

Flint, MI ................................................................................................................................................................................................ 435,877 

Asheville, NC ....................................................................................................................................................................................... 434,665 

Beaumont-Port Arthur, TX ................................................................................................................................................................... 397,872 

Ocala, FL ............................................................................................................................................................................................. 323,229 

Huntington-Ashland, WV-KY-OH ......................................................................................................................................................... 289,474 

Source: U.S. Census Bureau, Population Division, 2012 Population Estimates. Population estimates for MSAs and counties were adjusted to 

reflect CBA boundaries. 

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7. Advanced Notice of Proposed 

Rulemaking 

CMS issued an Advance Notice of 

Proposed Rulemaking (ANPRM): 

Medicare Program; Methodology for 

Adjusting Payment Amounts for Certain 

Durable Medical Equipment, 

Prosthetics, Orthotics, and Supplies 

(DMEPOS) using Information From 

Competitive Bidding Programs. The 

ANPRM was published in the Federal 

Register on February 26, 2014 (79 FR 

10754) and solicited comments on 

several aspects to consider in 

developing the proposed methodology 

to adjust DMEPOS fee schedule 

amounts or other payment amounts in 

non-competitive areas based on 

DMEPOS competitive bidding payment 

information. Specific questions related 

to this topic were presented in the 

notice, including: 

• Do the costs of furnishing various 

DMEPOS items and services vary based 

on the geographic area in which they are 

furnished? 

• Do the costs of furnishing various 

DMEPOS items and services vary based 

on the size of the market served in terms 

of population and/or distance covered 

or other logistical or demographic 

reasons? 

• Should an interim or different 

methodology be used to adjust payment 

amounts for items that have not yet been 

included in all CBPs (for example, items 

such as TENS devices that have only 

been phased into the nine Round 1 areas 

thus far)? 

The comment period for the ANPRM 

ended on March 28, 2014, and CMS 

received approximately 185 comments 

from suppliers, manufacturers, 

professional, state and national trade 

associations, physicians, physical 

therapists, beneficiaries and their 

caregivers, and one state government 

office. 

Commenters generally agreed that 

costs do vary by geographic region and 

that costs in rural and non-contiguous 

areas are higher than costs in urban 

areas. However, few commenters offered 

specific proposals or suggestions for 

addressing these costs differences and 

the suggestions that were provided were 

vague (for example, use the 75th 

percentile of SPAs rather than the 

national median SPA). Several 

commenters stated that the costs of 

furnishing DMEPOS items and services 

in different regions of the country do 

vary. One commenter representing 

many suppliers said that there exists no 

reliable cost data. Another commenter 

representing many manufacturers and 

suppliers listed several key variables or 

factors that influence the cost of 

furnishing items and services in 

different areas that should be 

considered, but the commenter did not 

provide information on how valid and 

reliable information related to these 

factors could be obtained. This 

commenter stated that information of all 

bids submitted under the programs 

should also be considered and not just 

the bids of winning suppliers. Some 

commenters expressed concern that the 

SPAs assume a significant increase in 

volume to offset lower payment 

amounts. Some commenters suggested 

that the price adjustments be phased in 

rather than making full, one-time 

adjustments. 

B. Proposed Provisions 

We propose establishing three 

methodologies for adjusting DMEPOS 

fee schedule amounts in areas where 

CBPs have not been established for 

these items and services based on SPAs 

established in accordance with the 

payment rules at § 414.408. Use of SPAs 

that may be established in accordance 

with the special payment rules 

proposed in section V to adjust 

DMEPOS fee schedule amounts in areas 

where CBPs have not been established 

for these items and services would be 

addressed in future notice and comment 

rulemaking. One proposed methodology 

is described in subsection 1 below and 

would utilize regional adjustments 

limited by national parameters for items 

bid in more than 10 CBAs throughout 

the country. A second proposed 

methodology is described in subsection 

2 below and would be used for lower 

volume items or other items that were 

bid in no more than 10 CBAs for various 

reasons. A third proposed methodology 

is described in subsection 5 and would 

be used for mail order items furnished 

in the Northern Mariana Islands. We are 

also proposing rules that would apply to 

all of these proposed methodologies. 

1. Proposed Regional Adjustments 

Limited by National Parameters 

CBPs are currently in place in 100 of 

the largest MSAs in the country for 

items and services that make up over 80 

percent of the total allowed charges for 

items subject to the DMEPOS CBP. SPAs 

are currently used in 109 CBAs that 

include areas in every state throughout 

the country except for Alaska, Maine, 

Montana, North Dakota, South Dakota, 

Vermont, and Wyoming. The number of 

CBAs, as listed in Table 33 that are fully 

or partially located within a given state 

range from one to twelve. The Honolulu 

CBA was phased in under Round 2 of 

the program. Suppliers submitting bids 

for furnishing items and services in 

these areas have received extensive 

education that they should factor all 

costs of furnishing items and services in 

an area as well as overhead and profit 

into their bids. 

For items and services that are subject 

to competitive bidding and have been 

included in more than 10 CBAs 

throughout the country, we propose to 

adjust the fee schedule payment 

amounts for these items and services 

using a methodology that is modeled 

closely after the regional fee schedule 

payment methodology in effect for P&O 

to allow for variations in payment based 

on bids for furnishing items and 

services in different parts of the country. 

Under the proposed methodology, 

adjusted fee schedule amounts for areas 

within the contiguous United States 

would be determined based on regional 

SPAs or RSPAs limited by a national 

floor and ceiling. The RSPA would be 

established using the average of the 

SPAs for an item from all CBAs that are 

fully or partially located in the region. 

The adjusted payment amount for the 

item would be equal to its RSPA but not 

less than 90 percent and not more than 

110 percent of the national average, 

which is the average of the RSPAs 

weighted by the number of states in the 

region. 

We believe modeling the proposed 

methodology on the regional fee 

schedule payment methodology for P&O 

is appropriate because the regional fee 

schedule payment methodology for P&O 

allows for variations in Medicare fee 

schedule amounts based on supplier 

charges for furnishing items and 

services in different regions of the 

country. The regional fee schedule 

payment methodology for P&O adjusts 

the Medicare allowed payments for 

entire regions of the country, including 

low population density or rural areas, 

based primarily on supplier information 

for furnishing items and services in 

urban areas. The regional fee schedule 

payment methodology for P&O has been 

fully phased in since 1994 in the 

contiguous United States and has not 

resulted in any barriers to access since 

then in any specific region of the 

country in which it has been applied. 

The DME and P&O fee schedule 

amounts are based in a part on 

statewide average reasonable charges 

calculated using supplier charges for 

furnishing items and services in 

localities throughout each state. 

Supplier charges for furnishing items in 

rural areas of the state are combined 

with charges for furnishing items in 

urban areas of the state, which 

represents the bulk of the charges since 

the vast majority of beneficiaries in each 

state reside in urban areas rather than 

rural areas. Although the fee schedule 

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payments are based heavily on charges 

for furnishing items and services in 

urban areas, this has not affected access 

to items and services in rural areas that 

are paid based on these fee schedule 

amounts. 

We considered modeling the 

proposed methodology on the fee 

schedule payment methodology for 

DME which establishes an upper limit 

on all fee schedule amounts based on 

the median of the state fee schedule 

amounts; however, this methodology 

does not allow for regional variations in 

fee schedule amounts, allows for 0 

percent variations in state fee schedule 

amounts above the national median 

amount, and only allows for up to 15 

percent variation in state fee schedule 

amounts below the national median 

amount. The statewide average 

reasonable charges for DME are updated 

by an annual covered item update factor 

and are then limited by a national 

ceiling and floor based on the median of 

the statewide amounts and 85 percent of 

the median of the statewide amounts. 

The DME fee schedule methodology 

allows for no variation in payment 

whatsoever above the national median 

statewide amount. The maximum 

variation in fee schedule amounts that 

is allowed is 15 percent below the 

national median statewide amount. By 

contrast, the regional fee schedule 

methodology for P&O allows for 

regional variation in fee schedule 

payment amounts by as much as 10 

percent below the national average 

amount and 20 percent above the 

national average amount. Similarly, the 

fee schedules for enteral nutrition are 

based on national average reasonable 

charges, and therefore, do not allow for 

any regional variation in fee schedule 

amounts. We believe that the model 

whereby regional fee schedule amounts 

for P&O are based on supplier charges 

for furnishing items and services within 

each region should be adopted when 

using SPAs to adjust fee schedule 

payment amounts in a way that reflects 

bidding in different regions of the 

country. The regional adjusted amounts 

are based on supplier bids for furnishing 

items and services within each region, 

as explained below. 

a. Regional Payment Adjustments 

Rather than adjusting state, regional, 

or national fee schedule amounts or 

infusion drug payment amounts based 

on all bids for an item in all CBAs across 

the country or based on all bids for an 

item in all CBAs within each state, we 

propose to adjust the payment amounts 

based on the average of bids for an item 

in CBAs that are fully or partially 

located in different regions of the 

country. In the first step of the proposed 

methodology we propose to calculate 

RSPAs or the average of the SPAs for an 

item and service in different regions of 

the country. In keeping with the 

example established by the P&O 

regional fee schedule payment 

methodology, this would allow 

variation in payment amounts for 

different regions of the country. For the 

purpose of establishing the boundaries 

for the regions, we propose using 8 

regions developed for economic analysis 

purposes by the Bureau of Economic 

Analysis (BEA) within the Department 

of Commerce. These regions are 

proposed based on research and 

analysis conducted by the BEA 

indicating that the states in each region 

share economic ties. Further 

information can be obtained at https:// 

www.bea.gov/regional/definitions/

nextpage.cfm?key=Regions. 

The information provided at this link 

states that: 

BEA Regions are a set of Geographic Areas 

that are aggregations of the states. The 

following eight regions are defined: Far West, 

Great Lakes, Mideast, New England, Plains, 

Rocky Mountain, Southeast, and Southwest. 

The regional classifications, which were 

developed in the mid-1950s, are based on the 

homogeneity of the states in terms of 

economic characteristics, such as the 

industrial composition of the labor force, and 

in terms of demographic, social, and cultural 

characteristics. For a brief description of the 

regional classification of states used by BEA, 

see U.S. Department of Commerce, Census 

Bureau, Geographic Areas Reference Manual, 

Washington, DC, U.S. Government Printing 

Office, November 1994, pp. 6–18;6–19. 

Therefore, we propose to revise the 

definition of region in § 414.202 to mean 

a region developed for economic 

analysis purposes by the Bureau of 

Economic Analysis (BEA) within the 

Department of Commerce for the 

purpose of calculating regional single 

payment amounts (RSPAs); the 

definition of region for the purposes of 

the P&O regional fee schedule would 

also continue to apply for those items 

and services not adjusted based on 

prices in competitively bid areas. 

According to the BEA, the regional 

classifications are based on the 

homogeneity of the states in terms of 

economic characteristics, such as the 

industrial composition of the labor 

force, and in terms of demographic, 

social, and cultural characteristics. The 

contiguous areas of the United States 

that fall under the 8 BEA regions under 

our proposal are listed in Table 34 

below. Further information can be 

obtained at http://www.bea.gov/. 

TABLE 34—BUREAU OF ECONOMIC ANALYSIS REGIONS

Region Name States/Areas (count) 

1 ............. New England ........ Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont (6). 

2 ............. Mideast ................. Delaware, District of Columbia, Maryland, New Jersey, New York, and Pennsylvania (6). 

3 ............. Great Lakes .......... Illinois, Indiana, Michigan, Ohio, and Wisconsin (5). 

4 ............. Plains .................... Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota (7). 

5 ............. Southeast .............. Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia (12). 

6 ............. Southwest ............. Arizona, New Mexico, Oklahoma, and Texas (4). 

7 ............. Rocky Mountain .... Colorado, Idaho, Montana, Utah, and Wyoming (5). 

8 ............. Far West ............... California, Nevada, Oregon, and Washington (4). 

We are soliciting public comments on 

whether different regional boundaries 

(e.g. CMS regions or Census Divisions) 

should be considered that would better 

reflect potential regional differences in 

the costs of furnishing items and 

services subject to the DMEPOS CBP. In 

addition to the CMS regions listed in 

section A.3 above, other established 

regional boundaries include those 

defined by the United States Census 

Bureau in the Department of Commerce 

for the purpose of reporting and 

analyzing census data. The Census 

Bureau uses 4 regions that are further 

divided into 9 divisions. The Census 

divisions are as follows: 

• New England (Division 1); 

including the 6 states Connecticut, 

Maine, Massachusetts, New Hampshire, 

Rhode Island and Vermont. 

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• Middle Atlantic (Division 2); 

including the 3 states New Jersey, New 

York and Pennsylvania. 

• East North Central (Division 3); 

including the 5 states Illinois, Indiana, 

Michigan, Ohio and Wisconsin. 

• West North Central (Division 4); 

including the 7 states Iowa, Kansas, 

Minnesota, Missouri, Nebraska, North 

Dakota and South Dakota. 

• South Atlantic (Division 5); 

including the 9 states Delaware, District 

of Columbia, Florida, Georgia, 

Maryland, North Carolina, South 

Carolina, Virginia and West Virginia. 

• East South Central (Division 6); 

including the 4 states Alabama, 

Kentucky, Mississippi and Tennessee. 

• West South Central (Division 7); 

including the 4 states Arkansas, 

Louisiana, Oklahoma, and Texas. 

• Mountain (Division 8); including 

the 8 states Arizona, Colorado, Idaho, 

Montana, Nevada, New Mexico, Utah 

and Wyoming. 

• Pacific (Division 9); including the 5 

states Alaska, California, Hawaii, 

Oregon and Washington. 

Table 35 below lists the states and 

number of CBAs located in each of the 

CMS regions, BEA regions, and census 

divisions. 

TABLE 35—STATES AND NUMBER OF CURRENT CBAS PER CMS REGION, BEA REGION, AND CENSUS DIVISION

10 CMS Regions 9 Census Divisions 8 BEA Regions 

Region States CBAs Division States CBAs Region States CBAs 

Boston ................ CT, ME, MA, NH, 

RI, VT.

7 New England ...... CT, ME, MA, NH, 

RI, VT.

7 New England ...... CT, ME, MA, NH, 

RI, VT.

7 

New York ............ NJ, NY ................ 13 Middle Atlantic .... NJ, NY, PA ......... 15 Mideast ............... DE, DC, MD, NJ, 

NY, PA.

17 

Phila ................... DE, DC, MD, PA, 

VA, WV.

9 

Atlanta ................ AL, FL, GA, KY, 

MS, NC, SC, 

TN.

28 South Atlantic ..... DE, DC, FL, GA, 

MD, NC, SC, 

VA, WV.

30 Southeast ........... AL, AR, FL, GA, 

KY, LA, MS, 

NC, SC, TN, 

VA, WV.

34 

............................. East South Central.AL, KY, MS, TN 7 

Chicago .............. IL, IN, MI, MN, 

OH, WI.

19 East North Central.IN, IL, MI, OH, 

WI.

19 Great Lakes ........ IL, IN, MI, OH, 

WI.

19 

Dallas ................. AR, LA, NM, OK, 

TX.

14 West South Central.AR, LA, OK, TX .. 13 Southwest .......... AZ, NM, OK, TX 11 

Kansas City ........ IA, KS, MO, NE .. 4 West North Central.IA, KS, MN, MO, 

NE, ND, SD.

5 Plains ................. IA, KS, MN, MO, 

NE, ND, SD.

5 

Denver ................ CO, MT, ND, SD, 

UT, WY.

3 Mountain ............ AZ, CO, ID, NM, 

MT, UT, NV, 

WY.

8 Rocky Mountain CO, ID, MT, UT, 

WY.

4 

San Fran ............ AZ, CA, NV ........ 16 Pacific ................. CA, OR, WA ....... 15 Far West ............ CA, NV, OR, WA 16 

Seattle ................ ID, OR, WA ........ 3 

The regional fee schedule amounts for 

P&O are based on the average of the 

statewide fees for P&O, weighted by 

total Part B claims for paid claims with 

dates of service from July 1, 1991, thru 

June 30, 1992, which results in fees for 

states with a greater volume of Part B 

claims having more influence on the 

regional fee schedule amounts than 

states with a smaller volume of Part B 

claims. We believe this aspect of the 

regional fee schedule payment 

methodology for P&O tends to favor 

more heavily populated states. The 

statewide fees for larger, more urban 

states where the most Medicare claims 

are processed, for example, 

Massachusetts for Region 1, play a larger 

role in determining the regional price 

than the statewide fees for smaller, more 

rural states in the region, for example, 

Vermont. Table 36 below shows the 

relative weighs applied to the statewide 

fees used in calculating the regional 

P&O fees for the CMS Boston Region or 

Region 1. 

TABLE 36—P&O REGIONAL FEE

WEIGHTS—CMS REGION 1 (BOSTON) (WEIGHTED BY TOTAL PAID

CLAIMS FOR DATES OF SERVICE

FROM JULY 1, 1991, THRU JUNE 30, 

1992) 

State Total part B 

claims 

Percent of 

total for 

Region 

MA ............ 11,710,121 48% 

CT ............. 6,288,638 26% 

RI .............. 2,251,892 9% 

ME ............ 2,012,385 8% 

NH ............. 1,571,936 6% 

VT ............. 759,242 3% 

Region ...... 24,594,214 ........................

As can be seen in this table, the 

regional P&O fees for the Boston Region 

are weighted heavily in favor of the 

statewide fees and average reasonable 

charges from 1986/87 for the more 

heavily populated urban states of 

Massachusetts and Connecticut with a 

greater utilization of Part B items and 

services, whereas the fees for more rural 

States like Vermont and Maine have a 

very minor impact in determining the 

regional fees. In contrast, we are 

proposing that the RSPAs be calculated 

based on a simple average of the SPAs 

for CBAs in each region, without 

weighting in favor of larger, more 

heavily populated CBAs. Using the New 

England BEA Region that is comprised 

of the same 6 states that make up the 

CMS Boston Region as an example, the 

proposed RSPA for this region would be 

based on the average of the SPAs for the 

following 7 CBAs, with estimated 2012 

population in parentheses: 

• Boston-Cambridge-Quincy, MA–NH 

(4,640,802) 

• Providence-New Bedford-Fall 

River, RI–MA (1,601,374) 

• Hartford-West Hartford-East 

Hartford, CT (1,214,400) 

• Bridgeport-Stamford-Norwalk, CT 

(933,835) 

• Worcester, MA (923,762) 

• New Haven-Milford, CT (862,813) 

• Springfield, MA (625,718) 

Therefore, rather than weighting the 

average of the SPAs in favor of more 

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heavily populated CBAs, we propose 

that the RSPA be based on the simple 

average of the SPAs for the CBAs in the 

region, with the SPA for the much 

smaller Springfield, MA CBA and the 

SPA for the much larger BostonCambridge-Quincy, MA–NH 

Springfield, MA CBA contributing 

equally toward calculation of the RSPA. 

We believe this approach would result 

in adjustments that factor in the regional 

costs associated with furnishing items 

and services in the New England region 

of the country, while not giving undue 

weight to the costs of furnishing items 

and services in larger markets. 

b. National Parameters 

As explained above, the regional fee 

schedule amounts for P&O are limited 

by a national ceiling equal to 120 

percent of the average of the regional fee 

schedule amounts for all the states and 

a national floor equal to 90 percent of 

the average of the regional fee schedule 

amounts for all the states. This limits 

the range in the regional fee schedule 

amounts from highest to lowest to no 

more than 30 percent, 20 percent above 

the national average and 10 percent 

below the national average. By contrast, 

the fee schedule payment methodology 

for DME only allows for a variation in 

statewide fees of 15 percent below the 

median of statewide fees for all the 

states. The national limits to the fee 

schedule amounts for P&O and DME 

have not resulted in a barrier to access 

to items and services in any part of the 

country. We believe this reflects the fact 

that the costs of furnishing DMEPOS 

items and services do not vary 

significantly from one part of the 

country to another and that national 

limits on regional prices is warranted. 

We therefore propose to limit the 

variation in the RSPAs using a national 

ceiling and floor in order to prevent 

unnecessarily high or low regional 

amounts that vary significantly from the 

national average prices for the items and 

services. The national ceiling and floor 

limits would be based on 110 percent 

and 90 percent, respectively, of the 

average of the RSPAs applicable to each 

of the 48 contiguous states and the 

District of Columbia (that is, the average 

of RSPAs is weighted by the number of 

contiguous states including the District 

of Columbia per region). We propose 

that any RSPA above the national 

ceiling would be brought down to the 

ceiling and any RSPA below the 

national floor would be brought up to 

the floor. We propose that the national 

ceiling would exceed the average of the 

RSPAs by the same percentage that the 

national floor would be under the 

average of the RSPAs. This allows for a 

maximum variation of 20 percent from 

the lowest RSPA to the highest RSPA. 

We believe that a variation in payment 

amounts both above and below the 

national average price should be 

allowed, and we believe that allowing 

for the same degree of variation (10 

percent) above and below the national 

average price is more equitable and less 

arbitrary than allowing a higher degree 

of variation (20 percent) above the 

national average price than below (10 

percent), as in the case of the national 

ceiling and floor for the P&O fee 

schedule, or allowing for only 15 

percent variation below the national 

average price, as in the case of the 

national ceiling and floor for the DME 

fee schedule. 

c. Rural and Frontier State Adjustments 

Under the DMEPOS CBP, the statute 

prohibits competitions before 2015 in 

new CBAs that are rural areas or MSAs 

with a population of less than 250,000. 

Even if competitions were to begin in 

these areas in 2015, it is very unlikely 

that the SPAs from these areas would be 

computed and finalized by January 1, 

2016. Therefore, we propose that the 

proposed RSPAs initially be based 

solely on information from existing 

programs implemented in 100 MSAs, 

which are generally comprised of more 

densely populated, urban areas than 

areas outside MSAs. We therefore 

believe that the initial RSPAs would not 

directly account for unique costs that 

may be associated with furnishing 

DMEPOS in states that have few MSAs 

and are predominantly rural or cover 

large geographic areas and are sparsely 

populated. However, in keeping with 

the discussion above, we do not believe 

that the cost of furnishing DMEPOS in 

these areas should deviate significantly 

from the national average price 

established based on supplier bids for 

furnishing items and services in 

different areas throughout the country. 

As explained above, the DMEPOS fee 

schedule amounts are based primarily 

on supplier charges for furnishing items 

and services in urban areas and this has 

not resulted in problems associated with 

access to these items and services in 

rural areas or large, sparsely populated 

areas. Nonetheless, for the purpose of 

ensuring access to necessary items and 

services in states that are more rural or 

sparsely populated than others, we 

propose that the adjusted fee schedule 

amounts for states that are more rural 

than urban and defined as ‘‘rural states’’ 

or states where a majority of the 

counties are sparsely populated and 

defined as ‘‘frontier states’’ would be no 

lower than the national ceiling amount 

discussed in section b above. 

We propose in § 414.202 that a rural 

state be defined as a state where more 

than 50 percent of the population lives 

in rural areas within the state as 

determined through census data, since a 

majority of the general population of the 

state lives in rural areas, it is likely that 

a majority of DMEPOS items and 

services are furnished in rural settings 

in the state. This is in contrast to other 

states where the majority of the general 

population of the state lives in urban 

areas, making it more likely that a 

majority of DMEPOS items and services 

are furnished in urban settings or in 

MSAs. We believe that for states where 

a majority of the general population 

lives in rural areas, adjustments to the 

fee schedule amounts should be based 

on the national ceiling amount if the 

RSPA is lower than the national ceiling 

amount. This higher level of payment 

would provide more assurance that 

access to items and services in states 

within a region that are more rural than 

urban is preserved in the event that 

costs of furnishing DMEPOS items and 

services in rural areas is higher than the 

costs of furnishing DMEPOS items and 

services in urban areas. 

We propose in § 414.202 that a 

frontier state, would be defined as a 

state where at least 50 percent of 

counties in the state have a population 

density of 6 people or less per square 

mile. In such states, the majority of 

counties where DMEPOS items and 

services may be needed are very 

sparsely populated and suppliers may 

therefore have to drive considerably 

longer distances in furnishing these 

items and services as opposed to other 

states where the beneficiaries live closer 

to one another. The designation of states 

as frontier states or frontier areas is 

currently used under Medicare Part A to 

make adjustments to the wage index for 

hospitals in these remote areas in order 

to ensure access to services in these 

areas. The definition of frontier state 

that is proposed above for the purpose 

of implementing section 1834(a)(1)(F) 

and (G) of the Act is consistent with the 

current definition in section 

1886(d)(3)(E)(iii)(II) and (III) of the Act 

and 42 CFR 412.64(m) of the regulations 

related to implementation of the 

hospital wage index adjustments and 

prospective payment system for 

hospitals under Part A. We believe that 

states designated as frontier states have 

a significant amount of area that is 

sparsely populated and are more likely 

to be geographically removed from (that 

is, a considerable driving distance from) 

areas where population is more 

concentrated. However, we solicit 

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comments on alternative definitions of 

frontier states. 

Based on the 2010 Census data, states 

designated as rural would include 

Vermont, Maine, West Virginia, and 

Mississippi. Other than one CBA that is 

fully located in Mississippi, one CBA 

that is partially located in Mississippi, 

and two CBAs that are partially located 

in West Virginia, the RSPAs would not 

include SPAs that reflect the costs of 

furnishing items and services in these 

states based on where the CBAs are 

currently located. Current frontier states 

include North Dakota, South Dakota, 

Montana, and Wyoming, and the RSPAs 

would not include SPAs that reflect the 

costs of furnishing items and services in 

any of these states based on where the 

CBAs are currently located. We propose 

that the designation of rural and frontier 

states could change as the U.S. Census 

information changes. We propose that 

when a state that is not designated as a 

rural state or frontier becomes a rural 

state or frontier state based on new, 

updated information from the U.S. 

Census Bureau, that adjustments to the 

fee schedule amounts in accordance 

with the proposed provision of this 

section would take effect as soon as 

such changes can be implemented. 

Likewise, we propose that at any time 

a state that is designated as a rural state 

or frontier no longer meets the proposed 

definition in this section for rural state 

or frontier state based on new, updated 

information from the U.S. Census 

Bureau, that adjustments to the fee 

schedule amounts in accordance with 

the proposed provision of this section 

would take effect as soon as such 

changes can be implemented. We 

propose that the changes to the state 

designation would occur based on the 

decennial Census. The decennial 

Census uses total population of the state 

to determine whether the state is 

predominately rural or frontier. The 

U.S. Census Bureau also uses current 

population estimates every 1, 3, and 5 

years through the American Community 

Survey but only samples a small 

percentage of the population every year, 

not the total population. Therefore, we 

propose that the designation of a rural 

or frontier state occur approximately 

every 10 years when the total 

population data is available. For the 

current proposed fee schedule 

adjustments, we propose to use the 2010 

Census Data. The next update would 

reflect the 2020 Census Data and any 

changes in the designation of a rural or 

frontier state and corresponding fee 

schedule changes would be 

implemented after the 2020 Census Data 

becomes available. For this and 

subsequent updates, we propose to 

include a listing of the qualifying rural 

and frontier States in program guidance 

that is issued quarterly and to provide 

at least 6 months advance notice of any 

adjustments. 

Some of the comments received on 

the ANPRM indicated that the costs of 

furnishing DMEPOS items and services 

in rural areas is significantly higher than 

the costs of furnishing DMEPOS items 

and services in urban areas. Other 

commenters suggested that the 

adjustments to the payment amounts 

based on information from CBPs be 

phased in to give suppliers time to 

adjust to the new payment levels. 

Although we believe that the costs of 

furnishing items and services in rural 

areas are different than the costs of 

furnishing items and services in urban 

areas, there is no evidence to support a 

statement that the difference in costs is 

significant. However, in order to 

proceed cautiously on this matter in the 

interest of ensuring access to covered 

DMEPOS items and services, we are 

proposing to phase in the price 

adjustments, as explained below, so that 

we can monitor the impact of the 

adjustments as they are gradually 

phased in. 

In summary, we propose that 

adjustments to payment amounts for 

areas within different regions of the 

contiguous United States would be 

based on the un-weighted average of 

SPAs from CBAs that are fully or 

partially located within these regions. 

The regional amounts would be limited 

by a national ceiling and floor and the 

adjusted payment amounts for all states 

designated as rural or frontier states 

would be equal to the national ceiling. 

In addition, we are soliciting public 

comments on whether payment in rural 

areas of states that are not designated as 

rural or frontier states should be set 

differently. 

d. Areas Outside the Contiguous United 

States 

Given the unique costs of furnishing 

DMEPOS items and services in remote, 

isolated areas outside the contiguous 

United States such as Alaska, Guam, 

Hawaii, Puerto Rico, the United States 

Virgin Islands and other areas, we 

propose that any SPAs from programs in 

these areas be excluded from the 

calculation of the RSPAs in section a. In 

addition, we propose that the 

adjustments to the fee schedule amounts 

for areas outside the contiguous United 

States would not be based on the 

RSPAs. Rather, we propose that the 

adjustments to the fee schedule amounts 

for these areas be based on the higher of 

the average of SPAs for CBAs in areas 

outside the contiguous United States 

(for example, Honolulu) or the national 

ceiling limit applied to the payment 

adjustments for areas within the 

contiguous United States. We believe 

that, to the extent that SPAs from noncontiguous areas are available, these 

amounts should be used in making 

adjustments to the payment amounts for 

other areas outside the contiguous 

United States since the challenges and 

costs of furnishing DMEPOS items and 

services in all remote, isolated areas is 

similar. We also believe that the 

payment adjustments for these areas, 

like those for the proposed rural and 

frontier states, should not be lower than 

the national ceiling established for items 

and services furnished in the contiguous 

United States. Areas outside the 

contiguous United States generally have 

higher shipping fees and other costs. We 

believe the SPAs in Honolulu and other 

areas outside the contiguous United 

States reflect these costs and could be 

used to adjust the fee schedule amounts 

for these areas without limiting access 

to DMEPOS items and services. 

However, in the event that the national 

ceiling limit described in section b 

above is greater than the average of the 

SPAs for CBPs in areas outside the 

contiguous United States, we propose 

that the higher national ceiling amount 

be used in adjusting the fee schedule 

amounts for areas outside the 

contiguous United States in order to 

better ensure access to DMEPOS items 

and services. 

We are soliciting comments on these 

proposals. 

2. Methodology for Items and Services 

Included in Limited Number of 

Competitive Bidding Programs 

In some cases, there may not be a 

sufficient number of CBAs and SPAs 

available for use in computing RSPAs, 

and therefore, a different methodology 

for implementing section 

1834(a)(1)(F)(ii) of the Act would be 

necessary. For items and services that 

are subject to competitive bidding and 

have been included in CBP in no more 

than 10 CBAs, we propose that payment 

amounts for these items in all noncompetitive bidding areas be adjusted 

based on 110 percent of the average of 

the SPAs for the areas where CBPs are 

implemented. Using a straight average 

of the SPAs rather than a weighted 

average of the SPAs gives SPAs for the 

various CBAs equal weight regardless of 

the size of the CBA. We believe this 

avoids giving undo weight to SPAs for 

more heavily populated areas. We are 

proposing the additional 10 percent 

adjustment to the average of the SPAs to 

account for unique costs such as 

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delivering items in remote, isolated 

locations, but would make this a 

uniform adjustment for program 

simplification purposes. This issue is 

discussed in more detail below. 

Under the DMEPOS CBP, there may 

be items and services for which 

implementation of CBPs could generate 

significant savings for the beneficiary 

and/or program, but which are 

furnished infrequently in most MSAs. In 

some cases, such items and services 

could be combined with other items and 

services under larger PCs or included in 

mail order competitions, to the extent 

that these are feasible options. For 

example, combining infrequently used 

traction equipment and frequently used 

hospital beds in the same product for 

bidding purposes would ensure that any 

beneficiary that needs traction 

equipment in the CBA would have 

access to the item from the suppliers 

also contracted to furnish hospital beds 

in the area. This would make it feasible 

to include traction equipment in 

numerous MSAs throughout the country 

and would allow use of the RSPA 

methodology described above. However, 

if a PC was established just for traction 

equipment for bidding purposes, the 

volume of items furnished in certain 

MSAs may not be sufficient to generate 

viable competitions under the program 

because there may be a limited number 

of suppliers interested in competing to 

furnish the items in local areas. 

Nonetheless, if significant savings for 

the beneficiary and/or program are 

possible for the equipment, we are 

mandated to phase the items in under 

the DMEPOS CBP. 

In addition, for lower volume items 

within large PCs, such as wheelchair 

accessories, we propose to include these 

items in a limited number of local 

competitions rather than in all CBAs to 

reduce the burden for suppliers 

submitting bids under the programs as 

a whole. In these cases, for the purposes 

of implementing section 1834(a)(1)(G) of 

the Act, we propose that payment 

amounts for these items in all areas 

where CBPs are not implemented be 

adjusted based on 110 percent of the 

average of the SPAs for the areas where 

CBPs are implemented. We are 

proposing the additional 10 percent 

adjustment to the national average price 

to account for unique costs in certain 

areas of the country such as delivering 

items in remote, isolated locations. For 

example, the PC for standard mobility in 

the 9Round 1 CBAs includes 25 HCPCS 

codes for low volume wheelchair 

accessories that are not included in the 

PC for standard wheelchairs, scooters, 

and related accessories in the 100 

Round 2 CBAs. We propose that 

payment amounts for these items in 

areas where CBPs are not implemented 

be adjusted based on 110 percent of the 

average of the SPAs for the 9Round 1 

areas where CBPs are implemented. 

Alternatively, we could include these 

low volume items in all PCs in all 109 

CBAs and suppliers would need to 

develop bid amounts and enter bids for 

these 25 codes for low volume items 

such as toe loop holders, shock 

absorbers and IV hangers. Including 

these 25 Healthcare Common Procedure 

Coding System (HCPCS) codes for low 

volume wheelchair accessories in the 

PCs under the 9 Round 1CBAs means 

that suppliers submitting bids for 

wheelchairs have 25 bid amounts to 

develop and enter per CBA for these 

items, or a total of 225 bid amounts to 

develop and enter for these low volume 

items if bidding for wheelchairs in all 9 

Round 1 CBAs. In contrast, including 

these codes in the PCs under all 

109CBAs means that suppliers 

submitting bids for wheelchairs have 

2,725 bid amounts to develop and enter 

for these low volume items, if bidding 

for wheelchairs in all 109 CBAs. We 

believe that adjusting fee schedule 

amounts based on SPAs from 10 or 

fewer CBAs achieve the savings 

mandated by the statute for these items 

while greatly reducing the burden on 

suppliers and the program in holding 

competitions for these items in all 109 

CBAs across the country. 

Finally, if contracts and SPAs for low 

volume items included in a limited 

number of CBAs expire and the items 

are not included in future CBPs, we 

propose to use the information from the 

past competitions to adjust the payment 

amounts for these items nationally 

based on 110 percent of the average of 

the SPAs for the areas where CBPs were 

implemented. Even though the SPAs 

may no longer be in effect, we believe 

it is reasonable to use the information to 

reduce excessive payment amounts for 

items and services as long as the SPAs 

did not result in a negative impact on 

access to quality items and services 

while they were in effect and as long as 

the amounts are adjusted to account for 

increases in costs over time. For 

example, 4 codes for adjustable 

wheelchair seat cushions were included 

in the Round 1 Rebid, with SPAs that 

were approximately 25 percent below 

the fee schedule amounts being in effect 

in 9 CBAs from January 2011 thru 

December 2013. These items were not 

bid in future rounds due to the low 

volume of use relative to other 

wheelchair seat cushions. During the 

course of the 3-year contract period 

when the SPAs were in effect in the 9 

areas, there were no reports of access 

problems and there were no negative 

health outcomes as a result of including 

these items under CBPs. For the future, 

savings for these items could be 

achieved by including them in future 

competitions or by using the previous 

SPAs, updated by an economic update 

factor to account for increases in costs. 

If the decision is made not to include 

these items in future competitions, we 

believe savings can and should still be 

obtained based on information from the 

previous competitions. 

We are soliciting comments on these 

proposals. 

3. Adjusted Payment Amounts for 

Accessories Used With Different Types 

of Base Equipment 

There may be situations where the 

same accessory or supply identified by 

a HCPCS code is used with different 

types of base equipment, and the item 

(HCPCS code) is included in one or 

more PCs under competitive bidding for 

use with some, but not all of the 

different types of base equipment it is 

used with. For these situations, we 

propose to use the weighted average of 

the SPAs from CBPs and PCs where the 

item is included for use in adjusting the 

payment amounts for the item (HCPCS 

code). We believe that it would be 

unnecessarily burdensome to have 

different fee schedule amounts for the 

same item (HCPCS code) when it is used 

with similar, but different types of base 

equipment. We believe that the costs of 

furnishing the accessory or supply 

should not vary significantly based on 

the type of base equipment it is used 

with. 

Therefore, we seek public comments 

on addressing situations where an 

accessory or supply identified by a 

HCPCS code is included in one or more 

PCs under competitive bidding for use 

with more than one type of base 

equipment. In these situations, we 

propose to calculate the SPA for each 

CBA by weighting the SPAs from each 

PC in that CBA by national allowed 

services. This would result in the 

calculation of a single SPA for the item 

for each CBA. The single SPA per code 

per CBA would then be used in 

applying the payment adjustment 

methodologies proposed above. For 

example, HCPCS code Exxx1 describes 

a tray used on a wheelchair. Exxx1 was 

included in a PC for manual 

wheelchairs in all CBAs and in a 

separate, second PC for power 

wheelchairs in all CBAs. SPAs for 

Exxx1 under the manual wheelchair PC 

are different than the SPAs for Exxx1 

under the power wheelchair PC. 

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Under the proposal, national allowed 

services would be used to compute a 

weighted average of the SPAs for Exxx1 

in each of the CBAs. So, rather than 

having 2 different SPAs for the same 

code in the same CBA, we would have 

1 SPA for the code for the CBA. If the 

item is included in only one PC, we 

propose to use the SPAs for the item 

from that PC in applying the payment 

adjustment methodologies proposed 

above. 

We are soliciting comments on these 

proposals. 

4. Adjustments to Single Payment 

Amounts That Result From Unbalanced 

Bidding 

Within the HCPCS there are instances 

where there are multiple codes for an 

item that are distinguished by the 

addition of a hierarchal feature(s). For 

example, one code may describe an 

enteral nutrition infusion pump with an 

alarm and another code may describe a 

less sophisticated pump without an 

alarm. Under competitive bidding, the 

code with the higher utilization would 

receive a higher weight and the bid for 

this item would have a greater impact 

on the composite bid and 

competitiveness of the supplier’s overall 

bid for the PC within the CBP than the 

bid for the less frequently used 

alternative. This can result in 

unbalanced bidding where the bids and 

SPAs for the item without the additional 

features is higher than the bids and 

SPAs for the item with the additional 

features due to the fact that the item 

with the features is utilized more than 

the item without the features and 

therefore receives a higher weight. We 

believe that it is not inherently 

reasonable for payment amounts for 

equipment with fewer features or 

functionality to be higher than payment 

amounts for equipment with additional 

features or functionality. 

For example, HCPCS code B9000 

describes an enteral nutrition infusion 

pump without alarm, whereas code 

B9002 describes an enteral nutrition 

infusion pump with alarm. Both codes 

have identical fee schedule amounts. 

Based on paid claims data, only 176 

Medicare beneficiaries received the 

pump without the alarm in 2012, 

whereas 52,531 Medicare beneficiaries 

received the pump with the alarm in 

2012. Both pumps are included in the 

PC for enteral nutrients, supplies, and 

equipment. As a result of the 

significantly higher utilization of code 

B9002, this code received a much higher 

item weight under the CBP than code 

B9000, and, as a result, a supplier could 

submit a much higher bid for B9000 

than for B9002 with virtually no impact 

on their composite bid. Under Round 2, 

unbalanced bidding resulted in SPAs for 

code B9000 without the alarm being 6 

percent higher on average than the SPAs 

for code B9002 with alarm. Unbalanced 

bidding also occurred under Round 2 in 

the case of standard power wheelchairs, 

with SPAs for infrequently used Group 

1, standard weight power wheelchairs 

(codes K0815 and K0816) being 16 

percent higher on average than the SPAs 

for the much more frequently used 

Group 2 versions (codes K0822 and 

K0823). Based on paid claims data, only 

474 Medicare beneficiaries received 

Group 1 power wheelchairs described 

by codes K0815 and K0816 in 2012, 

whereas 196,968 Medicare beneficiaries 

received higher performing Group 2 

power wheelchairs described by codes 

K0822 and K0823 in 2012. The long 

term solution for avoiding cases of 

unbalanced bidding is to eliminate 

duplicate codes in the HCPCS. For the 

purpose of implementing section 

1834(a)(1)(G) of the Act, and in making 

adjustments to payment amounts under 

sections 1834(a)(1)(F)(ii), 

1834(h)(1)(H)(ii), and 1842(s)(3)(B) of 

the Act, we propose that the payment 

amounts for infrequently used codes 

that describe items and services with 

fewer features than codes with more 

features be adjusted so that they are no 

higher than the payment amounts for 

the more frequently used codes with 

more features. For example, the adjusted 

fee schedule amounts for code B9000 

would be set so that they are no higher 

than the adjusted fee schedule amounts 

for code B9002. We believe that without 

this provision, unbalanced bidding 

could result in fee schedule amounts for 

items that essentially represent lower 

levels of service being higher than fee 

schedule amounts for items representing 

higher levels of service, based on bids 

being higher for infrequently used items 

with lower weights and less features 

than bids for frequently used items with 

higher weights and more features. This 

could result in beneficiaries receiving 

the item with fewer features and 

functionality simply because the 

supplier has a financial incentive to 

furnish that item. This is especially 

important in light of the fact that use of 

the inherent reasonableness authority 

provided by section 1842(b)(8) and (9) 

of the Act cannot be used to further 

adjust payment amounts that are 

adjusted based on the mandate of 

section 1834(a)(1)(F)(ii) and the 

authority provided by sections 

1834(h)(1)(H)(ii) and 1842(s)(3)(B) of the 

Act. 

We seek public comments on this 

issue and our proposed provision to 

address this issue. 

5. National Mail Order Program— 

Northern Mariana Islands 

While Section 1847(a)(1)(A) of the Act 

provides that CPBs be established 

throughout the United States, the 

definition of United States at section 

210(i) of the Act does not include the 

Northern Mariana Islands. We therefore 

previously determined that the Northern 

Mariana Islands are not considered an 

area eligible for inclusion under a 

national mail order CBP. For the 

purpose of implementing the 

requirements of section 1834(a)(1)(F)(ii) 

of the Act, we are proposing that the 

payment amounts established under a 

national mail order CBP would be used 

to adjust the fee schedule amounts for 

mail order items furnished to 

beneficiaries in the Northern Mariana 

Islands. We propose that the adjusted 

fee schedule amounts would be equal to 

100 percent of the amounts established 

under the national mail order CBP. 

We are soliciting comments on these 

proposals. 

6. Updating Adjusted Payment Amounts 

In accordance with section 

1834(a)(1)(F)(iii) of the Act, the adjusted 

payment amounts for DME must be 

updated as additional items are phased 

in or information is updated. We 

propose to add regulation text 

indicating that we would revise the 

adjusted payment amounts for DME, 

enteral nutrients, supplies, and 

equipment, and OTS orthotics each time 

a SPA is updated following one or more 

new competitions, which may occur at 

the end of a contract period, as 

additional items are phased in, or as 

new programs in new areas are phased 

in. This is required by section 

1834(a)(1)(F)(iii) for DME. Since we 

believe it is reasonable to assume that 

updated information from CBPs would 

better reflect current costs for furnishing 

items and services, we are proposing 

regulations to require similar updates 

for enteral nutrients, supplies, and 

equipment, and OTS orthotics. 

As we indicated above, if the only 

SPAs available for an item are those that 

were established under CBP that are no 

longer in effect, we propose to use these 

SPAs to adjust payment amounts using 

the methodologies described above and 

we propose to do so following 

application of inflation adjustment 

factors. We propose that the inflation 

adjustment factor would be based on the 

percentage change in the Consumer 

Price Index for all Urban Consumers 

(CPI–U) from the mid-point of the last 

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year the SPAs were in effect to the 

month ending 6 months prior to the date 

the initial payment adjustments would 

go into effect. The adjusted payment 

amounts would continue to be updated 

every 12 months using the percentage 

change in the CPI–U for the 12-month 

period ending 6 months prior to the date 

the updated payment adjustments 

would go into effect. Use of the CPI–U 

as the update factor is consistent with 

how pricing amounts for DMEPOS have 

been updated since October 1, 1985, 

when the CPI–U was used in calculating 

the IIC for use in calculating reasonable 

charges. The CPI–U was used in 

updating reasonable charge data for use 

in calculating the initial fee schedule 

amounts and is used in determining the 

covered item update factors at sections 

1834(a)(14), 1834(h)(4)(A), 1834(i)(1)(B), 

1842(s)(1)(B) of the Act. If CBPs are 

subsequently established for the item, 

we propose that the SPAs established 

under these programs would be used in 

applying the payment adjustment 

methodologies described above. 

If finalized, the payment amounts that 

would be adjusted in accordance with 

sections 1834(a)(1)(F)(ii) and (iii) of the 

Act for DME, section 1834(h)(2)(H)(ii) of 

the Act for orthotics, and section 

1842(s)(2)(B) of the Act for enteral 

nutrients, supplies, and equipment shall 

be used to limit bids submitted under 

future competitions of the DMEPOS 

CBP in accordance with regulations at 

§ 414.414(f). Section 1847(b)(2)(A)(iii) 

prohibits the awarding of contracts 

under a CBP unless we are sure that 

total payments made to contract 

suppliers in the CBA are less than the 

payment amounts that would otherwise 

be made. In order to assure savings 

under a CBP, the fee schedule amount 

that would otherwise be paid is used to 

limit the amount a supplier may submit 

as their bid for furnishing the item in 

the CBA. If finalized, the payment 

amounts that would be adjusted in 

accordance with sections 

1834(a)(1)(F)(ii) and (iii) of the Act for 

DME, section 1834(h)(2)(H)(ii) of the Act 

for orthotics, and section 1842(s)(2)(B) 

of the Act for enteral nutrients, supplies, 

and equipment would be the payment 

amounts that would otherwise be made 

if payments for the items and services 

were not made through implementation 

of a CBP. Therefore, the adjusted fee 

schedule amounts would become the 

new bid limits. 

We are soliciting comments on these 

proposals. 

7. Summary of Proposed Methodologies 

To summarize, under the proposed 

methodology in subsection 1 above 

which applies to items and services 

included in more than 10 CBAs, 

adjusted fee schedule amounts would be 

determined based on RSPAs limited by 

a national floor and ceiling. The RSPA 

would be established using the average 

of the SPAs for an item from all CBAs 

that are fully or partially located in the 

region. The payment amount for the 

item, with limited exceptions for areas 

outside the contiguous United States, 

would be equal to its RSPA but not less 

than 90 percent and not more than 110 

percent of the national average, which is 

the average of the RSPAs weighted by 

the number of states in the region. The 

proposed methodology is modeled 

closely after the regional fee schedule 

payment methodology in effect today for 

P&O. For the purpose of establishing the 

regional boundaries, we propose to use 

8 regions developed by the Bureau of 

Economic Analysis (BEA) within the 

Department of Commerce: New 

England, Mideast, Great Lakes, Plains, 

Southeast, Southwest, Rocky Mountain, 

and Far West. For rural and frontier 

states, we propose that the payment 

amount would be 110 percent of the 

national average. For areas outside the 

contiguous United States, the payment 

amount would be the greater of the 

average of the SPAs in the noncontiguous areas or 110 percent of the 

national average. As described in 

subsection 2 above, we propose a 

different methodology for low volume 

items with a limited number of SPAs. In 

addition, we propose to apply update 

factors to SPAs no longer in effect to 

adjust fee schedule amounts if no other 

data is available. Finally, we propose 

that adjustments would be made to 

account for SPAs for lower levels of 

service that are higher than SPAs for 

higher levels of service. 

A summary of the proposed 

methodologies is provided in Table 37 

below. 

TABLE 37—SUMMARY OF PROPOSED METHODOLOGIES FOR ADJUSTING PAYMENT IN NON-BID AREAS

Proposed methodology Calculations 

1) Adjustments for Items Included in More than 

10 CBAs* 

Regional Adjustments Limited by National 

Parameters for Items Furnished Within 

the Contiguous United States.

Adjusted payment equal to the RSPA (calculated using the un-weighted average of SPAs from 

CBAs that are fully or partially located with a BEA region) limited by a national floor and ceiling. The national ceiling and floor would be set at 110 percent and 90 percent, respectively, 

of the national weighted RSPA average (average of the RSPAs applicable to each of the 48 

contiguous states and DC). 

Adjustments for Rural and Frontier States .. Adjusted payment for designated States based on 110 percent of the national weighted RSPA 

average. 

Adjustments for Items Furnished Outside 

the Contiguous United States.

Adjusted payment for non-contiguous areas (e.g., Alaska, Guam, Hawaii) based on the higher 

of the average of SPAs for CBAs in areas outside the contiguous U.S. or 110 percent of the 

national weighted RSPA average applied to adjustments within the contiguous U.S. 

2) Adjustments for Lower Volume or Other 

Items Included in 10 or Fewer CBAs*.

Adjusted payment based on 110 percent of the un-weighted average of the SPAs for the 

areas where CBPs are implemented for contiguous and non-contiguous areas of the United 

States. 

3) Adjustments for Items Where the Only Available SPA is from a CBP No Longer in Effect.Payment based on adjusted payment determined under 1) or 2) above and adjusted on an annual basis based on the CPI–U update factors from the mid-point of the last year the SPAs 

were in effect to the month ending 6 months prior to the date the initial payment adjustments would go into effect. 

4) Adjustments for Accessories Used with Different Types of Base Equipment 

Adjustments for Accessories Included in 

One CBP Product Category.

SPAs for the item from that one Product Category would be used in determining the adjusted 

payment amounts under methodologies 1) or 2). 

Adjustments for Accessories Included in 

One or More CBP Product Category.

A weighted average of the SPAs for the item in each CBA where the item is included in more 

than one Product Category would be used to determine the adjusted payment amounts 

under methodologies 1) or 2). 

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TABLE 37—SUMMARY OF PROPOSED METHODOLOGIES FOR ADJUSTING PAYMENT IN NON-BID AREAS—Continued 

Proposed methodology Calculations 

5) Payment Adjustments to Northern Mariana 

Islands Using the National Mail Order SPAs.

Fee schedule amounts adjusted to equal the SPAs under the national mail order CBP. 

* Note: We are also proposing to adjust the SPAs for a lower level of service item to not exceed the SPAs of a higher level of service item 

prior to applying the methodologies in 1) and 2) above in instances where the SPA for the lower level of service item exceeds the higher level of 

service item. 

VI. Proposed Payment Methodologies 

and Payment Rules for Durable Medical 

Equipment and Enteral Nutrition 

Furnished Under the Competitive 

Bidding Program 

A. Background 

The payment rules for DME have 

changed significantly over the years 

since 1965, resulting in the replacement 

of the original monthly rental payment 

methodology with lump sum purchase 

and capped rental payment rules, as 

well as separate payment for repairs, 

maintenance and servicing, and 

replacement of expensive accessories for 

beneficiary-owned equipment. In our 

experience, these payment rules have 

been burdensome to administer and 

have added program costs associated 

with expensive wheelchair repairs and 

payment for loaner equipment, and have 

significantly increased costs associated 

with frequent replacement of expensive 

accessories at regular intervals for items 

such as CPAP devices. We estimate that 

separate payments for CPAP accessories 

have increased annual expenditures by 

approximately $200 million. In some 

cases, the costs associated with 

maintaining DME owned by 

beneficiaries equals or exceeds any 

savings that might be generated from 

capping rental payments. In the case of 

repairs, suppliers are not mandated to 

service the equipment they furnish once 

title transfers to the beneficiary—any 

supplier can provide these services. 

This could create a hardship for the 

beneficiary since they must find a 

supplier willing to repair the equipment 

and their separate coinsurance 

payments could be substantial if the 

repair services are extensive. According 

to § 414.408(h)(3) of our regulations, 

payment on a capped rental basis also 

results in the restart of periods of 

continuous use for capped rental items, 

and according to § 414.408(i)(2) of our 

regulations, an extension in the rental 

cap periods for oxygen equipment when 

a beneficiary transitions from a noncontract supplier to a contract supplier 

at the start of a new CBP. These issues 

were discussed in the February 26, 

2014, ANPRM noted above (79 FR 

10758). It is not clear, however, the 

extent to which the capped rental 

requirement, combined with separate 

payments for supplies, accessories, 

repairs, and program administration, 

overall results in net savings or net costs 

to the Medicare program, particularly if 

we examine the effects of the policy on 

specific DME items and services. 

Under the Social Security 

Amendments of 1965 (Pub. L. 89–97) 

enacted on July 30, 1965, Medicare Part 

B covered only rental of DME items. The 

Social Security Amendments of 1967 

(Pub. L. 90–248), approved January 2, 

1968, revised the statute to provide 

authority for making payment for DME 

on a purchase basis as well as on a 

rental basis. On May 12, 1972, the 

Government Accountability Office 

(GAO) issued a report to the Congress 

entitled ‘‘Need for Legislation to 

Authorize More Economical Ways of 

Providing Durable Medical Equipment 

under Medicare’’ (B–164031(4), May 12, 

1972) that led to Social Security 

Amendment (section 245) in 1972. 

Section 245 of the Social Security 

Amendments of 1972 (Pub. L. 92–603) 

enacted on October 30, 1972, modified 

the payment provisions for specific 

equipment items to LCL of reasonable 

charges to contain the costs of DME. 

This law allowed the Department of 

Health and Human Services (HHS) to 

experiment with reimbursement 

approaches and implement any 

purchase approach found to be feasible 

and economical in order to avoid 

prolonged rental payments for 

expensive DME. Furthermore, section 

16 of the Medicare-Medicaid Anti-Fraud 

and Abuse Amendments (Pub. L. 95– 

142), enacted on October 25, 1977, 

amended section 1833(f) of the Act to 

read as follows: 

In the case of durable medical equipment 

to be furnished an individual as described in 

section 1861(s)(6), the Secretary shall 

determine, on the basis of such medical and 

other evidence as he finds appropriate 

(including certification by the attending 

physician with respect to expected duration 

of need), whether the expected duration of 

the medical need for the equipment warrants 

a presumption that purchase of the 

equipment would be less costly or more 

practical than rental. If the Secretary 

determines that such a presumption does 

exist, he shall require that the equipment be 

purchased, on a lease-purchase basis or 

otherwise, and shall make payment in 

accordance with the lease-purchase 

agreement (or in a lump sum amount if the 

equipment is purchased other than on a 

lease-purchase basis); except that the 

Secretary may authorize the rental of the 

equipment notwithstanding such 

determination if he determines that the 

purchase of the equipment would be 

inconsistent with the purposes of this title or 

would create an undue financial hardship on 

the individual who will use it. 

This law required HHS to make leasepurchase decisions on a case-by-case 

basis based on whether purchase would 

be less costly or more practical than 

rental and reimburse on the basis of a 

lump-sum purchase or a lease/purchase 

arrangement. To implement the change 

in the law, HHS issued final regulations 

(45 FR 44287) on July 1, 1980. This 

regulation provided that the purpose of 

the lease purchase payment 

arrangement for new and used DME was 

to reduce program costs caused by long 

and costly rentals of the equipment and 

reduce beneficiary expenses for annual 

deductibles and coinsurance for 

unnecessarily long rentals. However, the 

regulations were not implemented until 

1985 because of uncertainty as to 

whether they would result in program 

savings. During the same time period, 

amidst growing concerns by the agency 

about prolonged and excessive rentals, 

Williams College under a grant 

administered by HCFA (now CMS) 

issued a report entitled ‘‘Determinants 

of Current and Future Expenditures on 

Durable Medical Equipment by 

Medicare and its Program Beneficiaries’’ 

on April 1983. This report estimated the 

excess rentals at about 14 percent of 

rental payments. Following this report, 

a GAO report titled ‘‘Procedures for 

avoiding excess rental payments for 

durable medical equipment should be 

modified’’ issued on July 30, 1985, 

showed that excess rentals represented 

about 54 percent of the amounts 

allowed for lower cost items ($120 or 

less) and 34 percent for higher cost 

items. In the GAO report, excess rental 

payments represented the difference 

between total Medicare rental payments 

for an item of equipment and Medicare 

reimbursement for the item if it had 

been purchased. GAO data showed 

substantially fewer short-term rentals 

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than Williams’ data (22 percent versus 

64 percent for episodes lasting 1 or 2 

months) and substantially more longterm rentals (33 percent. versus 8 

percent for episodes lasting more than 

12 months). 

GAO concluded that savings would 

result for reimbursing low-cost items on 

a purchase basis because about twothirds of the rented items in its study 

costing $100 or less would have been 

cheaper to buy. GAO also found that 

sufficient data was not available to 

reliably predict when purchasing a high 

cost item would be less costly than 

renting it. The report indicated that 

purchase price was reached by about 

month 7, with additional monthly rental 

payments beyond month 7 resulting in 

excess rental payments cost thereafter. 

Because of the uncertainty with respect 

to the high-cost items, GAO 

recommended alternative 

reimbursement approaches such as 

adjustment of the rental rate and 

requirements that suppliers accept 

whatever percentage is adopted. 

The report further discussed HHS and 

supplier comments on the GAO report 

draft. HHS also commented that the cap 

proposal did not address the issues 

associated with ownership of DME after 

the maximum amount of the cap had 

been reached. The supplier comments 

included recommendations from 

National Association of Medical 

Equipment Suppliers (NAMES) 

proposal for considering alternative 

methods that limited rental payments 

after a specified number of months such 

as 24 months for non-oxygen-related 

DME items (wheelchairs and hospital 

beds). At the end of the 2-year period, 

any item still being rented would be 

subject to a monthly maintenance fee in 

lieu of rental based on 30 percent of the 

latest allowable rental charge. Title to 

the items would remain with the 

supplier, and the item would be 

returned when no longer needed. 

Section 4062 of the Omnibus Budget 

Reconciliation (OBRA) Act of 1987 

(Pub. L. 100–203), was enacted on 

December 22, 1987. This legislation 

added section 1834(a) to the Act, which 

mandated payment categories and rules 

for DME that dictated whether payment 

would be made on a rental and/or 

purchase basis for items in each 

category. These changes were intended 

to align payment rates and achieve 

savings in the Medicare program. The 

new payment categories mandated by 

section 1834(a) of the Act were 

promulgated via regulation at § 414.210. 

Sections 1834(a)(2) through (a)(5) and 

1834(a)(7) of the Act set forth separate 

payment categories of DME and describe 

how the fee schedule for each of the 

following categories is established: 

Inexpensive or other routinely 

purchased items; Items requiring 

frequent and substantial servicing; 

Customized items; Oxygen and oxygen 

equipment; and Other items of DME or 

capped rental items. 

Section 13543 of the Omnibus Budget 

Reconciliation Act (OBRA) of 1993 

(Pub. L. 103–66), was enacted on August 

10, 1993, and amended section 1834(a) 

to reclassify nebulizers, CPAP devices, 

aspirators or suction pumps, and 

intermittent assist or respiratory assist 

devices from the category of items 

requiring frequent and substantial 

servicing to the capped rental payment 

category. It also mandated separate 

payment for accessories used in 

conjunction with these items. Section 

4315 of the Balanced Budget Act of 1997 

(Pub. L. 105–33), enacted on August 5, 

1997, added section 1842(s) to the Act, 

to authorize a fee schedule for PEN, 

which was promulgated via regulations 

at § 414.100 (66 FR 45173, August 28, 

2001). In 42 CFR Part 414, Subpart C of 

the regulations, govern payment on a fee 

schedule basis for PEN nutrients, 

equipment and supplies. Payment for 

PEN items and services is made in a 

lump sum for nutrients and supplies 

that are purchased and on a monthly 

basis for equipment that is rented. 

Section 1847 of the Act establishes 

the Medicare DMEPOS Competitive 

Bidding Program (CBP) (‘‘Competitive 

Bidding Program’’). Under the CBP, 

Medicare sets payment amounts for 

selected DMEPOS items and services 

furnished to beneficiaries in CBAs based 

on bids submitted by qualified suppliers 

and accepted by Medicare. For 

competitively bid items, these new 

payment amounts, referred to as ‘‘single 

payment amounts,’’ replace the fee 

schedule payment amounts. Section 

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

Medicare payment for competitively bid 

items and services is made on an 

assignment-related basis equal to 80 

percent of the applicable SPA amount, 

less any unmet Part B deductible. 

Payment errors and increased costs 

can occur as a result of paying 

separately for equipment, repairs, 

accessories, and routine maintenance 

and servicing associated with 

beneficiary ownership of DME after the 

13-month capped rental period or initial 

lump sum purchase, which have 

increased the risk for improper 

payments. The findings published in the 

August 2010 OIG report (OEI–07–08– 

00550) titled ‘‘A review of claims for 

capped rental durable medical 

equipment’’ reveal that from 2006 to 

2008, Medicare erroneously paid 

separately for these services. Medicare 

paid $2.2 million for routine 

maintenance and servicing of capped 

rental DME; from 2006 to 2008, 

Medicare erroneously allowed nearly 

$4.4 million for repairs for beneficiaryowned capped rental DME that failed to 

meet payment requirements; and in 

2007, Medicare allowed nearly $27 

million for repair claims of beneficiaryowned capped rental DME that failed to 

meet payment requirements. 

Based upon our experience, the 

ownership of equipment by beneficiary 

after lump sum purchase or after the 

end of 13 months capped rental period 

leads to complicated administrative 

procedures. The program must keep 

track of separate payment, coverage, 

medical necessity, and other rules for a 

number of related codes for replacement 

supplies and accessories used with the 

base equipment as well as labor and 

parts associated with repairing patientowned equipment. In addition, claims 

processing systems must count rental 

months and contractors must identify 

when legitimate breaks in continuous 

use occur and can result in the start of 

new capped rental periods. This leads to 

costly and complicated claims 

processing systems edits for processing 

millions of claims for these items and 

services. Payment on a purchase or 

capped rental basis results in the need 

to process and pay separately for 

numerous items that are not DME but 

are related to furnishing DME such as 

repair of equipment or replacement of 

supplies and accessories used with 

patient-owned equipment necessary for 

the effective use of DME. 

B. Proposed Provisions 

We believe that we have general 

authority under section 1847(a) and (b) 

of the Act to establish payment rules for 

DME and enteral nutrition equipment 

that are different than the rules 

established under section 1834(a) of the 

Act for DME, section 1842(s) for enteral 

nutrients, supplies, and equipment, and, 

section 6112(b) of Omnibus Budget 

Reconciliation (OBRA) Act of 1989 

(Pub. L. 101–239) for enteral pumps. We 

believe that lump sum purchase and 

capping rentals for certain DME and 

enteral nutrition may no longer be 

necessary to achieve savings under the 

program when competitive bidding can 

be used to establish a reasonable 

monthly payment. We also believe that 

payment on a continuous rental basis— 

that is, ongoing monthly payments not 

subject to a cap—could help to ensure 

that medically necessary DME and 

enteral nutrition equipment is kept in 

good working order for the entire 

duration of medial need and would 

make it easier for beneficiaries to change 

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from one supplier to another since the 

new supplier would not be faced with 

a finite number of rental payments. 

Currently, there is no requirement that 

a supplier take responsibility for 

repairing equipment once it is owned by 

a beneficiary, which may cause 

difficulties for the beneficiary to find a 

supplier to undertake such services. We 

believe that continuous rental payment 

would eliminate such issues because the 

supplier of the rented equipment would 

always be responsible for keeping the 

equipment in good working order. We 

do not believe that continuous monthly 

rental payments for DME and enteral 

nutrition would negatively impact 

access to items and services and could 

potentially be implemented in a manner 

that does not increase program 

expenditures since suppliers would be 

paid based on bids for furnishing the 

same general items and services they 

would otherwise provide. In addition, 

since Medicare payment for rental of 

DME and enteral nutrition equipment 

include payment for maintenance and 

servicing of the rented equipment, the 

suppliers would be directly responsible 

for meeting the monthly needs of the 

beneficiary in terms of keeping the 

rented equipment in good working 

order. 

As indicated in section IV above, CMS 

issued an ANPRM: Medicare Program; 

Methodology for Adjusting Payment 

Amounts for Certain Durable Medical 

Equipment, Prosthetics, Orthotics, and 

Supplies (DMEPOS) using Information 

From Competitive Bidding Programs on 

February 26, 2014 (79 FR 10754). As 

part of this ANPRM, comments were 

solicited on whether payment on a 

bundled, continuous rental basis for 

DME and enteral nutrition should be 

adopted under the DMEPOS CBP. Some 

commenters were concerned that 

services such as replacement of CPAP 

masks and equipment repairs would not 

be provided if they were not paid for 

separately. Some commenters supported 

bundling payments for oxygen and 

enteral nutrition. Some commenters 

suggested that the bundling 

methodology be tested first before it is 

utilized on a wide scale basis. Thirteen 

commenters that included beneficiaries, 

beneficiary advocacy organizations, 

occupational therapists, and physical 

therapists raised concerns that access to 

items such as highly configured 

wheelchairs and speech generated 

devices might be disrupted under a 

continuous monthly bundled rental 

payment that includes equipment 

rental, replacement accessories and 

repairs. They felt that payment on a 

rental basis would result in patients 

losing access to these devices when they 

entered institutions such as hospitals 

and skilled nursing facilities where 

separate payment for DME is prohibited 

by section 1861(n) of the Act. 

For items that continue to be paid for 

on a lump sum purchase basis or a 

capped rental basis where ownership of 

equipment transfers to the beneficiary 

following the capped rental period, we 

solicited comments on whether the 

supplier of the equipment should be 

responsible for repairing the equipment 

following transfer of title. Some 

commenters were opposed to the idea of 

making contract suppliers of purchased 

equipment responsible for ongoing 

repairs of equipment following transfer 

of title to the beneficiary. They stated 

that it would be a significant burden on 

suppliers to provide ongoing 

maintenance of equipment they 

furnished on a purchase basis, 

especially if the beneficiary moved out 

of the area. 

After carefully considering comments 

received in response to the ANPRM, we 

are proposing to update the regulations 

to include proposed special payment 

rules described below that would be 

utilized in paying claims for certain 

DME or enteral nutrition under a 

limited number of CBPs. As explained 

in more detail in the sections that follow 

below, we propose to revise the 

regulation by adding a new section at 42 

CFR 414.409 with special payment rules 

to replace specific payment rules at 

§ 414.408 for these items and services in 

these CBPs. We also propose to revise 

§ 414.412 regarding submission of bids 

for furnishing items and services paid in 

accordance with these special payment 

rules. We seek comments on these 

proposals. 

We propose to phase-in the special 

payment rules described in sections 1 

and 2 below in a limited number of 

areas for a limited number of items 

initially to determine whether it is in 

the best interest of the Medicare 

program and its beneficiaries to phase 

these rules in on a larger scale based on 

evaluation of the rules’ effects on 

Medicare program costs, and quality of/ 

access to care. In order to monitor the 

impact of phasing in the special 

payment rules in no more than 12 CBAs, 

we propose that, at a minimum, we 

would utilize evaluation criteria that are 

consistent with the current evaluation 

criteria for monitoring the impact of the 

CBP on utilizers of items and services in 

CBAs. To evaluate the quality of care for 

beneficiaries affected by the special 

payment rules, we propose that, at a 

minimum, we would utilize health 

status outcomes based criteria that 

would measure specific indicators such 

as mortality, morbidity, 

hospitalizations, emergency room and 

other applicable indicators unique to 

each product category. To evaluate 

beneficiary access to necessary items 

and services we propose that, at a 

minimum, we would monitor utilization 

trends for each product category and 

track beneficiary complaints related to 

access issues. To evaluate the cost of the 

program, we propose that, at a 

minimum, we would analyze the claims 

data for allowed services and allowed 

cost for each product category and the 

associated accessories, supplies and 

repair cost in the 12 CBAs and the 

comparator CBAs. We propose to 

analyze the effect of the proposed 

payment rules on beneficiary cost 

sharing. 

We propose that in any competition 

where these rules are applied, suppliers 

and beneficiaries would receive advance 

notice about the rules at the time the 

competitions that utilize the rules are 

announced. The combined, total 

number of CBAs where the proposed 

rules in either section 1 or 2 would 

apply would be limited to twelve. In 

other words, it would not be twelve 

CBAs for the rules in section 1 and an 

additional twelve CBAs for the rules in 

section 2, but 12 CBAs total. In addition, 

we propose that the PCs listed below 

would be phased in to include one or 

more of the CBAs that would number no 

more than twelve total. In addition, if a 

determination is made to phase-in these 

rules on a larger scale in additional 

areas and for additional items based on 

program evaluation results regarding 

cost, quality, and access, the process for 

phasing in the rules and the criteria for 

determining when the rules would be 

applied would be addressed in future 

notice and comment rulemaking. This 

rulemaking would also address how the 

methodology for using these SPAs to 

adjust fee schedule amounts would 

need to be revised. 

The Affordable Care Act (Patient 

Protection and Affordable Care Act of 

2010, Pub. L. 111–148 (March 23, 2010), 

Sec. 3021) establishes the Center for 

Medicare and Medicaid Innovations 

(CMMI) which is authorized to test 

models to reduce Medicare and 

Medicaid expenditures while preserving 

or improving quality for beneficiaries of 

those two programs. The provision 

includes appropriations of $10 billion 

for fiscal years 2011 through 2019. We 

solicit comments on the option for 

testing the above special payment rules 

for DME and enteral nutrition using the 

CMMI demonstration authority in no 

more than 12 CBAs that would allow us 

to test and evaluate the special payment 

rules on a wider scale and determine 

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whether the special payment rules 

reduce Medicare expenditure while 

preserving or improving the quality for 

Medicare beneficiaries. Regardless of 

the authority used to phase in or test 

these special payment rules, we would 

undertake rigorous evaluation to 

determine the rules’ effects on program 

costs, quality, and access. 

We seek comments on the specific 

proposals below. 

1. Payment on a Continuous Rental 

Basis for Select Items 

We propose to revise the regulation at 

42 CFR 414.409 to allow for payment on 

a continuous monthly rental basis under 

future competitions in no more than 12 

CBAs for one or more of the following 

categories of items and services: enteral 

nutrition, oxygen and oxygen 

equipment, standard manual 

wheelchairs, standard power 

wheelchairs, CPAP and respiratory 

assist devices, and hospital beds. We 

believe that 12 CBAs represents a 

limited number of CBAs yet would 

allow testing in different regions of the 

country. We propose that the SPAs 

established under the special payment 

rules would be based on bids submitted 

and accepted for furnishing rented DME 

and enteral nutrition on a monthly 

basis. We propose that the SPAs would 

represent a monthly payment for each 

month that rented DME or enteral 

nutrition is medically necessary. The 

SPA for the monthly rental of DME 

would include payment for each item 

and service associated with the rental 

equipment including the ongoing 

maintenance and servicing of the rental 

equipment, and replacement of supplies 

and accessories that are necessary for 

the effective use of the equipment. In 

the case of enteral nutrition, we propose 

that the monthly SPA would include 

payment for all nutrients, supplies and 

equipment. Suppliers would be 

responsible for furnishing all items and 

services in the applicable CBA needed 

each month based on the physician’s 

order. For example, in addition to 

furnishing the CPAP device, the 

supplier would be responsible for 

furnishing the accessories used with the 

device such as masks, tubing, headgear, 

humidifiers, etc., as well as all 

maintenance and servicing of the 

equipment. For wheelchairs, the 

supplier would be responsible for 

furnishing the type of wheelchair and 

all options and accessories used with 

the wheelchair that are needed by the 

patient, as well as well as all 

maintenance and servicing of the 

equipment. For hospital beds, the 

supplier would be responsible for 

furnishing the type of hospital bed and 

all accessories used with the hospital 

bed (for example, mattresses, side rails, 

trapeze bars, etc.) needed by the patient, 

as well as all maintenance and servicing 

of the equipment. As discussed in more 

detail below, phasing in these rules 

would help us determine the impact on 

Medicare expenditures as well as 

beneficiary access to items and services 

and other possible costs and benefits. 

We seek comments on this proposal. 

a. Enteral Nutrition 

We propose to implement future 

competitions for enteral nutrition in no 

more than 12 CBAs, where payment 

would be based on bids submitted for 

furnishing all enteral nutrients, 

supplies, and equipment needed on a 

monthly basis. We propose that the 

suppliers would submit a single bid for 

each CBA for furnishing all items and 

services related to furnishing such 

enteral nutrients, supplies, and 

equipment in the applicable CBA 

needed by a beneficiary on a monthly 

basis. We are soliciting comments on 

whether alternatives to submitting a 

single bid for enteral nutrition should be 

considered, such as having separate 

categories based on mode of delivery 

(syringe fed, pump fed, or gravity fed) 

or separate categories based on the type 

of nutrients delivered. We selected the 

category of enteral nutrition because we 

believe that payment on a separate, 

piecemeal basis for daily supplies, 

calories of nutrients furnished, and 

monthly rental of equipment the pumps 

is unnecessary and overly complex. For 

example, for a pump-fed patient, the 

beneficiary must choose whether they 

wish to rent the pump or purchase the 

pump. If the beneficiary chooses to rent 

the pump, the supplier is required to 

continue furnishing the pump until the 

capped rental period is over, but then is 

allowed to bill for maintenance and 

servicing of the pump once every 6 

month, but only if maintenance and 

servicing is needed and furnished. The 

supplier must also submit claims for 

daily supply kits as well as feeding 

tubes furnished in addition to billing for 

every 100 calories of enteral nutrient 

furnished. Finally, the supplier must 

bill for the pole used to hold the pump; 

however, the monthly rental payments 

for the pole are not subject to the cap 

on rentals that the statute specifically 

requires for the pump and this is 

confusing. In addition, issues have been 

raised regarding replacement parts and 

supplies for beneficiary-owned enteral 

nutrition infusion pumps when the 

manufacturer elects to discontinue the 

brand and model of pump owned by the 

beneficiary. Neither the beneficiary nor 

the supplier is able to obtain supplies 

that the manufacturer no longer sells 

and the Medicare rules would generally 

not allow for the purchase of a new 

pump since this would be duplicate 

equipment. We seek comments on this 

proposal. 

b. Oxygen and Oxygen Equipment 

We propose to implement future 

competitions for oxygen and oxygen 

equipment in no more than 12 CBAs, 

where payment would be based on bids 

submitted for furnishing all oxygen and 

oxygen equipment needed on a monthly 

basis. We propose that the suppliers 

would submit a single bid for each CBA 

for furnishing all items and services 

needed on a monthly basis, including 

all rented equipment and related 

accessories such as regulators, 

flowmeters, nasal cannulas, masks, 

tubing, humidifier bottles, tank stands 

and carts, and transtracheal catheters, as 

well as all maintenance and servicing of 

the equipment and delivery of oxygen 

contents. We selected the category of 

oxygen and oxygen equipment because 

we believe the rental cap for oxygen 

equipment generates very little savings 

under CBPs. A small percentage of 

beneficiaries, approximately 25 percent 

based on our review of Medicare claims, 

reach the 36-month cap, which is 

extended by as much as 9 months at the 

start of a CBP, and the SPAs for oxygen 

contents furnished after the cap are 

roughly the same as the SPAs for 

furnishing oxygen and oxygen 

equipment during the 36-month rental 

cap period. In addition, recent issues 

related to suppliers abandoning 

beneficiaries after the rental cap has 

resulted in the need to pay for lost 

oxygen and oxygen equipment, 

eliminating any savings the rental cap 

might have achieved. Although section 

1834(a)(5)(F)(ii)(I) of the Act mandates 

that the supplier receiving payment for 

the 36th month of continuous use must 

continue to furnish the oxygen and 

oxygen equipment for any period of 

medical need for the duration of the 

reasonable useful lifetime of the 

equipment, certain suppliers have failed 

to continue providing oxygen and 

oxygen equipment despite this 

requirement. 

Section 414.226 provides that for 

oxygen and oxygen equipment, 

Medicare payments are modality 

neutral, with the exception that the 

portable oxygen equipment add-on 

payment for oxygen generating portable 

equipment (OGPE) is higher than the 

add-on payment for liquid and gaseous 

portable oxygen equipment. The 

Medicare monthly payment for oxygen 

and oxygen equipment includes 

payment for stationary equipment 

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(concentrators, liquid, or gaseous 

stationary equipment) as well as 

payment for oxygen contents (stationary 

and portable). The add-on payment is 

only for the portable oxygen equipment 

and does not include payment for the 

portable oxygen contents. This fact is 

often confused and the portable oxygen 

add-on payment is erroneously viewed 

as a payment for portable oxygen 

contents as well as portable oxygen 

equipment. In a majority of cases, 

beneficiaries receive both stationary 

oxygen and oxygen equipment and 

portable oxygen and oxygen equipment, 

so having a separate add-on payment for 

portable oxygen equipment only seems 

unnecessary. Under our proposal, for 

oxygen and oxygen equipment payment 

under the select CBPs, we propose to 

eliminate the 36-month cap on 

equipment payments and eliminate 

separate add-on payments for portable 

equipment and separate payment for 

oxygen contents. Under our proposal, 

the contract suppliers would continue 

to be responsible for furnishing 

equipment consistent with the 

requirements in § 414.420. 

We seek comments on this proposal. 

c. Standard Manual Wheelchairs 

We propose to implement future 

competitions for standard manual 

wheelchairs in no more than 12 CBAs, 

where payment would be based on bids 

submitted for furnishing standard 

manual wheelchairs and all accessories 

used in conjunction with the 

wheelchairs on a monthly basis. We 

propose that the suppliers would submit 

a single bid for each HCPCS code 

describing the wheelchair for each CBA 

for furnishing the wheelchair and all 

accessories and services needed on a 

monthly basis. We are soliciting on this 

proposal as well as comments on 

whether all standard manual 

wheelchairs should be described under 

one HCPCS code in order to simplify 

bidding and claims processing 

procedures. The current HCPCS codes 

for standard manual wheelchairs 

include standard, hemi (low seat), 

lightweight, high strength lightweight, 

heavy duty, and extra heavy duty 

wheelchairs described by codes K0001 

thru K0004, K0006, and K0007 in the 

HCPCS. In view of comments to the 

ANPRM expressing concern regarding 

beneficiary impact of bundled 

arrangements for users of highly 

configured manual wheelchairs, we are 

requesting comment on what safeguards 

and monitoring approaches we should 

use to ensure that access to these items 

is not disrupted for individuals 

transitioning between settings and/or 

residing in remote areas. We seek 

comments on this proposal. 

d. Standard Power Wheelchairs 

We propose to implement future 

competitions for standard power 

wheelchairs in no more than 12 CBAs, 

where payment would be based on bids 

submitted for furnishing standard power 

wheelchairs and all accessories used in 

conjunction with the wheelchairs on a 

monthly basis. We propose that the 

suppliers would submit a single bid for 

each HCPCS code describing the 

wheelchair for each CBA for furnishing 

the wheelchair and all accessories 

(including batteries) and services 

needed on a monthly basis. We are 

soliciting comments on whether all 

standard power wheelchairs should be 

described under one HCPCS code in 

order to simplify bidding and claims 

processing procedures. The current 

HCPCS codes for standard power 

wheelchairs include all group 1 and 

group 2 power wheelchairs that cannot 

accommodate rehabilitative accessories 

and features described by codes K0813 

thru K0829 in the HCPCS. In view of 

comments to the ANPRM expressing 

concern regarding beneficiary impact of 

bundled arrangements for users of 

highly configured manual wheelchairs, 

we are requesting comment on what 

safeguards and monitoring approaches 

we should use to ensure that access to 

these items is not disrupted for 

individuals transitioning between 

settings and/or residing in remote areas. 

We selected the categories of standard 

manual and power wheelchairs because 

we believe that payment on a separate, 

piecemeal basis for hundreds of various 

wheelchair options and accessories is 

unnecessary and overly complex. In 

addition, issues have been raised 

regarding access to repair of beneficiaryowned wheelchairs following the 13- 

month capped rental period. For 

example, there are hundreds of codes 

for various wheelchair accessories and 

separate payment for each of these items 

in addition to the payment for the 

wheelchair. The separate billing, 

processing and payment of these claims 

would not be necessary given that the 

supplier can factor the costs of 

accessories into their bid for furnishing 

the rented equipment. In addition, the 

beneficiary’s needs may change such 

that the beneficiary needs a different 

type of accessory from the one that was 

initially furnished by the supplier. 

Under the current rules, the accessory 

may not be covered if it is similar to the 

one that was already paid for by 

Medicare. If payments for all types of 

accessories are included in an ongoing, 

monthly rental amount for the 

wheelchair, the beneficiary can receive 

other accessories included in the 

program, provided such accessories are 

medically necessary. 

We seek comments on this proposal. 

e. CPAP and Respiratory Assist Devices 

We propose to implement future 

competitions for CPAP and respiratory 

assist devices in no more than 12 CBAs, 

where payment would be based on bids 

submitted for furnishing the CPAP or 

respiratory assist device and supplies, 

accessories, and services needed on a 

monthly basis. We propose that the 

suppliers would submit a single bid for 

each device for each CBA for furnishing 

all items and services needed on a 

monthly basis. We are soliciting 

comments on our proposal as well as 

whether all CPAP and respiratory assist 

devices should be described under one 

HCPCS code in order to simplify 

bidding and claims processing 

procedures. We selected the category of 

CPAP and respiratory assist devices 

because we believe the cost of paying 

separately for the expensive accessories 

used with these devices may exceed the 

amount of savings achieved from 

capping the rental payments for the 

equipment. We seek comments on this 

proposal. 

f. Hospital Beds 

We propose to implement future 

competitions for hospital beds in no 

more than 12 CBAs, where payment 

would be based on bids submitted for 

furnishing hospital beds and all 

accessories used in conjunction with the 

hospital beds on a monthly basis. We 

propose that the suppliers would submit 

a single bid for each HCPCS code 

describing the hospital bed for each 

CBA for furnishing the hospital bed and 

all accessories and services needed on a 

monthly basis. We are soliciting 

comments on whether all hospital beds 

should be described under one HCPCS 

code in order to simplify bidding and 

claims processing procedures. We 

selected the category of hospital beds to 

allow us to determine the impact of the 

continuous monthly rental payment rule 

under CBP on beneficiary access, 

utilization rate and cost for an item that 

currently does not have beneficiary 

access issues or issues related to 

excessive cost for repair and accessories. 

We seek comments on this proposal. 

g. Transition Rules 

We propose to revise the regulation at 

42 CFR 414.409 to include supplier 

transition rules for enteral nutrition, 

oxygen and oxygen equipment, standard 

manual wheelchairs, standard power 

wheelchairs, CPAP and respiratory 

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assist devices, and hospital beds that 

would be paid in accordance with the 

rules proposed in this section. We also 

propose to revise the regulation at 42 

CFR 414.408 to provide a cross 

reference to proposed § 414.409. We 

propose that changes in suppliers from 

a non-contract supplier to a contract 

supplier at the beginning of the CBP 

where the proposed payment rules 

would apply would simply result in the 

contract supplier taking on 

responsibility for meeting all of the 

beneficiary’s monthly needs while 

receiving payment for each month of 

service. We developed these proposed 

rules based on that fact that for capped 

rented DME and oxygen and oxygen 

equipment, since rental caps would not 

apply under the proposed rules, there 

would be no need to restart or extend 

capped rental periods when a 

beneficiary transitions from a noncontract supplier to a contract supplier. 

We propose that supply arrangements 

for oxygen and oxygen equipment, and 

rental agreements for standard manual 

wheelchairs, standard power 

wheelchairs, CPAP devices, respiratory 

assist devices, and hospital beds entered 

into before the start of a CBP and 

application of the payment rules 

proposed in this section would be 

allowed to continue so long as the 

supplier agrees to furnish all necessary 

supplies and accessories used in 

conjunction with the rented equipment 

and needed on a monthly basis. We 

propose that non-contract suppliers in 

these cases would have the option to 

continue rental agreements; however, 

we propose that as part of the process 

of allowing the rental agreements to 

continue, the grandfathered supplier 

would be paid based on the payment 

rules proposed in this section and based 

on the SPAs established under the CBPs 

incorporating the proposed rules. 

We solicit comments on this proposed 

process. 

We propose that in the event that a 

beneficiary relocates from a CBA where 

the rules proposed in this section apply 

to an area where rental cap rules apply, 

that a new period of continuous use 

would begin for the capped rental item, 

enteral nutrition equipment, or oxygen 

equipment as long as the item is 

determined to be medically necessary. 

We believe these rules that would result 

in a new period of continuous use are 

necessary to safeguard beneficiary 

access to covered items and services and 

plan to closely monitor the impact these 

rules have on beneficiary cost sharing 

before phasing in these rules in more 

than a limited number of CBAs. 

We seek comments on these 

proposals. 

h. Beneficiary-Owned Equipment 

We propose that separate payment for 

all repairs, maintenance and servicing, 

and replacement of supplies and 

accessories for beneficiary-owned DME 

or enteral nutrition equipment would 

cease in the CBAs where the payment 

rules proposed under this section are in 

effect. We propose that if the beneficiary 

has a medical need for the equipment, 

the contract supplier would be 

responsible for furnishing new 

equipment and servicing that 

equipment. This option would ensure 

that beneficiaries continue to receive 

medically necessary equipment, 

including the supplies, accessories, 

maintenance and servicing that may be 

needed for such equipment. Please note 

that this would not apply to items 

which are not paid on a bundled, 

continuous rental basis. We propose to 

revise the regulations at § 414.409 to 

specify that any beneficiary who owns 

DME or enteral nutrition equipment and 

continues to have a medical need for the 

items should these rules take effect in a 

CBA where they reside, would have the 

option to obtain new equipment, if 

medically necessary, and related 

servicing from a contract supplier. We 

are requesting comment as to whether a 

transitional process should be 

considered when claims are selected for 

review to determine whether they are 

reasonable and necessary and other 

safeguards are required to ensure timely 

delivery of the replacement DME so that 

individuals’ mobility and ability to live 

independently is not adversely 

impacted by delays. While this could 

potentially increase beneficiary cost 

sharing, it would eliminate issues 

associated with repair of beneficiaryowned equipment. We plan to closely 

monitor the impact of this proposed 

provision, should it be finalized. 

We seek comments on this proposal, 

including issues related to the ability of 

low income beneficiaries to afford 

additional cost sharing, and how best to 

monitor beneficiary impact within the 

12 CBAs in which these new rules 

would be phased in. 

2. Responsibility for Repair of 

Beneficiary-Owned Power Wheelchairs 

Furnished Under CBPs 

We propose to revise the regulation at 

42 CFR 414.409 to add a new payment 

rule that would apply to future 

competitions for standard power 

wheelchairs in no more than 12 CBAs 

where payment is made on a capped 

rental basis and not on the basis of the 

rules proposed under § 1 above. In these 

CBPs, we propose that contract 

suppliers for power wheelchairs would 

be responsible for all necessary repairs 

and maintenance and servicing of any 

power wheelchairs they furnish during 

the contract period under the CBP, 

including repairs and maintenance and 

servicing of power wheelchairs after 

they have transferred title to the 

equipment to the beneficiary. We 

propose that this responsibility would 

end when the reasonable useful lifetime 

established for the power wheelchair 

expires, medical necessity for the power 

wheelchair ends, the contract period 

ends, or the beneficiary relocates 

outside the CBA. We propose that the 

contract supplier would not receive 

separate payment for these services and 

would factor the costs of these services 

into their bids. We believe that based on 

existing maintenance and servicing 

requirements, suppliers could project 

the cost of continuing to repair and 

service equipment of various ages once 

title to the equipment has transferred to 

the beneficiary. As indicated above, 

under existing rules, the supplier that 

transfers title to the equipment to the 

beneficiary after the 13 month period of 

continuous use is not held responsible 

for repairing the equipment they furnish 

after the beneficiary takes over 

ownership of the equipment. Therefore, 

we believe the propose rule would 

safeguard the beneficiary and better 

ensure that the beneficiary continues to 

have equipment in good working order 

to meet their needs. We propose that the 

contract supplier would not be 

responsible for repairing power 

wheelchairs they did not furnish. We 

propose that services to repair 

beneficiary-owned equipment furnished 

prior to the start of the contract period 

would be paid in accordance with the 

standard payment rules at § 414.210(e). 

We seek comments on this proposal. 

3. Phasing in the Proposed Payment 

Rules in CBAs 

We propose that the CBAs where the 

proposed rules in §§ 1 or 2 above would 

be applied would be for MSAs with a 

general population of at least 250,000 

and a Medicare Part B enrollment 

population of at least 20,000 that are not 

already included in Round 1 or 2. Based 

on 2012 population estimates from the 

Census Bureau and 2011 Medicare 

enrollment data, there are 

approximately 80 MSAs that would 

satisfy this criteria. Selecting MSAs not 

already included in Round 1 or 2 would 

allow competitions and rules associated 

with these competitions to begin after 

the final rule would take effect in areas 

that are comparable to existing CBAs. 

We propose that the boundaries of the 

CBAs would be established in 

accordance with the rules set forth at 

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§§ 414.406 and 414.410. We propose 

that additional CBPs for the items 

identified in §§ 1 and 2 above be 

established in ‘‘comparator’’ CBAs 

concurrent with CBPs where the 

proposed rules would be applied. 

Payment for items and services in the 

comparator CBAs would be made in 

accordance with the existing payment 

rules in § 414.408. We propose that 

these additional comparator CBAs and 

CBPs be established to facilitate our 

analysis of the effect of the payment 

rules proposed in sections 1 and 2 above 

compared to the effect of the existing 

payment rules in § 414.408. We propose 

that for each CBP where either the rules 

in section 1 or 2 above are implemented, 

a comparator CBA and CBP would be 

established. We propose that the 

comparator CBAs be selected so that 

they are located in the same state as the 

CBA where the special payment rules 

would apply and are similar to the 

CBAs in which the proposed payment 

rules would be implemented based on a 

combination of factors that could 

include geographic location (region of 

the country), general population, 

beneficiary population, patient mix, and 

utilization of items. We are proposing to 

establish the comparator CBAs and 

CBPs to enable us to review the impact 

of the proposed payment rules on 

expenditures, quality, and access to 

items and services in order to determine 

whether to pursue future rulemaking to 

expand the proposed payment rules to 

additional areas and or items. 

We seek comments on this proposal. 

4. Submitting Bids for Items Paid on a 

Continuous Rental Basis 

In accordance with section 

1847(b)(2)(A)(iii) of the Act, before 

contracts can be awarded, a 

determination must be made that the 

total amounts to be paid to contract 

suppliers under a CBP are expected to 

be less than the total amounts that 

would otherwise be paid. In accordance 

with § 414.414(f) of the regulations, 

under the DMEPOS CBP, bids amounts 

for an item or service are limited to the 

fee schedule amount that would 

otherwise be paid for the item or 

service. We propose that in order to 

apply the proposed rental payment 

rules, we would establish the bid limits 

for enteral nutrition, oxygen and oxygen 

equipment, standard manual 

wheelchairs, standard power 

wheelchairs, and hospital beds that 

would be paid in accordance with the 

proposed payment rules in sections 1 

and 2 above based on average monthly 

expenditures per beneficiary in an area 

for the items and services related to 

furnishing the DME. For example, the 

bid limit for the continuous monthly 

rental of a standard manual wheelchair 

in a CBA would be based on the total 

payment amounts per month in the area 

for the wheelchair, repair, maintenance 

and servicing of the wheelchair, and 

accessories used with the wheelchair, 

divided by the unduplicated number of 

beneficiaries receiving these items and 

services. We propose to revise § 414.412 

to specify that the supplier’s bid for 

furnishing enteral nutrition, oxygen and 

oxygen equipment, standard manual 

wheelchairs, standard power 

wheelchairs, and hospital beds on a 

continuous monthly rental basis could 

not be higher than the average monthly 

payment made in the area for the items 

and services prior to the start of the 

competition. In the case of CPAP 

devices and respiratory assist devices, 

these items were paid on a bundled, 

continuous rental fee schedule basis 

from 1989 thru 1993, based on the rules 

mandated by section 4062(b) of OBRA 

87, prior to the change by section 13543 

of OBRA 93 that moved them from the 

payment class for items requiring 

frequent and substantial servicing to the 

payment class for capped rental items. 

Payment on a bundled, continuous 

rental fee schedule basis was mandated 

by OBRA 87 from 1989 thru 1993. The 

fee schedule for 1993 is the most current 

fee schedule where payment was based 

on a bundled, continuous rental basis. 

We propose to revise § 414.412 to 

specify that the supplier’s bid for 

furnishing CPAP devices and 

respiratory assist devices on a 

continuous monthly rental basis could 

not be higher than the 1993 fee schedule 

amounts for these items, increased by 

the covered item update factors 

provided for these items in section 

1834(a)(14) of the Act. We seek 

comments on this proposal. 

We seek public comments on phasing 

in the proposed rules described in 

section 1 through 4 above. 

VII. Scope of Hearing Aid Coverage 

Exclusion 

A. Background 

Section 1862(a)(7) of the Act states 

notwithstanding any other provision of 

title XVIII, no payment may be made 

under part A or part B for any expenses 

incurred for items or services ‘‘where 

such expenses are for . . . hearing aids 

or examinations therefor. . . .’’ This 

policy is codified in the regulation at 42 

CFR 411.15(d), which specifically states 

that hearing aids or examination for the 

purpose of prescribing, fitting, or 

changing hearing aids are excluded from 

Medicare coverage. At the time of 

passage of the Social Security 

Amendments of 1965 (Pub. L. 97, 89th 

Congress), which added the Medicare 

coverage exclusion for hearing aids at 

section 1862(a)(7) of the Act, all hearing 

aids utilized functional air and/or bone 

conduction pathways to facilitate 

hearing. 

In general, to be covered by Medicare, 

an item or service must fall within one 

or more benefit categories contained 

within Part A or Part B, and must not 

be otherwise excluded from coverage. 

With regard to section 1862(a)(7) of the 

Act, we consider that a hearing aid 

provides assistance or ‘‘aid’’ to hearing 

that already exists via a functioning ear. 

Cochlear implants were the first hearing 

device that was not considered a 

hearing aid and met the benefit category 

of a prosthetic device. Prosthetic 

devices are a Medicare benefit category 

defined at section 1861(s)(8) of the Act 

which, in part, states a ‘‘prosthetic 

devices (other than dental) which 

replace all or part of an internal body 

organ.’’ A cochlear implant is 

considered a prosthetic device primarily 

because it replaces the function of the 

cochlea. A cochlear implant device 

differs from a hearing aid in that it is an 

electronic instrument, part of which is 

implanted surgically to directly 

stimulate auditory nerve fibers, and part 

of which is worn or carried by the 

individual to capture, analyze and code 

sound. Both cochlear devices and brain 

stem implants, which function in a 

similar manner, create the perception of 

sound rather than aid hearing that 

already exists. We interpret the statute 

as excluding devices that provide aid to 

extant hearing (or hearing aids) rather 

than devices that create the perception 

of sound and hearing, given that devices 

with technology that utilize either air or 

bone conduction via mechanical 

stimulation to aid extant hearing were 

primarily utilized when the statute was 

written. Moreover, we believe that 

prosthetic hearing devices are not 

‘‘hearing aids’’ given that such devices 

do more than ‘‘aid’’ in hearing and 

instead replace the function of an 

internal body organ (i.e., a part of the 

ear). 

Historically, CMS has periodically 

addressed the scope of the Medicare 

hearing aid coverage exclusion through 

program instructions and national 

coverage policies or determinations. We 

briefly discuss the relevant changes that 

have occurred over time with regard to 

Medicare coverage and payment of 

hearing devices. 

Cochlear implants were the first 

device covered for Medicare payment 

for adult beneficiaries in October 1986, 

when no other hearing device was being 

covered under Medicare, and such 

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coverage was supported by the Office of 

Health Technology Assessment’s 

‘‘Public Health Service Assessment of 

Cochlear Implant Devices for the 

Profoundly Hearing Impaired’’, dated 

June 30, 1986 found at https://

archive.org/stream/

cochlearimplantd00feig/

cochlearimplantd00feig_djvu.txt. 

Medicare coverage was restricted to 

cochlear implants that treated patients 

with post lingual, profound, bilateral, 

sensorineural deafness who are 

stimulable and who lack the unaided 

residual auditory ability to detect 

sound. 

Effective January 1, 2003, we clarified 

that the hearing aid exclusion broadly 

applied to all hearing aids that utilized 

functional air and/or bone conduction 

pathways to facilitate hearing (see 

section 15903, Hearing Aid Exclusion, 

Medicare Carriers Manual, Part 3— 

Claims Process (HCFA-Pub. 14–3), 

which was later moved to section 100, 

Hearing Aids and Cochlear Implants, of 

Chapter 16, of the Medicare Benefit 

Policy Manual, CMS-Pub. 100–02). Any 

device that does not produce at its 

output an electrical signal that directly 

stimulates the auditory nerve is a 

hearing aid for purposes of coverage 

under Medicare. Devices that produce 

air conduction sound into the external 

auditory canal, devices that produce 

sound by mechanically vibrating bone, 

or devices that produce sound by 

vibrating the cochlear fluid through 

stimulation of the round window are 

considered hearing aids and excluded 

from Medicare coverage. 

Effective April 4, 2005, Medicare’s 

national coverage policy for cochlear 

implants was modified through the NCD 

process (see section 65–14 of the 

Medicare Coverage Issues Manual 

(HCFA-Pub. 6), which was later moved 

to section 50.3, Cochlear Implantation, 

of Chapter 1, Part 1 of the Medicare 

National Coverage Determinations 

Manual (CMS-Pub. 100–03)). Our 

findings under the NCD, in part, state 

that ‘‘CMS has determined that cochlear 

implants fall within the benefit category 

of prosthetic devices under section 

1861(s)(8) of the Social Security Act.’’ 

Medicare is a defined benefit program. 

An item or device must not be 

statutorily excluded and fall within a 

benefit category as a prerequisite to 

Medicare coverage. We believe that 

prosthetic hearing devices are not 

‘‘hearing aids’’ given that such devices 

do more than ‘‘aid’’ in hearing and 

instead replace the function of an 

internal body organ (i.e., a part of the 

ear). Additional changes, regarding 

coverage criteria, have been made to 

NCD 50.3 over time, however, the NCD 

decision regarding benefit category and 

Medicare coverage for cochlear 

implantation has remained consistent. 

The NCD states that a cochlear implant 

device is an electronic instrument, part 

of which is implanted surgically to 

stimulate auditory nerve fibers, and part 

of which is worn or carried by the 

individual to capture, analyze, and code 

sound. Cochlear implant devices are 

available in single-channel and multichannel models. The purpose of 

implanting the device is to provide 

awareness and identification of sounds 

and to facilitate communication for 

persons who are moderately to 

profoundly hearing impaired. 

The regulations at 42 CFR 419.66 

were revised to add new requirements, 

effective January 1, 2006, for transitional 

pass-through payments for medical 

devices. The auditory osseointegrated 

device, referred to as a bone anchored 

hearing aid (BAHA), was determined to 

be a new device category according to 

the new requirements for transitional 

pass-through payment. Medicare 

coverage was also expanded to cover 

auditory osseointegrated and auditory 

brainstem devices as prosthetic devices. 

Currently, section 100 of Chapter 16 of 

the Medicare Benefit Policy Manual 

(CMS Pub. 100–02) reads as follows: 

Hearing aids are amplifying devices that 

compensate for impaired hearing. Hearing 

aids include air conduction devices that 

provide acoustic energy to the cochlea via 

stimulation of the tympanic membrane with 

amplified sound. They also include bone 

conduction devices that provide mechanical 

energy to the cochlea via stimulation of the 

scalp with amplified mechanical vibration or 

by direct contact with the tympanic 

membrane or middle ear ossicles. 

Certain devices that produce perception of 

sound by replacing the function of the 

middle ear, cochlea, or auditory nerve are 

payable by Medicare as prosthetic devices. 

These devices are indicated only when 

hearing aids are medically inappropriate or 

cannot be utilized due to congenital 

malformations, chronic disease, severe 

sensorineural hearing loss or surgery. 

The following are considered prosthetic 

devices: 

• Cochlear implants and auditory 

brainstem implants, that is, devices that 

replace the function of cochlear structures or 

auditory nerve and provide electrical energy 

to auditory nerve fibers and other neural 

tissue via implanted electrode arrays. 

• Osseointegrated implants, that is, 

devices implanted in the skull that replace 

the function of the middle ear and provide 

mechanical energy to the cochlea via a 

mechanical transducer. 

B. Current Issues 

We have received several benefit 

category determination requests in 

recent years for the consideration of 

non-implanted, bone conduction 

hearing aid devices for single-sided 

deafness, as prosthetic devices under 

the Medicare benefit. We have received 

similar requests for several other types 

of implanted and non-implanted 

devices as well. In response to these 

requests, we have re-examined the 

scope of the statutory hearing aid 

exclusion. Currently, we consider all air 

or bone conduction hearing devices, 

whether external, internal, or 

implanted, including, but not limited to, 

middle ear implants, osseointegrated 

devices, dental anchored bone 

conduction devices, and other types of 

external or non-invasive devices that 

mechanically stimulate the cochlea, as 

hearing aids. All of these devices 

provide traditional ‘‘aid’’ to hearing and 

are excluded in accordance with section 

1862(a)(7) of the Act. In order for an 

item to be covered by Medicare, it must 

fall into a Medicare benefit category and 

not be statutorily excluded. Not only are 

these devices statutorily excluded they 

do not fall in a benefit category. 

Specifically, they do not meet the 

statutory definition of a prosthetic 

device found at section 1861(s)(8) of the 

Act which, in part, states a ‘‘prosthetic 

devices (other than dental) which 

replace all or part of an internal body 

organ.’’ They do not replace the 

function of an internal body organ and 

thus are not considered prosthetic 

devices under Medicare payment 

policy. In regard to BAHA, it is a bone 

conduction hearing aid device that is 

osseointegrated. There are currently 

only two hearing devices that are not 

statutorily excluded and are a covered 

Medicare item that fall into the 

prosthetic benefit category; namely, the 

cochlear implant and the auditory 

brainstem device. These two devices 

meet the definition of a prosthetic 

device in that they replace the function 

of the inner ear consistent with the 

definition of prosthetic devices 

described in section 1861(s)(8) of the 

Act. 

C. Proposed Provisions 

After further considering the statutory 

Medicare hearing aid exclusion under 

section 1862(a)(7) of the Act, and reexamining the different types of external 

and implanted devices, we propose to 

interpret the term ‘‘hearing aid’’ to 

include all types of air or bone 

conduction hearing aid devices, 

whether external, internal, or 

implanted, including, but not limited to, 

middle ear implants, osseointegrated 

devices, dental anchored bone 

conduction devices, and other types of 

external or non-invasive devices that 

mechanically stimulate the cochlea. We 

believe, based on our understanding of 

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how such devices function, that such 

devices are hearing aids that are not 

otherwise covered as prosthetic devices, 

in that they do not replace all or part of 

an internal body organ. Therefore, we 

propose to modify the regulation at 

§ 411.15(d)(1) to specify that the hearing 

aid exclusion encompasses all types of 

air conduction and bone conduction 

hearing aids (external, internal, or 

implanted). Osseointegrated devices 

such as the BAHA are bone conduction 

hearing aids that mechanically stimulate 

the cochlea; therefore, we believe that 

the hearing aid exclusion applies to 

these devices and propose that Medicare 

should not cover these devices, 

consistent with our interpretation of 

section 1862(a)(7) of the Act. In 

addition, an NCD was issued for 

cochlear implant devices with the result 

that this determination and recent 

requests to expand coverage of hearing 

devices raises serious questions about 

the intent and scope of the Medicare 

coverage exclusion for hearing aids. It is 

for these reasons that we are addressing 

the hearing aid coverage exclusion in 

notice and comment rulemaking, and 

believe that the BAHA device qualifies 

as a hearing aid because it functions like 

other bone conduction hearing aids that 

are subject to the Medicare statutory 

coverage exclusion for hearing aids. 

We continue to believe that the 

hearing aid exclusion does not apply to 

brain stem implants and cochlear 

implants because these devices directly 

stimulate the auditory nerve, replacing 

the function of the inner ear rather than 

aiding the conduction of sound as 

hearing aids do. Therefore, we are not 

proposing any changes to our current 

policy about brain stem implants and 

cochlear implants and how such 

implants fall outside of the hearing aid 

statutory exclusion (that is, such devices 

would fall outside the Medicare 

coverage exclusion for hearing aids and 

remain covered subject to the Medicare 

NCD 50.3 found at https://

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

downloads/ncd103c1_Part1.pdf). We 

propose, however, to modify 

§ 411.15(d)(2) to specifically note that 

such devices do not fall within the 

hearing aid exclusion. 

We seek public comment on this 

proposal. 

VIII. Definition of Minimal SelfAdjustment of Orthotics Under 

Competitive Bidding 

A. Background 

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

mandates the implementation of CBPs 

throughout the United States for 

awarding contracts for furnishing 

competitively priced items and services, 

including OTS orthotics described in 

section 1847(a)(2)(C) of the Act (leg, 

arm, back or neck braces described in 

section 1861(s)(9) of the Act for which 

payment would otherwise be made 

under section 1834(h)) which require 

minimal self-adjustment for appropriate 

use and do not require expertise in 

trimming, bending, molding, 

assembling, or customizing to fit the 

individual. The regulation at 42 CFR 

414.402 currently defines ‘‘minimal selfadjustment’’ as ‘‘an adjustment that the 

beneficiary, caretaker for the 

beneficiary, or supplier of the device 

can perform and does not require the 

services of a certified orthotist (that is, 

an individual who is certified by either 

the American Board for Certification in 

Orthotics and Prosthetics, Inc., or the 

Board for Orthotist/Prosthetist 

Certification) or an individual who has 

specialized training.’’ This current 

definition was proposed in the 71 FR 

25669 (May 1, 2006) Notice for 

Proposed Rulemaking (NPRM) but did 

not include the term ‘‘individual with 

specialized training.’’ The definition 

was finalized in the 72 FR 18022 (April 

10, 2007) Final Rule with the term 

‘‘individual with specialized training’’ 

added after receiving comments that 

disagreed with the May 2006 definition 

and pointed out that occupational 

therapists, physical therapists, and 

physicians are licensed and trained to 

provide orthotics. 

B. Current Issues 

Since adoption of the minimal selfadjustment definition there has been 

some concerns raised by industry and 

other stakeholders regarding who is 

considered an individual with 

specialized training. We have had many 

inquiries and comments that this term is 

too ambiguous and left open for 

interpretation. In order to identify OTS 

orthotics for the purpose of 

implementing CBPs for these items and 

services in accordance with the statute, 

we need a clearer distinction between 

OTS orthotics and those that require 

more than minimal self-adjustment and 

expertise in custom fitting. In doing so, 

we believe it is essential to identify the 

credentials and training a supplier 

needs to have in order to be considered 

a supplier with expertise in custom 

fitting; therefore, we believe the term 

‘‘individual with specialized training’’ 

must be clarified. We believe these 

professionals must have specialized 

training equivalent to a certified 

orthotist for the provision of custom 

fitted orthotic devices such that these 

professionals satisfy requirements 

concerning higher education, 

continuing education requirements, 

licensing, and certification/registration 

requirements so that they meet a 

minimum professional skill level in 

order to ensure the highest standard of 

care and safety for Medicare 

beneficiaries. 

This would also help to prevent any 

supplier without expertise in custom 

fitting orthotics from potentially 

circumventing the competitive bidding 

process by furnishing custom fitting 

they are not qualified to provide in the 

event that they are not awarded a 

contract for furnishing OTS orthotics in 

their service area as the custom fitted 

devices are not statutorily included in 

the CBP. 

In addition, for claims processing and 

payment system purposes under the 

CBP, we need to identify OTS orthotics, 

which we accomplish with codes in the 

HCPCS. The HCPCS codes are used on 

claims to identify the items and services 

furnished to the beneficiary, that is, to 

identify orthotics that are furnished 

OTS and subject to the CBP and to 

identify orthotics that have been custom 

fitted by suppliers with expertise. On 

February 9, 2012, CMS issued initial 

guidance identifying specific HCPCS 

codes considered OTS orthotics and 

provided a 60-day comment period 

posted at http://www.cms.gov/Medicare/ 

Medicare-Fee-for-Service-Payment/

DMEPOSFeeSched/OTS_Orthotics.html. 

We received 185 comments. There was 

no general consistency between the 

various commenters on which specific 

HCPCS codes the commenters believed 

were appropriately deemed OTS. Many 

commenters expressed their support for 

the proposed list while others made 

numerous useful recommendations to 

improve the OTS list. We considered 

each comment and performed a 

thorough review of the individual 

HCPCS codes and devices included in 

the codes to assess appropriate orthotic 

categorization. Through this process we 

identified HCPCS codes that described 

items that we believe are never 

furnished OTS, HCPCS codes that 

described items that are always 

furnished OTS, and HCPCS codes that 

described items that may or may not be 

furnished OTS, depending on whether 

more than minimal fitting and 

adjustment of a particular device by an 

expert is necessary for a particular 

patient. In order to address this issue we 

decided to create HCPCS codes for items 

that may or may not be custom fitted, 

depending on individual patient’s 

needs, into separate codes that 

described the item when it has been 

furnished OTS and when it has been 

custom fitted. The new HCPCS codes 

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were published and became effective 

January 1, 2014 and are published at 

http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

DMEPOSFeeSched/OTS_Orthotics.html. 

C. Proposed Provisions 

Prefabricated orthotics are either 

furnished OTS or with custom fitting 

and are identified in the HCPCS. As 

noted above, with regard to minimal 

self-adjustment, § 414.402 in part 

identifies an individual with expertise 

in fitting as a certified orthotist or an 

individual with specialized training. 

Recently a DME Medicare 

Administrative Contractor (MAC) Web 

site Article entitled ‘‘Correct Coding— 

Definitions used for Off-the-Shelf versus 

Custom Fitted Prefabricated Orthotics 

(Braces)—Revised,’’ was published 

March 27, 2014, and included: A 

physician, a treating practitioner, an 

occupational therapist, or physical 

therapist in compliance with all 

applicable Federal and State licensure 

and regulatory requirements. The DME 

MAC published this article following 

the change in 2014 HCPCS codes for 

OTS and custom fitted orthotics as an 

education tool for Medicare enrolled 

DMEPOS suppliers. We believe 

physicians, treating practitioners, 

occupational therapists, and physical 

therapists are considered ‘‘individuals 

with specialized training’’ that possess 

training equivalent to a certified 

orthotist for the provision of custom 

fitted orthotic devices through their 

individual degree programs and 

continuing education requirements. In 

addition, physicians, treating 

practitioners, occupational therapists, 

and physical therapists possess 

equivalent or higher educational 

degrees, continuing education 

requirements, licensing, and 

certification and/or registration 

requirements. We believe these 

professionals meet a minimum 

professional skill level in order to 

ensure the highest standard of care and 

safety for Medicare beneficiaries. Each 

of these professionals has undergone 

medical training in various courses such 

as kinesiology and anatomy. For 

example, through coursework the 

named medical professionals gain a 

clinical understanding of the human 

body, proper alignment, normal range of 

motion, agonist and antagonist 

relationship, and biomechanics 

necessary to modify a custom fitted 

orthotic device properly. 

Clinical providers such as assistants, 

fitters, and manufacturer representatives 

that work under the supervision of the 

individual with specialized training 

must do so as required under their 

governing body Code of Ethics and 

supervision standards as well as state 

licensure requirements. These 

individuals are not considered to have 

specialized training for the purposes of 

providing custom fitting; therefore, 

orthotics adjusted by these individuals 

but not by individuals with specialized 

training would still be considered OTS. 

The current regulation of orthotic 

provision in the U.S. is inconsistent 

between individual States. There are 

currently 17 States that require 

licensure in P&O. In States that do 

require licensure for the provision of 

orthotics, individual states do not all 

recognize certified orthotic fitters and 

do not provide licensure for this level of 

provider. This inconsistency also 

prompts us to provide clarification on 

the individuals who are recognized as 

having specialized training for the 

purposes of determining what 

constitutes minimal self-adjustment of 

OTS orthotics. 

We propose to update the definition 

of minimal self-adjustment in § 414.402 

to codify an individual with specialized 

training includes: a physician defined in 

section 1861(r) of the Act, a treating 

practitioner defined at section 

1861(aa)(5) (physician assistant, nurse 

practitioner, or clinical nurse specialist), 

an occupational therapist defined at 42 

CFR 484.4, or physical therapist defined 

at 42 CFR 484.4, who is in compliance 

with all applicable Federal and State 

licensure and regulatory requirements 

for reasons discussed above. We seek 

comments on this proposal. 

IX. Revision To Change of Ownership 

Rules To Allow Contract Suppliers To 

Sell Specific Lines of Business 

A. Background 

Section 1847(a) of the Act, as 

amended by section 302(b)(1) of the 

Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (MMA) (Pub. L. 108–173), requires 

the Secretary to establish and 

implement CBPs in CBAs throughout 

the United States for contract award 

purposes for the furnishing of certain 

competitively priced DMEPOS items 

and services. The programs mandated 

by section 1847(a) of the Act are 

collectively referred to as the ‘‘Medicare 

DMEPOS Competitive Bidding 

Program.’’ The 2007 DMEPOS 

competitive bidding final rule (Medicare 

Program; Competitive Acquisition for 

Certain DMEPOS and Other Issues 

published in the Federal Register on 

April 10, 2007 (71 FR 17992)), required 

CBPs for certain Medicare Part B 

covered items of DMEPOS throughout 

the United States. The CBP, which was 

phased in over several years, utilizes 

bids submitted by qualified suppliers to 

establish applicable payment amounts 

under Medicare Part B for certain 

DMEPOS items for beneficiaries 

receiving services in designated CBAs. 

CMS awards contracts to those 

suppliers who meet all of the 

competitive bidding requirements and 

whose composite bid amounts fall at or 

below the pivotal bid (the bid at which 

the capacity provided by qualified 

suppliers meets the demand for the 

item). These qualified suppliers will be 

offered a competitive bidding contract 

for that PC, provided there are a 

sufficient number of qualified suppliers 

(there must be at a minimum of 2) to 

serve the area. Contracts are awarded to 

multiple suppliers for each PC in each 

CBA and will be re-competed at least 

once every 3 years. 

CMS specifies the duration of the 

contracts awarded to each contract 

supplier in the Request for Bid 

Instructions. We also conduct extensive 

bidder education where we inform 

bidders of the requirements and 

obligations of contract suppliers. Each 

winning supplier is awarded a single 

contract that includes all winning bids 

for all applicable CBAs and PCs. A 

competitive bidding contract cannot be 

subdivided. For example, if a contract 

supplier breaches its contract, the entire 

contract is subject to termination. In the 

Physician Fee Schedule final rule 

published on November 29, 2010, we 

stated that ‘‘once a supplier’s contract is 

terminated for a particular round due to 

breach of contract under the DMEPOS 

CBP, the contract supplier is no longer 

a DMEPOS contract supplier for any 

DMEPOS CBP PC for which it was 

awarded under that contract. This 

termination applies to all areas and PCs 

because there is only one contract that 

encompasses all CBAs and PCs for 

which the supplier was awarded a 

contract.’’ (75 FR 73578) 

A competitive bidding contract 

cannot be sold. However, CMS may 

permit the transfer of a contract to an 

entity that merges with or acquires a 

competitive bidding contract supplier if 

the new owner assumes all rights, 

obligations, and liabilities of the 

competitive bidding contract pursuant 

to regulations at 42 CFR 414.422(d). 

For the transfer of a contract to be 

considered, the CHOW must include the 

assumption of the entire contract, 

including all CBAs and PCs awarded 

under the contract. 

B. Proposed Provisions 

We propose to revise § 414.422(d) to 

permit transfer of part of a competitive 

bidding contract under specific 

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circumstances. We believe requiring a 

transfer of the entire contract to a 

successor entity in all circumstances 

may be overly restrictive, and may be 

preventing routine merger and 

acquisition activity. To maintain 

integrity of the bidding process we 

award one contract that includes all the 

CBA/PCs combinations for which the 

supplier qualifies for and accepts as a 

contract supplier. This proposed rule 

would establish an exception to the 

prohibition against transferring part of a 

contract by allowing a contract supplier 

to sell a distinct company (for example, 

an affiliate, subsidiary, sole proprietor, 

corporation, or partnership) which 

furnishes one or more specific PCs or 

serves one or more specific CBAs and 

transfer the portion of the contract 

initially serviced by the distinct 

company, including the PC(s), CBA(s), 

and location(s), to a qualified successor 

entity who meets all competitive 

bidding requirements (i.e., financial 

standards, licensing, and accreditation). 

The proposed exception would not 

apply to existing contracts but would 

apply to contracts issued in all future 

rounds of the program, starting with the 

Round 2 Recompete. As required in 

§ 414.422(d) we are also requiring a 

contract supplier that wants to sell a 

distinct company which furnishes one 

or more specific PCs or serves one or 

more specific CBAs to notify CMS 60 

days before the anticipated date of a 

change of ownership. If documentation 

is required to determine if a successor 

entity is qualified that documentation 

must be submitted within 30 days of 

anticipated change of ownership, 

pursuant to § 414.422(d)(2)(ii). We 

propose that CMS would then modify 

the contract of the original contract 

supplier by removing the affected PC(s), 

CBA(s) and locations from the original 

contract. For CMS to approve the 

transfer, we propose that several 

conditions would have to be met. First, 

we propose that every CBA, PC, and 

location of the company being sold must 

be transferred to the new owner. 

Second, we propose that all CBAs and 

PC’s in the original contract that are not 

explicitly transferred by CMS must 

remain unchanged in that original 

contract for the duration of the contract 

period unless transferred by CMS 

pursuant to a subsequent CHOW. Third, 

we propose that all requirements in 42 

CFR 414.422(d)(2) must be met. Fourth, 

we propose that the sale of the company 

must include all of the company’s assets 

associated with the CBA and/or PC(s). 

Finally, we propose that CMS must 

determine that transferring part of the 

original contract will not result in 

disruption of service or harm to 

beneficiaries. No transfer will be 

permitted for purposes of this program 

if we determine that the new supplier 

does not meet the competitive bidding 

requirements (such as financial 

requirements) and does not possess all 

applicable licenses and accreditation for 

the product(s). In order for the transfer 

to occur, the contract supplier and 

successor entity must enter into a 

novation agreement with CMS and the 

successor entity must accept all rights, 

responsibilities and liabilities under the 

competitive bidding contract. Part of a 

novation agreement requires successor 

entity to ‘‘seamlessly continue to service 

beneficiaries.’’ We believe that these 

proposed conditions are necessary for 

proper administration of the program, to 

ensure that payments are made correctly 

and also to ensure continued contract 

accountability and viability along with 

continuity of service and access to 

beneficiaries. We specifically invite 

comments on whether more or different 

conditions would be appropriate. 

In addition, we are proposing to 

update the current CHOW regulation, 

§ 414.422(d) to clarify the language to 

make it easier to comprehend. The 

proposed changes reformat the 

regulation so that the requirements 

applicable to successor entities and new 

entities are listed separately. These 

proposed changes to the regulation are 

technical, and not substantive in nature. 

CMS seeks comments on all changes 

proposed for § 414.422. 

X. Proposed Changes to the Appeals 

Process for Termination of Competitive 

Bidding Contract 

We propose to modify the DMEPOS 

CBP’s appeals process for termination of 

competitive bidding contracts under 

§ 414.423. First, we propose to modify 

the effective date of termination in the 

termination notice CMS sends to a 

contract supplier found to be in breach 

of contract. Currently, the regulation at 

42 CFR 414.423(b)(2)(vi) indicates that 

the effective date of termination is 45 

days from the date of the notification 

letter unless a timely hearing request 

‘‘has been’’ filed or corrective action 

plan ‘‘has been’’ submitted within 30 

days of the effective date of the 

notification letter (emphasis added). We 

propose to change these references to 

provide additional clarification. This 

change would emphasize that the 

contract will automatically be 

terminated if the supplier does not time 

file a hearing request or submit 

corrective action plan. This proposed 

change is also being addressed at 42 

CFR 414.423(l). We propose deleting the 

lead-in sentence, as it does not properly 

lead into the first paragraph. 

Additionally, we propose inserting 

language from the lead-in sentence in 

the second paragraph to indicate that 

the contract supplier, ‘‘whose contract 

has been terminated,’’ must notify 

beneficiaries of the termination of their 

contract. Second, we propose to modify 

the deadline by which a supplier whose 

competitive bidding contract is being 

terminated must notify affected 

beneficiaries that it is no longer a 

contract supplier. Current regulations at 

42 CFR 414.423(l)(2)(i) require a 

contract supplier to provide this notice 

within 15 days of receipt of a final 

notice of termination. We propose to 

change the beneficiary notification 

deadline to no later than 15 days prior 

to the effective date of termination. This 

proposed change is intended to provide 

beneficiaries with the protection of 

advanced notice prior to a contract 

supplier being terminated from the CBP 

so they have sufficient time to plan/

coordinate their current and future 

DMEPOS needs. 

XI. Technical Change Related To 

Submitting Bids for Infusion Drugs 

Under the DMEPOS Competitive 

Bidding Program 

The standard payment rules for drugs 

administered through infusion pumps 

covered as DME are located at section 

1842(o)(1)(D) of the Act, and mandate 

that payment for infusion drugs 

furnished through a covered item of 

DME on or after January 1, 2004, is 

equal to 95 percent of the average 

wholesale price for such drug in effect 

on October 1, 2003. The regulations 

implementing section 1842(o)(1)(D) of 

the Act are located at 42 CFR 414.707(a), 

under Subpart I of Part 414. Section 

1847(a)(2)(A) of the Act mandates the 

establishment of CBPs for covered items 

defined in section 1834(a)(13), for 

which payment would otherwise be 

made under section 1834(a), including 

items used in infusion and drugs (other 

than inhalation drugs) and supplies 

used in conjunction with DME. Section 

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

the awarding of contracts under a CBP 

unless the total amounts to be paid to 

contract suppliers are expected to be 

less than would otherwise be paid. The 

regulations implementing section 

1847(b)(2)(A)(iii) of the Act with respect 

to items paid on a fee schedule basis 

under Subparts C and D of Part 414 are 

located at 42 CFR 414.412(b)(2), and 

specify that ‘‘the bids submitted for each 

item in a PC cannot exceed the payment 

amount that would otherwise apply to 

the item under Subpart C or Subpart D 

of this part.’’ In addition, the regulations 

regarding the conditions for awarding 

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contracts under the DMEPOS CBP at 42 

CFR 414.414(f) state that ‘‘a contract is 

not awarded under this subpart unless 

CMS determines that the amounts to be 

paid to contract suppliers for an item 

under a CBP are expected to be less than 

the amounts that would otherwise be 

paid for the same item under subpart C 

or subpart D.’’ The regulations 

implementing of section 

1847(b)(2)(A)(iii) of the Act did not 

address payments for drugs under 

subpart I, which was an oversight. We 

therefore propose to revise 

§§ 414.412(b)(2) and 414.414(f) to 

include a reference to drugs paid under 

subpart I in addition to items paid 

under subparts C or D. We propose to 

revise § 414.412(b)(2) to specify that the 

bid amounts submitted for each drug in 

a PC cannot exceed the payment limits 

that would otherwise apply to the drug 

under subpart I of part 414. This 

concerns certain infusion drugs with 

payment limits equal to 95 percent of 

the average wholesale price for the drug 

in effect on October 1, 2003, in 

accordance with § 414.707(a)(3). See 

http://www.ecfr.gov/cgi-bin/text-idx?c=

ecfr&SID=7065f17b411e37b3788b6e7fc

ce21f89&rgn=div8&view=text&node=

42:3.0.1.1.1.9.1.3&idno=42. We propose 

to revise § 414.414(f) to specify that a 

contract is not awarded under this 

subpart unless CMS determines that the 

amounts to be paid to contract suppliers 

for infusion drugs provided with respect 

to external infusion pumps under a CBP 

are expected to be less than the amounts 

that would otherwise be paid to 

suppliers for the same drug under 

subpart I of part 414. We seek comments 

on this proposal. 

XII. Accelerating Health Information 

Exchange 

HHS believes all patients, their 

families, and their healthcare providers 

should have consistent and timely 

access to their health information in a 

standardized format that can be securely 

exchanged between the patient, 

providers, and others involved in the 

patient’s care. (HHS August 2013 

Statement, ‘‘Principles and Strategies for 

Accelerating Health Information 

Exchange’’). The Department is 

committed to accelerating health 

information exchange (HIE) through the 

use of electronic health records (EHRs) 

and other types of health information 

technology (HIT) across the broader care 

continuum through a number of 

initiatives including: (1) Alignment of 

incentives and payment adjustments to 

encourage provider adoption and 

optimization of HIT and HIE services 

through Medicare and Medicaid 

payment policies, (2) adoption of 

common standards and certification 

requirements for interoperable HIT, (3) 

support for privacy and security of 

patient information across all HIEfocused initiatives, and (4) governance 

of health information networks. These 

initiatives are designed to encourage 

HIE among health care providers, 

including professionals and hospitals 

eligible for the Medicare and Medicaid 

EHR Incentive Programs and those who 

are not eligible for the EHR Incentive 

programs, and are designed to improve 

care delivery and coordination across 

the entire care continuum. For example, 

the Transition of Care Measure #2 in 

Stage 2 of the Medicare and Medicaid 

EHR Incentive Programs requires HIE to 

share summary records for at least 10 

percent of care transitions. In addition, 

to increase flexibility in ONC’s 

regulatory certification structure and 

expand HIT certification, ONC has 

proposed a voluntary 2015 Edition EHR 

Certification rule to more easily 

accommodate HIT certification for 

technology used by all health care 

settings to facilitate greater HIE across 

the entire care continuum. 

We believe that HIE and the use of 

certified EHRs can effectively and 

efficiently help ESRD facilities and 

nephrologists improve internal care 

delivery practices, support management 

of patient care across the continuum, 

and support the reporting of 

electronically specified clinical quality 

measures (eCQMs). More information on 

the 2015 Edition EHR certification rule 

can be found at: http://healthit.gov/

policy-researchers-implementers/

standards-and-certification-regulations. 

XIII. Collection of Information 

Requirements 

A. Legislative Requirement for 

Solicitation of Comments 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

requirement should be approved by 

OMB, section 3506(c)(2)(A) of the 

Paperwork Reduction Act of 1995 

requires that we solicit comment on the 

following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

B. Requirements in Regulation Text 

In section II.F of this proposed rule, 

we are proposing changes to regulatory 

text for the ESRD PPS in CY 2015. 

However, the changes that are being 

proposed do not impose any new 

information collection requirements. 

C. Additional Information Collection 

Requirements 

This proposed rule does not impose 

any new information collection 

requirements in the regulation text, as 

specified above. However, this proposed 

rule does make reference to several 

associated information collections that 

are not discussed in the regulation text 

contained in this document. The 

following is a discussion of these 

information collections. 

1. ESRD QIP 

The information collection 

requirements associated with the ESRD 

QIP are currently approved under OMB 

control number 0938–0386. 

a. Data Validation Requirements for the 

PY 2017 ESRD QIP 

Section III.F.9 in this proposed rule 

outlines our data validation proposals 

for PY 2017. Specifically, we propose to 

randomly sample records from 300 

facilities as part of our continuing pilot 

data-validation program. Each sampled 

facility would be required to produce 

approximately 10 records, and the 

sampled facilities will be reimbursed by 

our validation contractor for the costs 

associated with copying and mailing the 

requested records. The burden 

associated with these validation 

requirements is the time and effort 

necessary to submit the requested 

records to a CMS contractor. We 

estimate that it will take each facility 

approximately 2.5 hours to comply with 

this requirement. If 300 facilities are 

asked to submit records, we estimate 

that the total combined annual burden 

for these facilities will be 750 hours 

(300 facilities × 2.5 hours). According to 

the Bureau of Labor Statistics, the mean 

hourly wage of a registered nurse is 

$33.13/hour. Since we anticipate that 

nurses (or administrative staff who 

would be paid at a lower hourly wage) 

would submit this data, we estimate that 

the aggregate cost of the CROWNWeb 

data validation would be $24,847.50 

(750 hours × $33.13/hour) total or 

$82.83 ($24,847.50/300 facilities) per 

facility in the sample. 

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Under the proposed feasibility study 

for validating data reported to the NHSN 

Dialysis Event Module, we propose to 

randomly select nine facilities to 

provide CMS with a quarterly list of all 

positive blood cultures drawn from their 

patients during the quarter, including 

any positive blood cultures collected on 

the day of, or the day following, a 

facility patient’s admission to a hospital. 

A CMS contractor will review the lists 

to determine if dialysis events for the 

patients in question were accurately 

reported to the NHSN Dialysis Event 

Module. If we determine that additional 

medical records are needed to validate 

dialysis events, facilities will be 

required to provide those records within 

60 days of a request for this information. 

We estimate that the burden associated 

with this feasibility study will be the 

time and effort necessary for each 

selected facility to compile and submit 

to CMS a quarterly list of positive blood 

cultures drawn from its patients. We 

estimate that it will take each 

participating facility approximately two 

hours per quarter to comply with this 

submission. If nine facilities are asked 

to provide lists, we estimate the 

quarterly burden for these facilities 

would be 72 hours per year (9 facilities 

× 2 hours/quarter × 4 quarters/year). 

Again, we estimate the mean hourly 

wage of a registered nurse to be $33.13/ 

hour, and we anticipate nurses (or 

administrative staff who would be paid 

at a lower hourly wage) would be 

responsible for preparing and 

submitting the list. Because we 

anticipate nurses (or administrative staff 

who would be paid at a lower hourly 

rate) would compile and submit these 

data, we estimate that the aggregate 

annual cost of the feasibility study to 

validate NHSN data would be $2,385.36 

(72 hours × $33.13/hour) total or 

$265.04 per facility ($2,385.36/9 

facilities). 

b. Proposed NHSN Healthcare Personnel 

Influenza Vaccination Reporting 

Measure for PY 2018 

We are proposing to include, 

beginning with the PY 2018 ESRD QIP, 

a measure requiring facilities to report 

healthcare personnel influenza 

vaccination data to NHSN. The NHSN is 

a secure, Internet-based surveillance 

system which is maintained and 

managed by CDC. Many dialysis 

facilities already submit NHSN 

Bloodstream Infection clinical measure 

data to NHSN. Specifically, we are 

proposing to require facilities to submit 

on an annual basis an HCP Influenza 

Vaccination Summary Form to NHSN, 

according to the specifications available 

in the NHSN Healthcare Personnel 

Safety Component Protocol. We 

estimate the burden associated with this 

measure to be the time and effort 

necessary for facilities to complete and 

submit the HCP Influenza Vaccination 

Summary Form on an annual basis. We 

estimate that approximately 5,996 

facilities will treat ESRD patients in PY 

2018. We estimate it will take each 

facility approximately 75 minutes to 

collect and submit the data necessary to 

complete the Healthcare Personnel 

Influenza Vaccination Summary Form 

on an annual basis. Therefore, the 

estimated total annual burden 

associated with reporting this measure 

in PY 2018 is 7,495 hours [(75/60) hours 

× 5,996 facilities]. Again, we estimate 

the mean hourly wage of a registered 

nurse to be $33.13, and we anticipate 

nurses (or administrative staff who 

would be paid at a lower hourly wage) 

would be responsible for this reporting. 

In total, we believe the cost for all ESRD 

facilities to comply with the reporting 

requirements associated with the NHSN 

Healthcare Personnel Influenza 

Vaccination reporting measure would be 

approximately $248,309 (7,495 hours × 

$33.13/hour) total, or $41.37 ($248,309/ 

5,996 facilities) per facility. 

XIV. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

XV. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

We examined the impacts of this 

proposed rule as required by Executive 

Order 12866 (September 30, 1993, 

Regulatory Planning and Review) and 

Executive Order 13563 on Improving 

Regulation and Regulatory Review 

(January 11, 2011). Executive Orders 

12866 and 13563 direct agencies to 

assess all costs and benefits of available 

regulatory alternatives and, if regulation 

is necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits of 

reducing costs, harmonizing rules, and 

promoting flexibility. This rule has been 

designated economically significant 

under section 3(f)(1) of Executive Order 

12866. Accordingly, the rule has been 

reviewed by the Office of Management 

and Budget. We have prepared a 

Regulatory Impact Analysis that to the 

best of our ability presents the costs and 

benefits of the proposed rule. We solicit 

comments on the regulatory impact 

analysis provided. 

2. Statement of Need 

This rule proposes a number of 

routine updates for renal dialysis 

services in CY 2015 and proposes 

several policy changes to the ESRD PPS. 

The routine updates include proposed 

updates to the wage index values, the 

wage index budget-neutrality 

adjustment factor, and the outlier 

payment threshold amounts. The 

proposed policy changes to the ESRD 

PPS include the revisions to the ESRDB 

market basket, changes in the CBSA 

delineations, changes to the laborrelated share, clarifications in the lowvolume payment adjustment, and 

additions and corrections to the ICD–10 

codes that will be used for the 

comorbidity payment adjustment when 

compliance with ICD–10 is required 

beginning October 1, 2015. In addition, 

this rule implements sections 

1881(b)(14)(F)(i) and (I), as amended by 

section 217 (b)(1) and (2) of PAMA, 

under which the drug utilization 

adjustment transition is eliminated and 

a 0.0 percent update to the ESRD PPS 

base rate is imposed in its place. This 

rule also implements the delay in 

payment for oral-only drugs used for the 

treatment of ESRD under the ESRD PPS 

until January 1, 2024 as required by 

section 217(a) of PAMA. Failure to 

publish this proposed rule would result 

in ESRD facilities not receiving 

appropriate payments in CY 2015. 

This rule proposes to implement 

requirements for the ESRD QIP by 

proposing to adopt measure sets for the 

PYs 2017 and 2018 programs, as 

directed by section 1881(h) of the Act. 

Failure to propose requirements for the 

PY 2017 ESRD QIP would prevent 

continuation of the ESRD QIP beyond 

PY 2016. In addition, proposing 

requirements for the PY 2018 ESRD QIP 

provides facilities with more time to 

review and fully understand new 

measures before their implementation in 

the ESRD QIP. 

This proposed rule proposes to 

establish a methodology for adjusting 

DMEPOS payment amounts using 

information from the Medicare 

DMEPOS CBP. The proposed rule 

would also phase in special payment 

rules for certain DME and enteral 

nutrition in a limited number of areas 

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40302 Federal Register / Vol. 79, No. 133 / Friday, July 11, 2014 / Proposed Rules 

under the Medicare DMEPOS CBP. This 

proposed rule also proposes to clarify 

the Medicare hearing aid coverage 

exclusion under section 1862(a)(7). In 

addition, this proposed rule would 

modify the definition of minimal selfadjustment at § 414.402 to indicate what 

specialized training is needed by 

suppliers to provide custom fitting 

services if they are not certified 

orthotists. Finally, if finalized, this 

proposed rule would provide 

clarification of the CHOW under the 

Medicare DMEPOS CBP. 

3. Overall Impact 

We estimate that the proposed 

revisions to the ESRD PPS will result in 

an increase of approximately $30 

million in payments to ESRD facilities 

in CY 2015, which includes the amount 

associated with updates to outlier 

threshold amounts, updates to the wage 

index, changes in CBSA delineations, 

and the labor-related share. 

For PY 2017, we estimate that the 

proposed requirements related to the 

ESRD QIP will cost approximately $27 

thousand total, and the payment 

reductions will result in a total impact 

of approximately $16 million across all 

facilities. For PY 2018, we estimate that 

the proposed requirements related to the 

ESRD QIP will cost approximately $248 

thousand total, and the payment 

reductions will result in a total impact 

of approximately $6.4 million across all 

facilities, resulting in a total impact 

from the proposed ESRD QIP of 

approximately $6.6 million. 

We estimate that the proposed 

methodology for adjusting DMEPOS 

payment amounts using information 

from DMEPOS CBPs would save over $7 

billion over FY 2016–2020. The savings 

would be primarily achieved from the 

reduced payment amounts for items and 

services. 

We estimate the special payment rules 

would not have a negative impact on 

beneficiaries and suppliers, or on the 

Medicare program. Contract suppliers 

are responsible for furnishing items and 

services needed by the beneficiary, and 

the cost to suppliers for furnishing these 

items and services generally would not 

change based on whether or not the 

equipment and related items and 

services are paid for separately under a 

capped rental payment method. Because 

the supplier’s bids would reflect the 

cost of furnishing items in accordance 

with the new payment rules, we expect 

the overall savings generally would be 

the same as they are under the current 

payment rules. Furthermore, as 

indicated above, the special payment 

rules would be phased in under a 

limited number of areas first to 

determine impact on the program, 

beneficiaries, and suppliers, including 

their effects on cost, quality, and access 

before expanding to other areas after 

notice and comment rulemaking, if 

supported by evaluation results. We 

believe that the special payment rules 

would give beneficiaries more choice 

and flexibility in changing suppliers. 

We estimate the proposed clarification 

of the statutory Medicare hearing aid 

coverage exclusion leading to 

withdrawal of coverage for bone 

anchored hearing aid (BAHA) devices 

would not have a significant fiscal 

impact on the Medicare program 

because the Medicare program 

expenditure for BAHA paid under 

Medicare during the period CY2005 

through CY 2013 was less than 

9,000,000 per year. This proposed 

regulation would provide guidance as to 

coverage of DME with regard to the 

statutory exclusion. The proposed rule 

proposes to specify that cochlear 

implants and brain stem implants are 

not hearing aids subject to the statutory 

exclusion and therefore, proposes no 

change to the current Medicare coverage 

status for these items. 

We estimate that the proposed 

clarification of the definition of minimal 

self-adjustment would have no 

significant impact on program 

expenditures or access to orthotics. This 

proposed clarification would impact 

suppliers furnishing custom fitted 

orthotics that do not have the expertise 

necessary to make more than minimal 

adjustments to an orthotic that a 

beneficiary or caregiver could be trained 

to make. The impact on these few 

suppliers will vary according to the 

caseload of custom fitted orthotics 

provided by an individual supplier. 

However, we believe the majority of 

custom fitted devices are currently 

being furnished by an individual with 

expertise. 

We estimate clarifying the CHOW 

under the Medicare DMEPOS CBP 

would have no significant impact to 

DMEPOS suppliers. 

B. Detailed Economic Analysis 

1. CY 2015 End-Stage Renal Disease 

Prospective Payment System 

a. Effects on ESRD Facilities 

To understand the impact of the 

changes affecting payments to different 

categories of ESRD facilities, it is 

necessary to compare estimated 

payments in CY 2014 to estimated 

payments in CY 2015. To estimate the 

impact among various types of ESRD 

facilities, it is imperative that the 

estimates of payments in CY 2014 and 

CY 2015 contain similar inputs. 

Therefore, we simulated payments only 

for those ESRD facilities for which we 

are able to calculate both current 

payments and new payments. 

For this proposed rule, we used the 

December 2013 update of CY 2013 

National Claims History file as a basis 

for Medicare dialysis treatments and 

payments under the ESRD PPS. We 

updated the 2013 claims to 2014 and 

2015 using various updates. The 

updates to the ESRD PPS base rate are 

described in section II.B of this 

proposed rule. Table 38 shows the 

impact of the estimated CY 2015 ESRD 

payments compared to estimated 

payments to ESRD facilities in CY 2014. 

TABLE 38—IMPACT OF PROPOSED CHANGES IN PAYMENTS TO ESRD FACILITIES OR CY 2015 PROPOSED RULE

Facility type Number of 

facilities 

Number of 

treatments 

(in millions) 

Effect of 2015 

changes in 

outlier policy 

% 

Effect of 2015 

changes in 

wage indexes, 

CBSA designations and 

labor-related 

share 

% 

Effect of 2015 

changes in 

payment rate 

update 

% 

Effect of total 

2015 changes 

% 

A B C D E F 

All Facilities .............................................. 5,996 39.1 0.3 0.0 0.0 0.3 

Type: 

Freestanding ..................................... 5,520 36.6 0.3 0.0 0.0 0.3 

Hospital based .................................. 476 2.5 0.3 0.2 0.0 0.5 

Ownership Type: 

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TABLE 38—IMPACT OF PROPOSED CHANGES IN PAYMENTS TO ESRD FACILITIES OR CY 2015 PROPOSED RULE— 

Continued 

Facility type Number of 

facilities 

Number of 

treatments 

(in millions) 

Effect of 2015 

changes in 

outlier policy 

% 

Effect of 2015 

changes in 

wage indexes, 

CBSA designations and 

labor-related 

share 

% 

Effect of 2015 

changes in 

payment rate 

update 

% 

Effect of total 

2015 changes 

% 

A B C D E F 

Large dialysis organization ............... 4,150 27.5 0.3 ¥0.1 0.0 0.2 

Regional chain .................................. 871 5.9 0.2 0.2 0.0 0.4 

Independent ...................................... 582 3.6 0.2 0.2 0.0 0.4 

Hospital based 1 ................................ 393 2.1 0.3 0.1 0.0 0.4 

Geographic Location: 

Rural ................................................. 1,212 5.9 0.3 ¥0.8 0.0 ¥0.5 

Urban ................................................ 4,784 33.3 0.3 0.1 0.0 0.4 

Census Region: 

East North Central ............................ 979 5.8 0.3 ¥0.3 0.0 0.0 

East South Central ........................... 497 2.9 0.3 ¥1.2 0.0 ¥0.9 

Middle Atlantic .................................. 661 4.8 0.3 0.9 0.0 1.1 

Mountain ........................................... 352 1.9 0.2 ¥0.1 0.0 0.1 

New England .................................... 177 1.3 0.3 1.3 0.0 1.5 

Pacific 2 ............................................. 710 5.4 0.2 1.5 0.0 1.7 

Puerto Rico and Virgin Islands ......... 42 0.3 0.3 ¥3.9 0.0 ¥3.6 

South Atlantic .................................... 1,333 9.1 0.3 ¥0.6 0.0 ¥0.3 

West North Central ........................... 438 2.0 0.3 ¥0.2 0.0 0.0 

West South Central .......................... 807 5.6 0.3 ¥0.6 0.0 ¥0.3 

Facility Size: 

Less than 4,000 treatments3 ............ 1,086 2.7 0.3 ¥0.3 0.0 0.0 

4,000 to 9,999 treatments ................ 2,226 10.5 0.3 ¥0.3 0.0 0.0 

10,000 or more treatments ............... 2,523 25.7 0.3 0.1 0.0 0.4 

Unknown ........................................... 161 0.3 0.3 ¥0.1 0.0 0.2 

Percentage of Pediatric Patients: 

Less than 2% .................................... 5,885 38.7 0.3 0.0 0.0 0.3 

Between 2 and 19% ......................... 48 0.4 0.3 0.0 0.0 0.2 

Between 20 and 49% ....................... 12 0.0 0.1 ¥0.4 0.0 ¥0.3 

More than 50% ................................. 51 0.0 0.0 0.2 0.0 0.3 

1 Includes hospital-based ESRD facilities not reported to have large dialysis organization or regional chain ownership. 

2 Includes ESRD facilities located in Guam, American Samoa, and the Northern Mariana Islands. 

3Of the 1,086 ESRD facilities with less than 4,000 treatments, approximately 422 would be expected to qualify for the low-volume adjustment 

in 2015. This estimate is based on actual claims for 2013 plus the number of hospital-based facilities that may newly qualify with a change in 

policy. The low-volume adjustment is mandated by Congress, and is not applied to pediatric patients. The impact to these low-volume facilities is 

a 0.4 percent decrease in payments. 

Note: Totals do not necessarily equal the sum of rounded parts, as percentages are multiplicative, not additive. 

Column A of the impact table 

indicates the number of ESRD facilities 

for each impact category and column B 

indicates the number of dialysis 

treatments (in millions). The overall 

effect of the proposed changes to the 

outlier payment policy described in 

section II.B.4 of this proposed rule is 

shown in column C. For CY 2015, the 

impact on all ESRD facilities as a result 

of the changes to the outlier payment 

policy will be a 0.3 percent increase in 

estimated payments. The estimated 

impact of the changes to outlier 

payment policy ranges from a 0.0 

percent to a 0.3 percent increase. Nearly 

all ESRD facilities are anticipated to 

experience a positive effect in their 

estimated CY 2015 payments as a result 

of the proposed outlier policy changes. 

Column D shows the effect of the 

wage index, new CBSA delineations, 

and labor-related share on ESRD 

facilities and reflects the CY 2015 wage 

index values for the ESRD PPS 

payments. Facilities located in the 

census region of Puerto Rico and the 

Virgin Islands would receive a 3.9 

percent decrease in estimated payments 

in CY 2015. Since most of the facilities 

in this category are located in Puerto 

Rico, the decrease is primarily due to 

the change in the labor-related share. 

The other categories of types of facilities 

in the impact table show changes in 

estimated payments ranging from a 3.9 

percent decrease to a 1.5 percent 

increase due to the update of the wage 

indexes, CBSA delineations and laborrelated share. 

Column E shows the effect of the 

ESRD PPS payment rate update of 0.0 

percent as required by section 

1881(b)(14)(F) and (I) as amended by 

section 217 of PAMA. 

Column F reflects the overall impact 

(that is, the effects of the proposed 

outlier policy changes, the proposed 

wage index, the proposed CBSA 

delineations, the proposed labor-related 

share, and the effect of the payment rate 

update. We expect that overall ESRD 

facilities will experience a 0.3 percent 

increase in estimated payments in 2015. 

ESRD facilities in Puerto Rico and the 

Virgin Islands are expected to receive a 

3.6 percent decrease in their estimated 

payments in CY 2015. This larger 

decrease is primarily due to the negative 

impact of the change in the labor-related 

share. The other categories of types of 

facilities in the impact table show 

impacts ranging from a decrease of 0.9 

percent to increase of 1.7 percent in 

their 2015 estimated payments. 

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b. Effects on Other Providers 

Under the ESRD PPS, ESRD facilities 

are paid directly for the renal dialysis 

bundle and other provider types such as 

laboratories, DME suppliers, and 

pharmacies, may no longer bill 

Medicare directly for renal dialysis 

services. Rather, effective January 1, 

2011, such other providers can only 

furnish renal dialysis services under 

arrangements with ESRD facilities and 

must seek payment from ESRD facilities 

rather than Medicare. Under the ESRD 

PPS, Medicare pays ESRD facilities one 

payment for renal dialysis services, 

which may have been separately paid to 

suppliers by Medicare prior to the 

implementation of the ESRD PPS. 

Therefore, in CY 2015, we estimate that 

the proposed ESRD PPS will have zero 

impact on these other providers. 

c. Effects on the Medicare Program 

We estimate that Medicare spending 

(total Medicare program payments) for 

ESRD facilities in CY 2015 will be 

approximately $9.1 billion. This 

estimate takes into account a projected 

increase in fee-for-service Medicare 

dialysis beneficiary enrollment of 3.2 

percent in CY 2015. 

d. Effects on Medicare Beneficiaries 

Under the ESRD PPS, beneficiaries are 

responsible for paying 20 percent of the 

ESRD PPS payment amount. As a result 

of the projected 0.3 percent overall 

increase in the proposed ESRD PPS 

payment amounts in CY 2015, we 

estimate that there will be an increase 

in beneficiary co-insurance payments of 

0.3 percent in CY 2015, which translates 

to approximately $10 million. 

e. Alternatives Considered 

For this proposed rule, we proposed 

to implement a 50/50 blended wage 

index for CY 2015 that would apply to 

all ESRD facilities. Specifically, the 

proposal would transition all ESRD 

facilities experiencing an impact, or not, 

due to the implementation of the new 

CBSA delineations. We considered 

proposing to implement the new CBSA 

delineations without a transition; 

however we decided to mitigate the 

impact this change would have on ESRD 

facilities that may experience a decrease 

in payments due to the change. 

In addition, for CY 2015 we proposed 

to implement a revised 50.673 percent 

labor-related share using a 2-year 

transition. This proposal would 

transition all ESRD facilities from the 

current labor-related share of 41.737 

percent to the revised labor-related 

share of 50.673 percent. We considered 

proposing to implement the laborrelated share without a transition; 

however we decided to mitigate the 

impact this change would have on ESRD 

facilities that may experience a decrease 

in payments due to the change. 

2. End-Stage Renal Disease Quality 

Incentive Program 

a. Effects of the PY 2017 ESRD QIP 

The ESRD QIP provisions are 

intended to prevent possible reductions 

in the quality of ESRD dialysis facility 

services provided to beneficiaries as a 

result of payment changes under the 

ESRD PPS. The methodology that we are 

proposing to use to determine a 

facility’s TPS for PY 2017 is described 

in section III.F.5 of this proposed rule. 

Any reductions in ESRD PPS payments 

as a result of a facility’s performance 

under the PY 2017 ESRD QIP would 

affect the facility’s reimbursement rates 

in CY 2017. 

We estimate that, of the total number 

of dialysis facilities (including those not 

receiving a TPS), approximately 20 

percent or 1,227 of the facilities would 

likely receive a payment reduction in 

PY 2017. Facilities that do not receive 

a TPS are not eligible for a payment 

reduction. 

In conducting our impact assessment, 

we have assumed that there will be an 

initial count of 5,996 dialysis facilities 

paid under the ESRD PPS. Table 39 

shows the overall estimated distribution 

of payment reductions resulting from 

the PY 2017 ESRD QIP. 

TABLE 39—ESTIMATED DISTRIBUTION OF PY 2017 ESRD QIP PAYMENT REDUCTIONS

Payment reduction (percent) Number of 

facilities 

Percent of 

facilities 

0.0 ................................................................................................................................................................ 4,484 78.5 

0.5 ................................................................................................................................................................ 887 15.5 

1.0 ................................................................................................................................................................ 264 4.6 

1.5 ................................................................................................................................................................ 58 1.0 

2.0 ................................................................................................................................................................ 18 0.3 

Note: This table excludes 285 facilities that we estimate will not receive a payment reduction because they will not report enough data to receive a Total Performance Score. 

To estimate whether or not a facility 

would receive a payment reduction in 

PY 2017, we scored each facility on 

achievement and improvement on 

several measures we have previously 

finalized and for which there were 

available data from CROWNWeb and 

Medicare claims. Measures used for the 

simulation are shown in Table 40. 

TABLE 40—DATA USED TO ESTIMATE PY 2017 ESRD QIP PAYMENT REDUCTIONS

Measure 

Period of time used to 

calculate achievement 

thresholds, performance 

standards, benchmarks, and 

improvement thresholds 

Performance period 

Vascular Access Type: 

% Fistula ..................................................................................................................... Jan 2012—Dec 2012 .............. Jan 2013—Dec 2013. 

% Catheter .................................................................................................................. Jan 2012—Dec 2012 .............. Jan 2013—Dec 2013. 

Kt/V: 

Adult HD ...................................................................................................................... Jan 2012—Dec 2012 .............. Jan 2013—Dec 2013. 

Adult PD ...................................................................................................................... Jan 2012—Dec 2012 .............. Jan 2013—Dec 2013. 

Pediatric HD ................................................................................................................ Jan 2012—Dec 2012 .............. Jan 2013—Dec 2013. 

Hypercalcemia .................................................................................................................... May 2012—Dec 2012 ............. Jan 2013—Dec 2013. 

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TABLE 40—DATA USED TO ESTIMATE PY 2017 ESRD QIP PAYMENT REDUCTIONS—Continued 

Measure 

Period of time used to 

calculate achievement 

thresholds, performance 

standards, benchmarks, and 

improvement thresholds 

Performance period 

SRR .................................................................................................................................... Jan 2011—Dec 2011 .............. Jan 2012—Dec 2012. 

Clinical measure topic areas with less 

than 11 cases for a facility were not 

included in that facility’s Total 

Performance Score. Each facility’s Total 

Performance Score was compared to the 

estimated minimum Total Performance 

Score and the payment reduction table 

found in section III.F.8 of this proposed 

rule. Facility reporting measure scores 

were estimated using available data 

from CY 2013. Facilities were required 

to have a score on at least one clinical 

and one reporting measure in order to 

receive a Total Performance Score. 

To estimate the total payment 

reductions in PY 2017 for each facility 

resulting from this proposed rule, we 

multiplied the total Medicare payments 

to the facility during the one year period 

between January 2013 and December 

2013 by the facility’s estimated payment 

reduction percentage expected under 

the ESRD QIP, yielding a total payment 

reduction amount for each facility: 

(Total ESRD payment in January 2013 

through December 2013 times the 

estimated payment reduction 

percentage). For PY 2017, the total 

payment reduction for the 1,227 

facilities estimated to receive a 

reduction is approximately $11.9 

million ($11,873,127). Further, we 

estimate that the total costs associated 

with the collection of information 

requirements for PY 2017 described in 

section VIII.1.a of this proposed rule 

would be approximately $27 thousand 

for all ESRD facilities. As a result, we 

estimate that ESRD facilities will 

experience an aggregate impact of 

approximately $11.9 million ($27,232 + 

$11,873,127 = $11,900,359) in PY 2017, 

as a result of the PY 2017 ESRD QIP. 

Table 41 below shows the estimated 

impact of the finalized ESRD QIP 

payment reductions to all ESRD 

facilities for PY 2017. The table 

estimates the distribution of ESRD 

facilities by facility size (both among 

facilities considered to be small entities 

and by number of treatments per 

facility), geography (both urban/rural 

and by region), and by facility type 

(hospital based/freestanding facilities). 

Given that the time periods used for 

these calculations will differ from those 

we are proposing to use for the PY 2017 

ESRD QIP, the actual impact of the PY 

2017 ESRD QIP may vary significantly 

from the values provided here. 

TABLE 41—IMPACT OF PROPOSED QIP PAYMENT REDUCTIONS TO ESRD FACILITIES IN PY 2017 

Number of 

facilities 

Number of 

treatments 

2013 (in 

millions) 

Number of 

facilities 

with QIP 

score 

Number of 

facilities 

expected to 

receive a 

payment 

reduction 

Payment 

reduction 

(percent 

change in 

total ESRD 

payments) 

All Facilities ...................................................... 5,996 39.1 5,711 1,227 ¥0.14 

Facility Type: 

Freestanding ............................................. 5,520 36.6 5,289 1,093 ¥0.13 

Hospital-based .......................................... 476 2.5 422 134 ¥0.24 

Ownership Type: 

Large Dialysis ........................................... 4,150 27.5 3,995 786 ¥0.12 

Regional Chain ......................................... 871 5.9 836 169 ¥0.14 

Independent .............................................. 582 3.6 534 157 ¥0.22 

Hospital-based (non-chain) ....................... 393 2.1 346 115 ¥0.25 

Facility Size: 

Large Entities ............................................ 5,021 33.5 4,831 955 ¥0.12 

Small Entities 1 .......................................... 975 5.7 880 272 ¥0.23 

Rural Status: 

1) Yes ....................................................... 1,212 5.9 1,167 187 ¥0.10 

2) No ......................................................... 4,784 33.3 4,544 1,040 ¥0.15 

Census Region: 

Northeast .................................................. 792 5.8 770 160 ¥0.14 

Midwest ..................................................... 1,341 7.7 1,276 314 ¥0.16 

South ......................................................... 2,527 17.5 2,460 504 ¥0.12 

West .......................................................... 1,015 7.1 966 159 ¥0.10 

US Territories 2 ......................................... 321 1.0 239 90 ¥0.33 

Census Division: 

East North Central .................................... 979 5.8 909 249 ¥0.19 

East South Central ................................... 497 2.9 475 92 ¥0.12 

Middle Atlantic .......................................... 661 4.8 632 139 ¥0.16 

Mountain ................................................... 352 1.9 335 55 ¥0.10 

New England ............................................ 177 1.3 168 29 ¥0.13 

Pacific ....................................................... 710 5.4 671 119 ¥0.11 

South Atlantic ............................................ 1,333 9.1 1,279 314 ¥0.15 

West North Central ................................... 438 2.0 417 81 ¥0.12 

West South Central .................................. 807 5.6 783 125 ¥0.10 

US Territories 2 ......................................... 42 0.3 42 24 ¥0.42 

Facility Size (# of total treatments): 

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TABLE 41—IMPACT OF PROPOSED QIP PAYMENT REDUCTIONS TO ESRD FACILITIES IN PY 2017—Continued 

Number of 

facilities 

Number of 

treatments 

2013 (in 

millions) 

Number of 

facilities 

with QIP 

score 

Number of 

facilities 

expected to 

receive a 

payment 

reduction 

Payment 

reduction 

(percent 

change in 

total ESRD 

payments) 

Less than 4,000 treatments ...................... 1,086 2.7 928 211 ¥0.17 

4,000–9,999 treatments ............................ 2,226 10.5 2,174 423 ¥0.12 

Over 10,000 treatments ............................ 2,523 25.7 2,514 557 ¥0.14 

Unknown ................................................... 161 0.3 95 36 ¥0.38 

1Small Entities include hospital-based and satellite facilities and non-chain facilities based on DFC self-reported status. 

2 Includes Puerto Rico and Virgin Islands. 

3Based on claims and CROWNWeb data through December 2013. 

b. Effects of the PY 2018 ESRD QIP 

The methodology that we are 

proposing to use to determine a 

facility’s TPS for the PY 2018 ESRD QIP 

is described in sections III.F.6 and 

III.F.7 of this proposed rule. Any 

reductions in ESRD PPS payments as a 

result of a facility’s performance under 

the PY 2018 ESRD QIP would apply to 

ESRD PPS payments made to the facility 

in CY 2018. 

We estimate that, of the total number 

of dialysis facilities (including those not 

receiving a TPS), approximately 16 

percent or 919 of the facilities would 

likely receive a payment reduction in 

PY 2018. Facilities that do not receive 

a TPS are not eligible for a payment 

reduction. 

In conducting our impact assessment, 

we have assumed that there will be 

5,996 dialysis facilities paid through the 

PPS. Table 42 shows the overall 

estimated distribution of payment 

reductions resulting from the PY 2018 

ESRD QIP. 

TABLE 42—ESTIMATED DISTRIBUTION

OF PY 2018 ESRD QIP PAYMENT

REDUCTIONS

Payment 

reduction 

(percent) 

Number of 

facilities 

Percent of 

facilities 

(percent) 

0.0 ............. 4,989 84.4 

0.5 ............. 729 12.3 

1.0 ............. 132 2.2 

1.5 ............. 35 0.6 

2.0 ............. 23 0.4 

Note: This table excludes 88 facilities that 

we estimate will not receive a payment reduction because they will not report enough data 

to receive a Total Performance Score. 

To estimate whether or not a facility 

would receive a payment reduction in 

PY 2018, we scored each facility on 

achievement and improvement on 

several measures we have previously 

finalized and for which there were 

available data from CROWNWeb and 

Medicare claims. Measures used for the 

simulation are shown in Table 43. 

TABLE 43-DATA USED TO ESTIMATE PY 2018 ESRD QIP PAYMENT REDUCTIONS

Measure 

Period of time used to calculate achievement thresholds, 

performance standards, benchmarks, and improvement 

thresholds 

Performance period 

Vascular Access Type: 

% Fistula ........................................................................ Jan 2012–Dec 2012 ............................................................. Jan 2013–Dec 2013. 

% Catheter ..................................................................... Jan 2012–Dec 2012 ............................................................. Jan 2013–Dec 2013. 

Kt/V: 

Adult HD ........................................................................ Jan 2012–Dec 2012 ............................................................. Jan 2013–Dec 2013. 

Adult PD ......................................................................... Jan 2012–Dec 2012 ............................................................. Jan 2013–Dec 2013. 

Pediatric HD ................................................................... Jan 2012–Dec 2012 ............................................................. Jan 2013–Dec 2013. 

Pediatric PD ................................................................... Jan 2012–Dec 2012 ............................................................. Jan 2013–Dec 2013. 

Hypercalcemia ...................................................................... May 2012–Dec 2012 ............................................................ Jan 2013–Dec 2013. 

SRR ....................................................................................... Jan 2011–Dec 2011 ............................................................. Jan 2012–Dec 2012. 

STrR ...................................................................................... Jan 2011–Dec 2011 ............................................................. Jan 2012–Dec 2012 

Clinical measure topic areas with less 

than 11 cases for a facility were not 

included in that facility’s Total 

Performance Score. Each facility’s Total 

Performance Score was compared to an 

estimated minimum Total Performance 

Score and an estimated payment 

reduction table that were consistent 

with the proposals outlined in Section 

III.G.9 of this proposed rule. Facility 

reporting measure scores were estimated 

using available data from CY 2013. 

Facilities were required to have a score 

on at least one clinical and one 

reporting measure in order to receive a 

Total Performance Score. 

To estimate the total payment 

reductions in PY 2018 for each facility 

resulting from this proposed rule, we 

multiplied the total Medicare payments 

to the facility during the one year period 

between January 2013 and December 

2013 by the facility’s estimated payment 

reduction percentage expected under 

the ESRD QIP, yielding a total payment 

reduction amount for each facility: 

(Total ESRD payment in January 2013 

through December 2013 times the 

estimated payment reduction 

percentage). For PY 2018, the total 

payment reduction for all of the 919 

facilities expected to receive a reduction 

is approximately $7 million 

($6,958,521). Further, we estimate that 

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the total costs associated with the 

collection of information requirements 

for PY 2018 described in Section 

VIII.1.b of this proposed rule would be 

approximately $248 thousand for all 

ESRD facilities. As a result, we estimate 

that ESRD facilities will experience an 

aggregate impact of approximately $7.2 

million ($248,309 + $6,958,521 = 

$7,206,830) in PY 2018, as a result of 

the PY 2018 ESRD QIP. 

Table 44 below shows the estimated 

impact of the finalized ESRD QIP 

payment reductions to all ESRD 

facilities for PY 2018. The table details 

the distribution of ESRD facilities by 

facility size (both among facilities 

considered to be small entities and by 

number of treatments per facility), 

geography (both urban/rural and by 

region), and by facility type (hospital 

based/freestanding facilities). Given that 

the time periods used for these 

calculations will differ from those we 

propose to use for the PY 2018 ESRD 

QIP, the actual impact of the PY 2018 

ESRD QIP may vary significantly from 

the values provided here. 

TABLE 44—IMPACT OF PROPOSED QIP PAYMENT REDUCTIONS TO ESRD FACILITIES FOR PY 2018 

Number of 

facilities 

Number of 

treatments 

2013 

(in millions) 

Number of 

facilities 

with QIP 

score 

Number of 

facilities 

expected to 

receive a 

payment 

reduction 

Payment 

reduction 

(percent change 

in total ESRD 

payments) 

All Facilities ...................................................... 5,996 39.1 5,908 919 ¥0.10 

Facility Type: 

Freestanding ............................................. 5,520 36.6 5,455 818 ¥0.09 

Hospital-based .......................................... 476 2.5 453 101 ¥0.17 

Ownership Type: 

Large Dialysis ........................................... 4,150 27.5 4,115 580 ¥0.08 

Regional Chain ......................................... 871 5.9 858 127 ¥0.10 

Independent .............................................. 582 3.6 561 123 ¥0.15 

Hospital-based (non-chain): 393 2.1 374 89 ¥0.19 

Facility Size:.

Large Entities ............................................ 5,021 33.5 4,973 707 ¥0.08 

Small Entities 1 .......................................... 975 5.7 935 212 ¥0.16 

Rural Status: 

(1) Yes ...................................................... 1,212 5.9 1,190 139 ¥0.07 

(2) No ........................................................ 4,784 33.3 4,718 780 ¥0.10 

Census Region: 

Northeast .................................................. 792 5.8 784 111 ¥0.08 

Midwest ..................................................... 1,341 7.7 1,318 226 ¥0.10 

South ......................................................... 2,527 17.5 2,517 337 ¥0.07 

West .......................................................... 1,015 7.1 1,008 109 ¥0.06 

US Territories 2 ......................................... 321 1.0 281 136 ¥0.43 

Census Division: 

East North Central .................................... 979 5.8 952 202 ¥0.13 

East South Central ................................... 497 2.9 493 67 ¥0.09 

Middle Atlantic .......................................... 661 4.8 650 106 ¥0.10 

Mountain ................................................... 352 1.9 349 43 ¥0.08 

New England ............................................ 177 1.3 172 21 ¥0.09 

Pacific ....................................................... 710 5.4 703 90 ¥0.08 

South Atlantic ............................................ 1,333 9.1 1,315 232 ¥0.10 

West North Central ................................... 438 2.0 426 53 ¥0.07 

West South Central .................................. 807 5.6 806 90 ¥0.07 

US Territories 2 ......................................... 42 0.3 42 15 ¥0.25 

Facility Size (# of total treatments): 

Less than 4,000 treatments ...................... 1,086 2.7 1,032 215 ¥0.16 

4,000–9,999 treatments ............................ 2,226 10.5 2,225 277 ¥0.07 

Over 10,000 treatments ............................ 2,523 25.7 2,523 352 ¥0.07 

Unknown ................................................... 161 0.3 128 75 ¥0.59 

1Small Entities include hospital-based and satellite facilities and non-chain facilities based on DFC self-reported status. 

2 Includes Puerto Rico and Virgin Islands. 

3Based on claims and CROWNWeb data through December 2013. 

3. DMEPOS Provisions 

a. Effects of the Proposed Methodology 

for Adjusting DMEPOS Payment 

Amounts Using Information From 

Competitive Bidding Programs 

We estimate that the proposed 

methodology for adjusting DMEPOS 

payment amounts using information 

from DMEPOS CBPs would save over $7 

billion over FY 2016 through 2020. The 

savings would be primarily achieved 

from price reductions for items. 

Therefore, most of the economic impact 

is expected from the reduced prices. We 

estimate that approximately half of the 

DMEPOS items and services furnished 

to Medicare beneficiaries are furnished 

to beneficiaries residing outside existing 

CBAs. (See Table 45.) 

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TABLE 45—IMPACT OF PRICING ITEMS IN NON-COMPETITIVE AREAS USING COMPETITIVE BIDDING PRICING

FY 

Impact on the federal 

government in dollars 

(to the nearer ten 

million) 

Impact on beneficiary 

cost sharing in dollars 

(to the nearer ten 

million) 

2016 ......................................................................................................................................... ¥880 ¥270 

2017 ......................................................................................................................................... ¥1,430 ¥470 

2018 ......................................................................................................................................... ¥1,520 ¥510 

2019 ......................................................................................................................................... ¥1,630 ¥540 

2020 ......................................................................................................................................... ¥1,750 ¥580 

Although these transfers create 

incentives that very likely cause 

changes in the way society uses its 

resources, we lack data with which to 

estimate the resulting social costs or 

benefits. 

b. Effects of the Proposed Special 

Payment Methodologies and Payment 

Rules for Durable Medical Equipment 

and Enteral Nutrition Furnished Under 

the Competitive Bidding Program 

We believe that the proposed special 

payment rules would not have a 

significant impact on beneficiaries and 

suppliers. Contract suppliers are 

responsible for furnishing items and 

services needed by the beneficiary, and 

the cost to suppliers for furnishing these 

items and services does not change 

based on whether or not the equipment 

and related items and services are paid 

for separately under a capped rental 

payment method. Because the supplier’s 

bids would reflect the cost of furnishing 

items in accordance with the new 

payment rules, we expect the overall 

savings would be generally the same as 

they are under the current payment 

rules. Furthermore, as indicated above, 

we are proposing that the alterative 

payment rules would be phased in 

under a limited number of areas first to 

determine impact on the program, 

beneficiaries, and suppliers. If 

supported by evaluation results, a 

decision to expand the proposed special 

payment rules to other areas would be 

addressed in future rulemaking. 

c. Effects of the Proposed Clarification 

of the Scope of the Medicare Hearing 

Aid Coverage Exclusion 

This proposed rule proposes to clarify 

the scope of the Medicare coverage 

exclusion for hearing aids and proposes 

to no longer cover BAHAs. However, if 

finalized, this proposed rule would have 

no significant fiscal impact on the 

Medicare program, because Medicare 

program expenditures for BAHAs 

during the period CY2005 through CY 

2013 have been insignificant. This 

proposed clarification would provide 

clear guidance about coverage of DME 

with regard to the statutory hearing aid 

exclusion. The proposed regulation, if 

finalized, would explicitly except 

cochlear implants and brain stem 

implants from the hearing aid exclusion, 

and therefore, Medicare coverage for 

these devices would continue. 

We estimate that the proposed 

clarification of the scope of the 

Medicare hearing coverage exclusion 

would save Medicare approximately $80 

million dollars over five years beginning 

in January 1, 2015 through September 

30, 2019. The savings would be 

primarily achieved from removing 

coverage of the BAHA device. (See 

Table 46.) 

TABLE 46—CLARIFICATION OF THE

STATUTORY MEDICARE HEARING AID

COVERAGE EXCLUSION

FY 

Impact to the Federal 

Government 

(rounded to the 

nearer $10 millions) 

2015 .......................... ¥10 

2016 .......................... ¥10 

2017 .......................... ¥20 

2018 .......................... ¥20 

2019 .......................... ¥20 

d. Effects of the Proposed Definition of 

Minimal Self-Adjustment of Orthotics 

Under Competitive Bidding 

The proposed rule would modify the 

definition of minimal self-adjustment to 

indicate that it means an adjustment 

that the beneficiary, caretaker for the 

beneficiary, or supplier of the device 

can perform and does not require the 

services of a certified orthotist (that is, 

an individual certified by either the 

American Board for Certification in 

Orthotics and Prosthetics, Inc., or the 

Board for Orthotist/Prosthetist 

Certification) or a physician as defined 

in section 1861(r) of the Act, a treating 

practitioner means a physician assistant, 

nurse practitioner, or clinical nurse 

specialist as defined in section 

1861(aa)(5) of the Act, an occupational 

therapist as defined in 42 CFR 484.4, or 

physical therapist as defined in 42 CFR 

484.4 in compliance with all applicable 

Federal and State licensure and 

regulatory requirements. We estimate 

that the proposed clarification of the 

definition of minimal self-adjustment 

would have no significant impact on 

program expenditures or access to 

orthotics. This proposed clarification 

would impact suppliers furnishing 

custom fitted orthotics that do not have 

the expertise necessary to make more 

than minimal adjustments to an orthotic 

that a beneficiary or caregiver could be 

trained to make. 

e. Effects of the Proposed Revision to 

Change of Ownership Rules To Allow 

Contract Suppliers To Sell Specific 

Lines of Business 

This rule would clarify the change of 

ownership rules so as to not interfere 

with the normal course of business for 

DME suppliers. This rule would 

establish an exception under the CHOW 

rules to allow transfer of part of a 

competitive bidding contract when a 

contract supplier sells a distinct line of 

business to a qualified successor entity 

r under certain specific circumstances. 

This clarification would impact 

businesses in a positive way by allowing 

them to conduct everyday transactions 

without interference from our rules and 

regulations. 

C. Accounting Statement 

As required by OMB Circular A–4 

(available at http://www.whitehouse.

gov/omb/circulars_a004_a-4), in Table 

47 below, we have prepared an 

accounting statement showing the 

classification of the transfers and costs 

associated with the various provisions 

of this proposed rule. 

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TABLE 47—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS AND COSTS/SAVINGS

Category Transfers 

ESRD PPS for CY 2015 

Annualized Monetized Transfers ................................................................................................ $ 30 million. 

From Whom to Whom ................................................................................................................ Federal government to ESRD providers. 

Increased Beneficiary Co-insurance Payments ......................................................................... $10 million. 

From Whom to Whom ................................................................................................................ Beneficiaries to ESRD providers. 

ESRD QIP for PY 2017 

Annualized Monetized Transfers ................................................................................................ ¥$11.9 million. 

From Whom to Whom ................................................................................................................ Federal government to ESRD providers. 

Category Costs 

Annualized Monetized ESRD Provider Costs ............................................................................ $27 thousand. 

ESRD QIP for PY 2018 

Annualized Monetized Transfers ................................................................................................ ¥$7 million. 

From Whom to Whom ................................................................................................................ Federal government to ESRD providers. 

Annualized Monetized ESRD Provider Costs ............................................................................ $248 thousand. 

Pricing Items in Non-competitive Areas Using Competitive Bidding Pricing 

Category Transfer 

Annualized monetized transfer on beneficiary 

cost sharing 

Estimates Year 

dollar 

Discount rate 

(percent) 

Period 

covered 

¥$464.5 million ............................................. 2014 7 2016–2020 

¥$469.9 million ............................................. 2014 3 2016–2020 

From Whom to Whom .................................... Beneficiaries to Medicare providers. 

Transfers 

Annualized monetized transfer payments Estimates Year 

dollar 

Discount rate 

(percent) 

Period 

covered 

¥$1,415.4 million .......................................... 2014 7 2016–2020 

¥$1,430.5 million .......................................... 2014 3 2016–2020 

From Whom to Whom .................................... Federal government to Medicare providers. 

Clarification of the Statutory Medicare Hearing Aid Coverage Exclusion 

Category Transfers 

Annualized monetized transfer payments Estimates Year 

dollar 

Discount rate 

(percent) 

Period 

covered 

¥$15.6 million ............................................... 2014 7 2015–2019 

¥$15.8 million ............................................... 2014 3 2015–2019 

From Whom to Whom .................................... Federal government to Medicare providers. 

XVI. Regulatory Flexibility Act 

Analysis 

The Regulatory Flexibility Act 

(September 19, 1980, Pub. L. 96–354) 

(RFA) requires agencies to analyze 

options for regulatory relief of small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. 

Approximately 16 percent of ESRD 

dialysis facilities are considered small 

entities according to the Small Business 

Administration’s (SBA) size standards, 

which classifies small businesses as 

those dialysis facilities having total 

revenues of less than $35.5 million in 

any 1 year. Individuals and States are 

not included in the definitions of a 

small entity. For more information on 

SBA’s size standards, see the Small 

Business Administration’s Web site at 

http://www.sba.gov/content/smallbusiness-size-standards (Kidney 

Dialysis Centers are listed as 621492 

with a size standard of $35.5 million). 

We do not believe ESRD facilities are 

operated by small government entities 

such as counties or towns with 

populations of 50,000 or less, and 

therefore, they are not enumerated or 

included in this estimated RFA analysis. 

Individuals and States are not included 

in the definition of a small entity. 

For purposes of the RFA, we estimate 

that approximately 16 percent of ESRD 

facilities are small entities as that term 

is used in the RFA (which includes 

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small businesses, nonprofit 

organizations, and small governmental 

jurisdictions). This amount is based on 

the number of ESRD facilities shown in 

the ownership category in Table 38. 

Using the definitions in this ownership 

category, we consider the 582 facilities 

that are independent and the 393 

facilities that are shown as hospitalbased to be small entities. The ESRD 

facilities that are owned and operated 

by LDOs and regional chains would 

have total revenues of more than $35.5 

million in any year when the total 

revenues for all locations are combined 

for each business (individual LDO or 

regional chain), and are not, therefore, 

included as small entities. 

For the ESRD PPS updates proposed 

in this rule, a hospital-based ESRD 

facility (as defined by ownership type) 

is estimated to receive a 0.4 percent 

increase in payments for CY 2015. An 

independent facility (as defined by 

ownership type) is also estimated to 

receive a 0.4 percent increase in 

payments for CY 2015. 

We estimate that of the 1,217 ESRD 

facilities expected to receive a payment 

reduction in the PY 2017 ESRD QIP, 275 

of those facilities would be ESRD small 

entity facilities. We present these 

findings in Table 39 (‘‘Estimated 

Distribution of PY 2017 ESRD QIP 

Payment Reductions’’) and Table 41 

(‘‘Impact of Proposed QIP Payment 

Reductions to ESRD Facilities for PY 

2017’’) above. We estimate that the 

payment reductions will average 

approximately $9,353 per facility across 

the 1,217 facilities receiving a payment 

reduction, and $8,698 for each small 

entity facility. Using our estimates of 

facility performance, we also estimated 

the impact of payment reductions on 

ESRD small entity facilities by 

comparing the total payment reductions 

for the 275 small entity facilities with 

the aggregate ESRD payments to all 

small facilities. We estimate that there 

are a total of 885 small facilities, and 

that the aggregate ESRD PPS payments 

to these facilities would decrease 0.23 

percent in PY 2017. 

We estimate that of the 1,320 ESRD 

facilities expected to receive a payment 

reduction in the PY 2018 ESRD QIP, 282 

are ESRD small entity facilities. We 

present these findings in Table 39 

(‘‘Estimated Distribution of PY 2018 

ESRD QIP Payment Reductions’’) and 

Table 41 (‘‘Impact of Proposed QIP 

Payment Reductions to ESRD Facilities 

for PY 2018’’) above. We estimate that 

the payment reductions will average 

approximately $7,119 per facility across 

the 895 facilities receiving a payment 

reduction, and $6,294 for each small 

entity facility. Using our estimates of 

facility performance, we also estimated 

the impact of payment reductions on 

ESRD small entity facilities by 

comparing the total estimated payment 

reductions for 209 small entity facilities 

with the aggregate ESRD payments to all 

small entity facilities. We estimate that 

there are a total of 975 small entity 

facilities, and that the aggregate ESRD 

PPS payments to these facilities would 

decrease 0.16 percent in PY 2018. 

We expect that the proposed 

methodology for adjusting DMEPOS 

payment amounts using information 

from DMEPOS CBPs would have a 

significant impact on a substantial 

number of small suppliers. Although 

suppliers furnishing items and services 

outside CBAs do not have to compete 

and be awarded contracts in order to 

continue furnishing these items and 

services, the payment amounts for these 

items and services would be reduced 

using the methodology established as a 

result of the proposed rule. The statute 

requires that the methodology for 

adjusting payment amounts take into 

consideration the costs of furnishing 

items and services in areas where the 

adjustments will occur and these 

considerations are discussed in the 

preamble (refer to section IV(A)(5) of the 

preamble). The proposed methodology 

for making payment adjustments would 

allow for adjustments based on bids in 

different geographic regions to reflect 

regional variation in costs of furnishing 

items and services and the national floor 

for adjustments in states with unique 

costs. We believe that suppliers would 

be able to continue furnishing items and 

services to beneficiaries in areas outside 

the CBAs after the reductions in the 

payment amounts are applied without a 

significant change in the rate at which 

they accept assignment of Medicare 

claims for these items and services. 

Because section 1834(a)(1)(F)(ii) of the 

Act mandates that payment amounts for 

DME subject to competitive bidding be 

adjusted in areas where CBPs are not 

implemented, the only alternative we 

can consider other than paying based on 

adjusted fee schedule amounts is to 

implement CBPs in all areas. However, 

this approach would have an even 

greater impact on small suppliers. 

We expect the proposed special 

payment rules for DME and enteral 

nutrition would not have a significant 

impact on small suppliers. We believe 

that these rules would benefit affected 

suppliers since payment for rental of 

DME and enteral nutrition infusion 

pumps would no longer be capped and 

suppliers would retain ownership to the 

equipment. 

We expect that the proposal to modify 

the definition of minimal selfadjustment of orthotics would not have 

a significant impact on small suppliers. 

According to the Medicare Pricing, Data 

Analysis and Coding (PDAC) Contractor 

from FY 2010 through FY 2013 there 

were approximately 6,000 DMEPOS 

suppliers with a provider transaction 

access number (PTAN) registered with 

the National Supplier Clearinghouse to 

supply orthotics. In addition, there are 

a limited number of applicable HCPCS 

codes (approximately 77) that require a 

skilled individual’s expertise. We 

believe that the majority of businesses 

providing orthotics already employ a 

‘‘skilled individual.’’ However, for those 

few businesses that do not already have 

a skilled individual providing custom 

fitted orthotics they could comply with 

the proposed changes to the definition 

and requirements by hiring a skilled 

individual. For example, according to 

the Bureau of Labor Statistics 

Occupational Employment Statistics 

May 2013 the median pay for a certified 

orthotist was $30.27 an hour. The 

impact will vary according to the 

caseload of custom fitted orthotics 

provided by an individual supplier. 

We expect that although the proposal 

which clarifies the scope of the 

Medicare statutory exclusion for hearing 

aids would withdraw the coverage for 

BAHAs, it would not have a significant 

impact on small suppliers since the 

volume of allowed services for bone 

anchored hearing aids covered by 

Medicare is very small (less than 2,000 

nationwide) and would not account for 

a large percentage of any individual 

supplier’s total revenue. 

We expect that the proposed revisions 

to CHOW rules to allow contract 

suppliers to sell specific lines of 

business provision would have a 

positive impact on suppliers and no 

significant negative impact on small 

suppliers. 

Therefore, the Secretary has 

determined that this proposed rule 

would have a significant economic 

impact on a substantial number of small 

entities. We solicit comment on the RFA 

analysis provided. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. Any such regulatory impact 

analysis must conform to the provisions 

of section 603 of the RFA. For purposes 

of section 1102(b) of the Act, we define 

a small rural hospital as a hospital that 

is located outside of a metropolitan 

statistical area and has fewer than 100 

beds. We do not believe this proposed 

rule will have a significant impact on 

operations of a substantial number of 

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small rural hospitals because most 

dialysis facilities are freestanding. 

While there are 145 rural hospital-based 

dialysis facilities, we do not know how 

many of them are based at hospitals 

with fewer than 100 beds. However, 

overall, the 145 rural hospital-based 

dialysis facilities will experience an 

estimated 0.1 percent decrease in 

payments. As a result, this proposed 

rule is not estimated to have a 

significant impact on small rural 

hospitals. Therefore, the Secretary has 

determined that this proposed rule will 

not have a significant impact on the 

operations of a substantial number of 

small rural hospitals. 

XVII. Unfunded Mandates Reform Act 

Analysis 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

(Pub. L. 104–4) also requires that 

agencies assess anticipated costs and 

benefits before issuing any rule whose 

mandates require spending in any 1 year 

$100 million in 1995 dollars, updated 

annually for inflation. In 2013, that 

threshold is approximately $141 

million. This proposed rule does not 

include any mandates that would 

impose spending costs on State, local, or 

Tribal governments in the aggregate, or 

by the private sector, of $141 million. 

XVIII. Federalism Analysis 

Executive Order 13132 on Federalism 

(August 4, 1999) establishes certain 

requirements that an agency must meet 

when it promulgates a proposed rule 

(and subsequent final rule) that imposes 

substantial direct requirement costs on 

State and local governments, preempts 

State law, or otherwise has Federalism 

implications. We have reviewed this 

proposed rule under the threshold 

criteria of Executive Order 13132, 

Federalism, and have determined that it 

will not have substantial direct effects 

on the rights, roles, and responsibilities 

of States, local or Tribal governments. 

XXI. Congressional Review Act 

This proposed rule is subject to the 

Congressional Review Act provisions of 

the Small Business Regulatory 

Enforcement Fairness Act of 1996 (5 

U.S.C. 801 et seq.) and has been 

transmitted to the Congress and the 

Comptroller General for review. 

In accordance with the provisions of 

Executive Order 12866, this proposed 

rule was reviewed by the Office of 

Management and Budget. 

XX. Files Available to the Public via the 

Internet 

The Addenda for the annual ESRD 

PPS proposed and final rulemakings 

will no longer appear in the Federal 

Register. Instead, the Addenda will be 

available only through the Internet and 

is posted on the CMS Web site at 

http://www.cms.gov/ESRDPayment/

PAY/list.asp. In addition to the 

Addenda, limited data set (LDS) files are 

available for purchase at http://

www.cms.gov/Research-Statistics-Dataand-Systems/Files-for-Order/

LimitedDataSets/

EndStageRenalDiseaseSystemFile.html. 

Readers who experience any problems 

accessing the Addenda or LDS files 

should contact Stephanie Frilling at 

(410) 786–4507. 

List of Subjects 

42 CFR Part 405 

Administrative practice and 

procedure, Health facilities, Health 

professions, Kidney diseases, Medical 

devices, Medicare, Reporting and 

recordkeeping requirements, Rural 

areas, and X-rays 

42 CFR Part 411 

Kidney diseases, Medicare, Physician 

Referral, and Reporting and 

recordkeeping requirements 

42 CFR Part 413 

Health facilities, Kidney diseases, 

Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 414 

Administrative practice and 

procedure, Health facilities, Health 

professions, Kidney diseases, Medicare, 

and Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV as follows: 

PART 405—FEDERAL HEALTH 

INSURANCE FOR THE AGED AND 

DISABLED 

■ 1. The authority for part 405 

continues to read as follows: 

Authority: Secs. 205(a), 1102, 1861, 

1862(a), 1869, 1871, 1874, 1881, and 1886(k) 

of the Social Security Act (42 U.S.C. 405(a), 

1302, 1395x, 1395y(a), 1395ff, 1395hh, 

1395kk, 1395rr and 1395ww(k)), and sec. 353 

of the Public Health Service Act (42 U.S.C. 

263a). 

§ 405.2102 [Amended] 

■ 2. Section 405.2102 is amended by 

removing all the definitions, with the 

exception of two definitions, ‘‘Network, 

ESRD’’, and ‘‘Network organization’’. 

PART 411—EXCLUSIONS FROM 

MEDICARE AND LIMITATIONS ON 

MEDICARE PAYMENT 

■ 3. The authority citation for part 411 

continues to read as follows: 

Authority: Secs. 1102, 1860D–1 through 

1860D–42, 1871, and 1877 of the Social 

Security Act (42 U.S.C. 1302, 1395w–101 

through 1395w–152, 1395hh, and 1395nn). 

■ 4. Section 411.15 is amended by 

revising paragraph (d) to read as 

follows: 

§ 411.15 Particular services excluded from 

coverage. 

* * * * * 

(d) Hearing aids or examinations for 

the purpose of prescribing, fitting, or 

changing hearing aids. 

(1) Scope. The scope of the hearing 

aid exclusion encompasses all types of 

air conduction and bone conduction 

hearing aids (external, internal, or 

implanted). 

(2) Devices not subject to the hearing 

aid exclusion. Cochlear implants and 

auditory brainstem implants that 

replace the function of cochlear 

structures or auditory nerve and provide 

electrical energy to auditory nerve fibers 

and other neural tissue via implanted 

electrode arrays. These devices produce 

the perception of sound and do not meet 

the definition of hearing aid. 

* * * * * 

PART 413—PRINCIPLES OF 

REASONABLE COST 

REIMBURSEMENT; PAYMENT FOR 

END–STAGE RENAL DISEASE 

SERVICES; OPTIONAL 

PROSPECTIVELY DETERMINED 

PAYMENT RATES FOR SKILLED 

NURSING FACILITIES 

■ 5. The authority citation for part 413 

is revised to read as follows: 

Authority: Secs. 1102, 1812(d), 1814(b), 

1815, 1833(a), (i), and (n), 1861(v), 1871, 

1881, 1883 and 1886 of the Social Security 

Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 

1395g, 1395l(a), (i), and (n), 1395x(v), 

1395hh, 1395rr, 1395tt, and 1395ww); and 

sec. 124 of Pub. L. 106–113 (113 Stat. 1501A– 

332), sec. 3201 of Pub. L. 112–96 (126 Stat. 

156), sec. 632 of Pub. L. 112–240 (126 Stat. 

2354), and sec. 217 of Pub. L. 113–93. 

§ 413.174 [Amended] 

■ 6. In § 413.174, paragraph (f)(6) is 

amended by removing ‘‘January 1, 

2016’’ and by adding in its place 

‘‘January 1, 2024.’’ 

■ 7. Section 413.232 is amended 

revising paragraphs (b) introductory text 

and (f) and adding paragraph (h) to read 

as follows: 

§ 413.232 Low-volume adjustment. 

* * * * * 

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(b) Definition of low-volume facility. 

A low-volume facility is an ESRD 

facility that, as determined based on the 

documentation submitted pursuant to 

paragraph (h) of this section: 

* * * * * 

(f) Except as provided in paragraph (g) 

of this section, to receive the lowvolume adjustment an ESRD facility 

must provide an attestation statement, 

by November 1st of each year preceding 

the payment year, to its Medicare 

Administrative Contractor that the 

facility meets all the criteria established 

in this section. For calendar year 2012, 

the attestation must be provided by 

January 3, 2012. For calendar year 2015, 

the attestation must be provided by 

December 31, 2014. 

* * * * * 

(h) To receive the low-volume 

adjustment, an ESRD facility must 

include in their attestation provided 

pursuant to paragraph (f) of this section 

a statement that the ESRD facility meets 

the definition of a low-volume facility 

in paragraph (b) of this section. To 

determine eligibility for the low-volume 

adjustment, the Medicare 

Administrative Contractor (MAC) on 

behalf of CMS relies upon as filed or 

final settled 12-consecutive month cost 

reports for the 3 cost reporting years 

preceding the payment year to verify the 

number of treatments, except that: 

(1) In the case of a hospital-based 

ESRD facility as defined in § 413.174(c), 

the MAC relies upon the attestation 

submitted pursuant to paragraph (f) of 

this section and may consider other 

supporting data in addition to the total 

treatments reported in each of the 12- 

consecutive month cost reports for the 

3 cost reporting years preceding the 

payment year to verify the number of 

treatments that were furnished by the 

individual hospital-based ESRD facility 

seeking the adjustment; and 

(2) In the case of an ESRD facility that 

has undergone a change of ownership 

that does not result in a new Provider 

Transaction Access Number for the 

ESRD facility, the MAC relies upon the 

attestation and when the change of 

ownership results in two non-standard 

cost reporting periods (less than or 

greater than 12-consecutive months), 

does one or both of the following for the 

3 cost reporting years preceding the 

payment year to verify the number of 

treatments: 

(i) Combines the two non-standard 

cost reporting periods of less than 12 

months to equal a full 12-consecutive 

month period; and/or 

(ii) Combines the two non-standard 

cost reporting periods that in 

combination may exceed 12-consecutive 

months and prorates the data to equal a 

full 12-consecutive month period. 

§ 413.237 [Amended] 

■ 8. In § 413.237, paragraph (a)(1)(iv) is 

amended by removing ‘‘January 1, 

2016’’ and adding in its place ‘‘January 

1, 2024.’’ 

PART 414—PAYMENT FOR PART B 

MEDICAL AND OTHER HEALTH 

SERVICES 

■ 9. The authority citation for part 414 

continues to read as follows: 

Authority: Secs. 1102, 1871, and 1881(b)(l) 

of the Social Security Act (42 U.S.C. 1302, 

1395hh, and 1395rr(b)(l)). 

■ 10. Section 414.105 is added to read 

as follows: 

§ 414.105 Application of Competitive 

Bidding Information and Limitation of 

Inherent Reasonableness Authority 

(a) For enteral nutrients, equipment 

and supplies furnished on or after 

January 1, 2011, the fee schedule 

amounts may be adjusted based on 

information on the payment determined 

as part of implementation of the 

programs under subpart F using the 

methodologies set forth at § 414.210(g). 

(b) In the case of such adjustments, 

the rules at § 405.502(g) and (h) of this 

chapter shall not be applied. 

Subpart D—Payment for Durable 

Medical Equipment and Prosthetic and 

Orthotic Devices 

■ 11. The heading for subpart D is 

revised to read as set forth above. 

■ 12. Section 414.202 is amended by: 

■ A. Adding the definition of ‘‘Frontier 

state’’. 

■ B. Revising the definition of ‘‘Region’’. 

■ C. Adding the definition of ‘‘Rural 

State’’. 

The additions and revision read as 

follows: 

§ 414.202 Definitions. 

* * * * * 

Frontier state means a state where at 

least 50 percent of counties in the state 

have a population density of 6 people or 

less per square mile. 

* * * * * 

Region means, for the purpose of 

implementing § 414.210(g), geographic 

areas defined by the Bureau of 

Economic Analysis in the United States 

Department of Commerce for economic 

analysis purposes, and, for the purpose 

of implementing § 414.228, those 

contractor service areas administered by 

CMS regional offices. 

Rural State means a state where more 

than 50 percent of the population is 

rural as determined through census 

data. 

■ 13. Section 414.210 is amended by 

revising paragraph (a) and adding 

paragraph (g) to read as follows: 

§ 414.210 General payment rules. 

(a) General rule. For items furnished 

on or after January 1, 1989, except as 

provided in paragraphs (c), (d), and (g) 

of this section, Medicare pays for 

durable medical equipment, prosthetics 

and orthotics, including a separate 

payment for maintenance and servicing 

of the items as described in paragraph 

(e) of this section, on the basis of 80 

percent of the lesser of— 

(1) The actual charge for the item; 

(2) The fee schedule amount for the 

item, as determined in accordance with 

the provisions of §§ 414.220 through 

414.232 

* * * * * 

(g) Application of Competitive 

Bidding Information and Limitation of 

Inherent Reasonableness Authority. For 

items furnished on or after January 1, 

2011, the fee schedule amounts may be 

adjusted based on information on the 

payment determined as part of 

implementation of the programs under 

subpart F, of this part, excluding 

information on the payment determined 

in accordance with the special payment 

rules at § 414.409. In the case of such 

adjustments, the rules at § 405.502(g) 

and (h) of this chapter shall not be 

applied 

(1) Payment adjustments for areas 

within the contiguous United States 

using information from competitive 

bidding programs. For an item or service 

subject to the programs under subpart F, 

that payment amount for such item or 

services for areas within the contiguous 

United States shall be established as 

follows: 

(i) CMS determines a regional price 

for each state in the contiguous United 

States and the District of Columbia 

equal to the un-weighted average of the 

single payment amount for an item or 

service established in accordance with 

§ 414.416 for competitive bidding areas 

that are fully or partially located in the 

same region where the state or District 

of Columbia is located. 

(ii) CMS determines a national 

average price equal to the average of the 

regional prices determined under 

paragraph (g)(1)(i) of this section. 

(iii) A regional price determined 

under paragraph (g)(1)(i) of this section 

cannot be greater than 110 percent of 

the national average price determined 

under paragraph (g)(1)(ii) of this section 

nor less than 90 percent of the national 

average price determined under 

paragraph (g)(1)(ii) of this section. In 

addition, a regional price determined 

under paragraph (g)(1)(i) of this section 

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for a state designated as a rural or 

frontier state cannot be less than 110 

percent of the national average price 

determined under paragraph (g)(1)(ii) of 

this section. 

(2) Payment adjustments for areas 

outside the contiguous United States 

using information from competitive 

bidding programs. For an item or service 

subject to the programs under subpart F, 

the fee schedule amounts for areas 

outside the contiguous United States are 

adjusted based on the greater of— 

(i) The average of the single payment 

amounts for the item or service for CBAs 

outside the contiguous United States. 

(ii) 110 percent of the national average 

price for the item or service determined 

under paragraph (g)(1)(ii) of this section. 

(3) Payment adjustments for items 

and services included in no more than 

ten competitive bidding programs. 

Notwithstanding paragraph (g)(1) of this 

section, for an item or service that is 

included in ten or fewer competitive 

bidding programs as defined at 

§ 414.402, the fee schedule amounts 

applied for all areas within and outside 

the contiguous United States are 

adjusted based on 110 percent of the unweighted average of the single payment 

amounts for the item or service. 

(4) Payment adjustments using data 

on items and services included in 

competitive bidding programs no longer 

in effect. In the case where adjustments 

to fee schedule amounts are made using 

any of the methodologies described, if 

the adjustments are based solely on 

single payment amounts from 

competitive bidding programs that are 

no longer in effect, the adjusted fee 

schedule amounts shall be increased on 

an annual basis using the percentage 

change in the Consumer Price Index for 

all Urban Consumers (CPI–U) from the 

mid-point of the last year the single 

payment amounts were in effect to the 

month ending 6 months prior to the date 

the initial payment adjustments would 

go into effect. Following the initial 

adjustment to the fee schedule amounts, 

the adjusted fee schedule amounts 

would continue to be updated every 12 

months using the percentage change in 

the CPI–U for the 12-month period 

ending 6 months prior to the date the 

updated payment adjustments would go 

into effect. 

(5) Adjusted payment amounts for 

accessories used with different types of 

base equipment. In situations where a 

HCPCS code that describes an item used 

with different types of base equipment 

is included in more than one product 

category in a CBA under competitive 

bidding, a weighted average of the 

single payment amounts for the code is 

computed for each CBA, weighted based 

on national allowed services for the 

code when used with different 

equipment. The weighted average single 

payment amount per code per CBA 

would then be used in applying the 

payment adjustment methodologies 

proposed in this section. 

(6) Payment adjustments consistent 

with items and services furnished. In the 

case where payment amounts are 

established under subpart F of this part 

for an item or service that are greater 

than the payment amounts established 

under subpart F of this part for a higher 

level item or service (i.e., one with 

additional features or functionality), the 

payment amounts for the lower level of 

service are adjusted so that they are no 

greater than the payment amounts for 

the higher level of service before making 

payment adjustments using any of the 

methodologies above. 

(7) Payment adjustments for mail 

order items furnished in the Northern 

Mariana Islands. The fee schedule 

amounts for mail order items furnished 

to beneficiaries in the Northern Mariana 

Islands are adjusted so that they are 

equal to 100 percent of the single 

payment amounts established under a 

national mail order competitive bidding 

program. 

(8) Updating adjusted fee schedule 

amounts. The adjusted fee schedule 

amounts are revised each time a single 

payment amount for an item or service 

is updated following one or more new 

competitions and as other items are 

added to programs established under 

subpart F of this part. 

■ 14. Section 414.402 is amended by 

revising the definition of ‘‘Minimal selfadjustment’’ to read as follows: 

§ 414.402 Definitions. 

* * * * * 

Minimal self-adjustment means an 

adjustment the beneficiary, caretaker for 

the beneficiary, or supplier of the device 

can perform and does not require the 

services of a certified orthotist (that is, 

an individual certified by either the 

American Board for Certification in 

Orthotics and Prosthetics, Inc., or the 

Board for Orthotist/Prosthetist 

Certification), or a physician as defined 

in 1861(r) of the Act, a treating 

practitioner which means a physician 

assistant, nurse practitioner, or clinical 

nurse specialist as defined in section 

1861(aa)(5) of the Act, an occupational 

therapist as defined in § 484.4 of this 

chapter, or physical therapist as defined 

in § 484.4 of this chapter who are in 

compliance with all applicable Federal 

and State licensure and regulatory 

requirements. 

* * * * * 

■ 15. Section 414.408 is amended by 

adding paragraph (l) to read as follows: 

§ 414.408 Payment rules. 

* * * * * 

(l) Exceptions for certain items and 

services paid in accordance with special 

payment rules. The payment rules in 

paragraphs (f) thru (i), (j)(2), (j)(3), (j)(7), 

and (k) of this section do not apply to 

items and services paid in accordance 

with the special payment rules at 

§ 414.409. 

■ 16. Section 414.409 is added to read 

as follows: 

§ 414.409 Special payment rules. 

(a) Payment on a bundled, continuous 

rental basis. (1) In no more than 12 

CBAs, in conjunction with competitions 

that begin on or after January 1, 2015, 

payment is made on a bundled, 

continuous monthly rental basis for 

enteral nutrients, supplies and 

equipment, oxygen and oxygen 

equipment, standard manual 

wheelchairs, standard power 

wheelchairs, CPAP and respiratory 

assist devices, and hospital beds. The 

CBAs and competitions where these 

payment rules apply are announced in 

advance of each competition, with the 

payment rules in this section used in 

lieu of the payment rules at § 414.408(f) 

thru (i), (j)(2), (j)(3), (j)(7), and (k). The 

single payment amounts are established 

based on bids submitted and accepted 

for furnishing rented DME and enteral 

nutrition on a monthly basis for each 

month of medical need during the 

contract period monthly single payment 

amount would include payment for all 

nutrients, supplies and equipment. 

(2) Payment is made on a continuous 

monthly rental basis for DME. The 

single payment amount for the monthly 

rental of DME includes payment for the 

rented equipment, maintenance and 

servicing of the rented equipment, and 

replacement of supplies and accessories 

necessary for the effective use of the 

rented equipment. Separate payment for 

replacement of equipment, repair or 

maintenance and servicing of 

equipment, or for replacement of 

accessories and supplies necessary for 

the effective use of equipment is not 

allowed under any circumstances. 

(3) Payment is made on a monthly 

basis for enteral nutrition. The single 

payment amount includes payment for 

all nutrients, supplies and equipment. 

Separate payment for replacement of 

equipment, repair or maintenance and 

servicing of equipment, or for 

replacement of accessories and supplies 

necessary for the effective use of 

equipment is not allowed under any 

circumstances. 

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40314 Federal Register / Vol. 79, No. 133 / Friday, July 11, 2014 / Proposed Rules 

(b) Payment for grandfathered DME 

items paid on a bundled, continuous 

rental basis. Payment to a supplier that 

elects to be a grandfathered supplier of 

DME furnished in CBPs where these 

special payment rules apply is made in 

accordance with § 414.408(a)(1). 

(c) Supplier transitions for DME and 

enteral nutrition paid on a bundled, 

continuous rental basis. Changes from a 

non-contract supplier to a contract 

supplier at the beginning of a CBP 

where payment is made on a bundled, 

continuous monthly rental basis results 

in the contract supplier taking on 

responsibility for meeting all of the 

monthly needs for furnishing the 

covered DME or enteral nutrition. In the 

event that a beneficiary relocates from a 

CBA where these special payment rules 

apply to an area where rental cap rules 

apply, a new period of continuous use 

begins for the capped rental item, 

enteral nutrition equipment, or oxygen 

equipment as long as the item is 

determined to be medically necessary. 

(d) Responsibility for repair and 

maintenance and servicing of power 

wheelchairs. In no more than 12 CBAs 

where payment for power wheelchairs 

is made on a capped rental basis, for 

power wheelchairs furnished in 

conjunction with competitions that 

begin on or after January 1, 2015, 

contract suppliers that furnish power 

wheelchairs under contracts awarded 

based on these competitions shall 

continue to repair power wheelchairs 

they furnish following transfer of title to 

the equipment to the beneficiary. The 

responsibility of the contract supplier to 

repair, maintain and service beneficiaryowned power wheelchairs does not 

apply to power wheelchairs that the 

contract supplier did not furnish to the 

beneficiary. For power wheelchairs that 

the contract supplier furnishes during 

the contract period, the responsibility of 

the contract supplier to repair, maintain 

and service the power wheelchair once 

it is owned by the beneficiary continues 

until the reasonable useful lifetime of 

the equipment expires, coverage for the 

power wheelchair ends, or the 

beneficiary relocates outside the CBA 

where the item was furnished. The 

contract supplier may not charge the 

beneficiary or the program for any 

necessary repairs or maintenance and 

servicing of a beneficiary-owned power 

wheelchair it furnished during the 

contract period. 

■ 17. Section 414.412 is amended by 

revising paragraph (b)(2) and adding 

paragraphs (b)(3) through (5) to read as 

follows: 

§ 414.412 Submission of bids under a 

competitive bidding program. 

* * * * * 

(b) * * * 

(2) The bids submitted for each item 

or drug in a product category cannot 

exceed the payment amount that would 

otherwise apply to the item under 

Subpart C, Subpart D, or Subpart I of 

this part. 

(3) The bids submitted for enteral 

nutrition, oxygen and oxygen 

equipment, standard manual 

wheelchairs, standard power 

wheelchairs, and hospital beds paid in 

accordance with the special payment 

rules at § 414.409(a) cannot exceed the 

average monthly payment for the bundle 

of items and services that would 

otherwise apply to the item under 

subpart C or subpart D of this part. 

(4) The bids submitted for continuous 

positive airway pressure (CPAP) devices 

and respiratory assist devices paid in 

accordance with the special payment 

rules at § 414.409(a) cannot exceed the 

1993 fee schedule amounts for these 

items, increased by the covered item 

update factors provided for these items 

in section 1834(a)(14) of the Act. 

(5) Suppliers shall take into 

consideration the special payment rules 

at § 414.409(d) when submitting bids for 

furnishing power wheelchairs under 

competitions where these rules apply. 

* * * * * 

■ 18. Section 414.414 is amended by 

revising paragraph (f) to read as follows: 

§ 414.414 Conditions for awarding 

contracts. 

* * * * * 

(f) Expected savings. A contract is not 

awarded under this subpart unless CMS 

determines that the amounts to be paid 

to contract suppliers for an item or drug 

under a competitive bidding program 

are expected to be less than the amounts 

that would otherwise be paid for the 

same item under subpart C or subpart D 

or the same drug under subpart I based 

on 95 percent of the average wholesale 

price in effect on October 1, 2003. 

* * * * * 

■ 19. Section 414.422 is amended by 

revising paragraph (d) to read as 

follows: 

§ 414.422 Terms of contracts. 

* * * * * 

(d) Change of ownership. (1) A 

contract supplier must notify CMS if it 

is negotiating a change in ownership no 

later than 60 days before the anticipated 

date of the change. 

(2) CMS may transfer a contract to an 

entity that merges with, or acquires, a 

contract supplier if the entity meets the 

following requirements: 

(i) A successor entity— 

(A) Meets all requirements applicable 

to contract suppliers for the applicable 

competitive bidding program; 

(B) Submits to CMS the 

documentation described under 

§ 414.414(b) through (d) if 

documentation has not previously been 

submitted by the successor entity or if 

the documentation is no longer 

sufficient for CMS to make a financial 

determination. A successor entity is not 

required to duplicate previously 

submitted information if the previously 

submitted information is not need to 

make a financial determination. This 

documentation must be submitted no 

later than 30 days prior to the 

anticipated effective date of the change 

of ownership; and 

(C) Submits to CMS, at least 30 days 

before the anticipated effective date of 

the change of ownership, a signed 

novation agreement acceptable to CMS 

stating that it will assume all obligations 

under the contract; or 

(ii) A new entity— 

(A) Meets the requirements of 

(d)(2)(i)(A) and (B) of this section; and 

(B) Contract supplier submits to CMS, 

at least 30 days before the anticipated 

effective date of the change of 

ownership, its final draft of a novation 

agreement as described in paragraph 

(d)(2)(iii) of this section for CMS review. 

The new entity submits to CMS, within 

30 days after the effective date of the 

change of ownership, an executed 

novation agreement acceptable to CMS. 

(3) Except as specified in paragraph 

(d)(4) of this section, CMS transfers the 

entire contract, including all product 

categories and competitive bidding 

areas, to a new entity. 

(4) For contracts issued in the Round 

2 Recompete and subsequent rounds in 

the case of a CHOW where a contract 

supplier sells a distinct company, (e.g., 

an affiliate, subsidiary, sole proprietor, 

corporation, or partnership) that 

furnishes a specific product category or 

services a specific CBA, CMS may 

transfer the portion of the contract 

performed by that company to a 

successor, if the following conditions 

are met: 

(i) Every CBA, product category, and 

location of the company being sold must 

be transferred to the new qualified 

owner who meets all competitive 

bidding requirements; i.e. financial, 

accreditation and licensure; 

(iii) All CBAs and product categories 

in the original contract that are not 

explicitly transferred by CMS remain 

unchanged in that original contract for 

the duration of the contract period 

unless transferred by CMS pursuant to 

a subsequent CHOW; 

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Federal Register / Vol. 79, No. 133 / Friday, July 11, 2014 / Proposed Rules 40315 

(iv) All requirements of paragraph 

(d)(2) of this section are met; and 

(v) The sale of the distinct company 

includes all of the contract supplier’s 

assets associated with the CBA and/or 

product category(s); and 

(vi) CMS determines that transfer of 

part of the original contract will not 

result in disruption of service or harm 

to beneficiaries. 

* * * * * 

■ 20. Section 414.423 is amended by 

revising paragraphs (b)(1)(vi), (l)(2) 

introductory text, and (l)(2)(i) to read as 

follows: 

§ 414.423 Appeals Process for Termination 

of Competitive Bidding Contract. 

* * * * * 

(b) * * * 

(1) * * * 

(vi) The effective date of termination 

is 45 days from the date of the 

notification letter unless a timely 

hearing request is filed or a corrective 

action plan (CAP) is submitted within 

30 days of the date on the notification 

letter. 

* * * * * 

(l) * * * 

(2) A contract supplier whose contract 

has been terminated must notify all 

beneficiaries who are receiving rented 

competitive bid items or competitive 

bid items received on a recurring basis, 

of the termination of their contract. 

(i) The notice to the beneficiary from 

the supplier whose contract is 

terminated must be provided no later 

than 15 days prior to the effective date 

of termination. 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: June 24, 2014. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: June 27, 2014. 

Sylvia M. Burwell, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2014–15840 Filed 7–2–14; 4:15 pm] 

BILLING CODE 4120–01–P 

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