DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

42 CFR Parts 413 and 414 

[CMS-1577-P] 

RIN 0938-AQ27 

Medicare Program; Changes to the End-Stage Renal Disease 

Prospective Payment System for CY 2012, End-Stage Renal 

Disease Quality Incentive Program for PY 2013 and PY 2014; 

Ambulance Fee Schedule; and Durable Medical Equipment 

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

ACTION: Proposed rule. 

SUMMARY: This proposed rule would update and make certain 

revisions to the End-Stage Renal Disease (ESRD) prospective 

payment system (PPS) for calendar year (CY) 2012. This proposed 

rule would also set forth proposed requirements for the ESRD 

quality incentive program (QIP) for payment years (PYs) 2013 and 

2014. In addition, this proposed rule would revise the 

ambulance fee schedule regulations to conform with statutory 

changes. Finally, this proposed rule would revise the 

definition of durable medical equipment (DME) by adding a 3-year 

minimum lifetime criterion that must be met by an item or device 

in order to be considered durable for the purpose of classifying 

the item under the Medicare benefit category for DME. (See the 

Table of Contents for a listing of the specific issues addressed 
 

2 

in this proposed rule.) 

DATES: To be assured consideration, comments must be received 

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

[OFR--insert date 60 days after date of display in the Federal 

Register]. 

ADDRESSES: In commenting, please refer to file code CMS-1577-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-1577-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: 
 

3 

 Centers for Medicare & Medicaid Services, 

 Department of Health and Human Services, 

 Attention: CMS-1577-P, 

 Mail Stop C4-26-05, 

 7500 Security Boulevard, 

 Baltimore, MD 21244-1850. 

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

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

comment period to either of the following addresses: a. For 

delivery in Washington, DC-- 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

Room 445-G, Hubert H. Humphrey Building, 

 200 Independence Avenue, SW., 

 Washington, DC 20201 

(Because access to the interior of the 

Hubert H. Humphrey Building is not readily available to persons 

without Federal government identification, commenters are 

encouraged to leave their comments in the CMS drop slots located 

in the main lobby of the building. A stamp-in clock is 

available for persons wishing to retain a proof of filing by 

stamping in and retaining an extra copy of the comments being 

filed.) 
 

4 

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

to schedule your arrival with one of our staff members. 

 Comments mailed to the addresses indicated as appropriate 

for hand or courier delivery may be delayed and received after 

the comment period. 

For information on viewing public comments, see the 

beginning of the "SUPPLEMENTARY INFORMATION" section. 

FOR FURTHER INFORMATION CONTACT: 

Lisa Hubbard (410)786-4533, for issues related to ESRD. 

Roechel Kujawa, (410)786-9111, for issues related to ambulance 

services. 

Heidi Oumarou, (410)786-7942, for issues related to the ESRD 

market basket. 

Shannon Kerr, (410)786-3039, for issues related to the quality 

incentive program. 

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

definition of durable medical equipment (DME). 

SUPPLEMENTARY INFORMATION: 
 

5 

Inspection of Public Comments: All comments received before the 

close of the comment period are available for viewing by the 

public, including any personally identifiable or confidential 

business information that is included in a comment. We post all 

comments received before the close of the comment period on the 

following Web site as soon as possible after they have been 

received: http://www.regulations.gov. Follow the search 

instructions on that Web site to view public comments. 

Comments received timely will also be available for public 

inspection as they are received, generally beginning 

approximately 3 weeks after publication of a document, at the 

headquarters of the Centers for Medicare & Medicaid Services, 

7500 Security Boulevard, Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 a.m. to 4 p.m. To 

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

743-3951. 

Electronic Access

 This Federal Register document is also available from the 

Federal Register online database through Federal Digital System 

(FDsys), a service of the U.S. Government Printing Office. This 

database can be accessed via the internet at 

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

Addenda are Only Available Through the Internet on the CMS Web 

Site 
 

6 

 In the past, a majority of the Addenda referred to 

throughout the preamble of our proposed and final rules appeared 

in the Federal Register. However, beginning with this CY 2012 

proposed rule, the Addenda of the annual proposed and final 

rules will no longer appear 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 that are posted on the CMS Web site 

identified above should contact Lisa Hubbard at 410-786-4533. 

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. Calendar Year (CY) 2012 End-Stage Renal Disease (ESRD) 

Prospective Payment System (PPS) 

A. Background for the End-Stage Renal Disease Prospective 

Payment System (ESRD PPS) for calendar year (CY) 2012 

B. Routine Updates and Proposed Policy Changes for CY 2012 ESRD 
 

7 

PPS 

1. Proposals Related to the Composite Rate Portion of the ESRD 

PPS Blended Payment 

2. Proposals Related to the ESRD PPS 

3. Clarifications and Proposals Regarding the Low-Volume 

Adjustment Policy Under the ESRD PPS 

4. Technical Corrections to the CY 2011 ESRD PPS Final Rule 

5. Clarifications Regarding the ESRD PPS 

C. Provisions of the Proposed Regulations for the ESRD PPS 

1. Proposed Updates to the Composite Rate and ESRD PPS Base 

Rate for CY 2012 

a. Proposed Composite Rate 

b. ESRD PPS Base Rate 

2. ESRD Bundled Market Basket 

a. Overview and Background 

b. Proposed Market Basket Update Increase Factor and Laborrelated share for ESRD facilities for CY 2012 

c. Proposed Productivity Adjustment 

d. Multifactor Productivity-Adjusted Market Basket Update 

3. Transition Budget-Neutrality Adjustment for CY 2011 

4. Proposed Transition Budget-Neutrality Adjustment for CY 2012 

5. Proposed Low-Volume Facility Provisions 

6. Proposed Update to the Drug Add-on to the Composite Rate 

Portion of the ESRD Blended Payment Rate 
 

8 

a. Estimating Growth in Expenditures for Drugs and Biologicals 

b. Estimating Per Patient Growth 

c. Applying the Proposed Growth Update to the Drug Add-on 

Adjustment 

d. Proposed Update to the Drug Add-on Adjustment for CY 2012 

7. Updates to the Wage Index Values and Wage Index Floor For 

the Composite Portion of the ESRD PPS Blended Payment and Under 

the ESRD PPS Payment 

a. Proposed Reduction to the ESRD Wage Index Floor 

b. Proposed Policies for Areas With No Hospital Data 

c. Proposed Wage Index Budget-Neutrality Adjustment 

d. ESRD PPS Wage Index Tables 

8. Drugs 

a. Vancomycin 

b. Drug Overfill 

9. Proposed Revisions to Patient-Level Adjustment for Body 

Surface Area (BSA) 

10. Proposed Revisions to the Outlier Policy 

a. Proposed Revisions Related to Outlier ESRD Drugs and 

Biologicals 

b. Proposed Exclusion of Automated Multi-Channel Chemistry 

(AMCC) Laboratory Tests From the Outlier Calculation 

c. Impact of Proposed Changes to the Outlier Policy 

D. Technical Corrections 
 

9 

1. Training Add-on 

2. ESRD-Related Laboratory Test 

E. Clarifications Regarding the ESRD PPS 

1. ICD-9-CM Diagnosis Codes 

2. Emergency Services to ESRD Beneficiaries 

II. End-Stage Renal Disease Quality Incentive Program for 

Payment Year (PY) 2013 and 2014 

A. Background for the End-Stage Renal Disease Quality Incentive 

Program for PY 2013 and PY 2014 

1. Overview of Quality Monitoring Initiatives 

2. Statutory Authority for the ESRD QIP 

3. Payment Year (PY) 2012 ESRD QIP 

B. Provisions of the Proposed Regulations for End-Stage Renal 

Disease (ESRD) Quality Incentive Program (QIP) for PY 2013 and 

PY 2014 

1. Proposed PY 2013 ESRD QIP Requirements 

a. Overview of the Proposed PY 2013 ESRD QIP 

b. Proposed Performance Performance Measures for the PY 2013 

ESRD QIP 

c. Proposed Performance Period for the PY 2013 ESRD QIP 

d. Performance Standards for the PY 2013 ESRD QIP 

e. Methodology for Calculating the Total Performance Score for 

the PY 2013 ESRD QIP 

f. Proposed Payment Reductions for the PY 2013 ESRD QIP 
 

10 

2. Proposed PY 2014 ESRD QIP 

a. Overview of the Proposed PY 2014 ESRD QIP 

b. Proposed Performance Measures for the PY 2014 ESRD QIP 

i. Proposed Anemia Management Measure (Hemoglobin 

Greater Than 12g/dL) 

ii. Proposed Kt/V Dialysis Adequacy Measure 

iii. Proposed Vascular Access Type Measure 

iv. Proposed Vascular Access Infections Measure 

v. Proposed Standardized Hospitalization Ratio - Admissions 

Measure 

vi. Proposed National Healthcare Safety Network (NHSN) Dialysis 

Event Reporting Measure 

vii. Proposed Patient Experience of Care Survey Usage Measure 

viii. Proposed Mineral Metabolism Reporting Measure 

c. Proposed Performance Period for the PY 2014 ESRD QIP 

d. Proposed Performance Standards for the PY 2014 ESRD QIP 

e. Proposed Methodology for Calculating the Total Performance 

Score for the PY 2014 ESRD QIP 

i. Setting Performance Benchmarks and Thresholds 

ii. Scoring Provider and Facility Performance on Clinical 

Measures Based on Achievement 

iii. Scoring Provider/Facility Performance on Clinical Measures 

Based on Improvement 

iv. Calculating the Proposed Vascular Access Type Measure Score 

v. Calculating the Proposed NHSN Dialysis Event Reporting 
 

11 

Measure, Patient Experience Survey Usage Reporting Measure and 

Mineral Metabolism Reporting Measure Scores 

vi. Examples to Illustrate Proposed 2014 ESRD QIP Performance 

Scoring Model as Applied to Clinical Measures 

vii. Proposed Weighting of the PY 2014 ESRD QIP Measures and 

Calculation of the PY 2014 ESRD QIP Total Performance Score 

viii. Example of Applying the Proposed PY 2014 ESRD QIP 

Performance Scoring Model and Calculating the Total Performance 

Score 

f. Proposed Payment Reductions for the 2014 ESRD QIP 

3. Proposed Public Reporting Requirements 

4. Future QIP Measures 

5. Proposed Process of Updating Measures 

III. Ambulance Fee Schedule 

A. Section 106 of the Medicare and Medicaid Extenders Act of 

2010 (MMEA) 

1. Amendment to section 1834(l)(13) of the Act 

2. Amendment to section 146(b)(1) of MIPPA 

3. Amendment to section 1834(l)(12) of the Act 

B. Technical Correction 

IV. Durable Medical Equipment and Supplies 

A. Background for Durable Medical Equipment and Supplies 

B. Current Issues 

C. Provisions of the Proposed Regulations 
 

12 

1. Application of the 3-year lifetime standard to items 

currently covered as DME and to supplies and accessories of 

covered DME 

2. Application of the 3-year minimum lifetime criteria to 

multi-component devices 

V. Collection of Information Requirements 

A. Legislative Requirement for Solicitation of Comments 

B. Requirements in Regulation Text 

C. Additional Information Collection Requirements 

1. Proposed Display of Certificates for PY 2013 and PY 2014 

ESRD QIP 

2. Proposed NHSN Reporting Requirement for the PY 2014 ESRD QIP 

3. Proposed Patient Experience Survey Usage Requirement for the 

PY 2014 ESRD QIP 

4. Proposed Mineral Metabolism Reporting Requirement for the 

2014 ESRD QIP 

VI. Response to Comments 

VII. Economic Analysis 

A. Regulatory Impact Analysis 

1. Introduction 

2. Statement of Need 

3. Overall Impact 

B. Detailed Economic Analysis 

1. CY 2012 End-Stage Renal Disease Prospective Payment System 
 

13 

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 (QIP) 

a. Effects of the Proposed 2013 and 2014 ESRD QIP 

b. Alternatives Considered for 2013 and 2014 ESRD QIP 

3. Ambulance Fee Schedule 

C. Accounting Statement 

VIII. Regulatory Flexibility Act Analysis 

IX. Unfunded Mandates Reform Act Analysis 

X. Federalism Analysis

XI. Files Available to the Public via the Internet 

Regulations Text 

Acronyms 

In addition, because of the many terms to which we refer by 

acronym in this proposed rule, we are listing the acronyms used 

and their corresponding meanings in alphabetical order below: 

AMCC Automated Multi-Channel Chemistry 

ASP Average Sales Price 

AV Arteriovenous 

BLS Bureau of Labor Statistics 
 

14 

BMI Body Mass Index 

BSA Body Surface Area 

CBSA Core Based Statistical Area 

CDC Centers for Disease Control and Prevention 

CLABSI Central Line Access Bloodstream Infections 

CFR Code of Federal Regulations 

CIP Core Indicators Project 

CMS Centers for Medicare & Medicaid Services 

CPM Clinical Performance Measure 

CPT Current Procedural Terminology 

CROWNWeb Consolidated Renal Operations in a Web-Enabled Network 

DFC Dialysis Facility Compare 

DFR Dialysis Facility Report 

DME Durable Medical Equipment 

ESA Erythropoiesis stimulating agent 

ESRD End-Stage Renal Disease 

ESRDB End-Stage Renal Disease Bundled 

FDA Food and Drug Administration 

FI/MAC Fiscal Intermediary Medicare Administrative Contractor 

FY Fiscal Year 

GDP Gross Domestic Product 

HAI Healthcare-associated Infections 

HCPCS Healthcare Common Procedure Coding System 

HD Hemodialysis 
 

15 

HHD Home Hemodialysis 

ICD-9-CM International Classification of Diseases, 9th 

ICH CAHPS In-Center Hemodialysis Consumer Assessment of 

Healthcare Advisors 

IGI IHS Global Insight 

IPPS Inpatient Prospetive Payment System 

KDIGO Kidney Disease: Improving Global Outcomes 

KDOQI Kidney Disease Outcome Quality Initiative 

Kt/V A measure of dialysis adequacy where K is dialyzer 

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

water volume 

LDO Large dialysis organization 

MAP Medicare Allowable Payment 

MCP Monthly Capitation Payment 

MIPPA Medicare Improvements for Patients and Providers Act 

of 2008 (Pub. L. 110-275) 

MMA Medicare Prescription Drug, Improvement and 

Modernization Act of 2003 

MMEA Medicare and Medicaid Extenders Act of 2010 Pub. L. 

111-309 

MFP Multifactor Productivity 

NHSN National Healthcare Safety Network 

NQF National Quality Forum 

PD Peritoneal Dialysis 
 

16 

PFS Physician Fee Schedule 

PPS Prospective payment system 

PY Payment Year 

QIP Quality incentive program 

REMIS Renal management information system 

RFA Regulatory Flexibility Act 

RUL Reasonable Useful Lifetime 

SBA Small Business Administration 

SIMS Standard information management system 

SHR Standardized Hospitalization Ratio 

SSA Social Security Administration 

the Act Social Security Act 

the Affordable Care Act The Patient Protections and Affordable 

Care Act 

URR Urea reduction ratio 

VBP Value Based Purchasing 

I. Calendar Year (CY) 2011 End-Stage Renal Disease (ESRD) 

Prospective Payment System (PPS) 

A. Background for the End-Stage Renal Disease Prospective 

Payment System (ESRD PPS) for calendar year (CY) 2012

On August 12, 2010, we published in the Federal Register, a 

final rule (75 FR 49030 through 49214), entitled, “End-Stage 

Renal Disease Prospective Payment System”, hereinafter referred 

to as the CY 2011 ESRD PPS final rule. In the CY 2011 ESRD PPS 
 

17 

final rule, we implemented a case-mix adjusted bundled PPS for 

Medicare outpatient ESRD dialysis patients beginning January 1, 

2011, in accordance with 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). The ESRD PPS replaced the prior basic case-mix 

adjusted composite payment system and the methodologies for the 

reimbursement of separately billable outpatient ESRD services. 

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

153(b) of MIPPA and amended by section 3401(h) of Public Law 

111-148, the Affordable Care Act, for 2012 and each subsequent 

year, the Secretary shall reduce the market basket increase 

factor by a productivity adjustment described in section 

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

In the CY 2011 ESRD PPS final rule (75 FR 49030), the 

Centers for Medicare & Medicaid Services (CMS) finalized the 

following: 

• A base rate of $229.63 per treatment for renal dialysis 

services (but postponed payment for oral-only renal 

dialysis drugs under the ESRD PPS until January 1, 2014) 

that applies to both adult and pediatric dialysis patients 

prior to the application of any case-mix adjustments. This 

amount included the 2 percent reduction for budgetneutrality required by MIPPA, a one percent reduction for 
 

18 

estimated outlier payments, and a reduction to account for 

estimated payments for case-mix and the low-volume payment 

adjustments. 

• A 4-year transition (for those ESRD facilities that elected 

to receive blended payments during the transition) period 

during which ESRD facilities receive a blend of payments 

under the prior basic case-mix adjusted composite payment 

system and the new ESRD PPS. Although the statute uses the 

term “phase-in”, we are using the term “transition” to be 

consistent with other Medicare payment systems. 

• A -3.1 percent transition budget-neutrality adjustment to 

ensure that overall spending under the ESRD PPS did not 

increase as a result of the provision that permits ESRD 

facilities to be excluded from the 4-year transition. 

• A payment adjustments for dialysis treatments furnished to 

adults for patient age, body surface area (BSA), low body 

mass index (BMI), onset of dialysis, and six specified comorbidities. 

• A home or self-care dialysis training payment adjustment of 

$33.44 per treatment which is wage adjusted and applies to 

claims for patients trained by ESRD facilities certified to 

provide home dialysis training. 
 

19 

• Payment adjustments for dialysis treatments furnished to 

pediatric patients for patient age and dialysis modality. 

• A low-volume payment adjustment for adult patients of 18.9 

percent that applies to the otherwise applicable case-mix 

adjusted payment rate for facilities that qualifies as lowvolume ESRD facilities. 

• An outlier payment policy that provides an additional 

payment to ESRD facilities treating high cost, resourceintensive patients. 

• The wage index adjustment that is applied when calculating 

the ESRD PPS payment rates in order to account for 

geographic differences in area wage levels. 

• An ESRDB market basket index used to project prices in the 

costs of goods and services used to furnish outpatient 

maintenance dialysis. 

In addition, on April 6, 2011, we published an interim 

final rule with comment period in the Federal Register (76 FR 

18930), entitled “Changes in the End-Stage Renal Disease 

Prospective Payment System Transition Budget-Neutrality 

Adjustment”, which revised the ESRD transition budget-neutrality 

adjustment for CY 2011. In the interim final rule, we revised 

the 3.1 percent transition budget-neutrality adjustment 

reduction to a zero percent transition budget-neutrality 
 

20 

adjustment for renal dialysis services furnished on April 1, 

2011 through December 31, 2011. 

B. Routine Updates and Proposed Policy Changes for 

CY 2012 ESRD PPS

In this proposed rule, we propose to (1) make a number of 

routine updates for CY 2012, (2) implement the second year of 

the transition, and (3) make several policy changes under the 

ESRD PPS, as well as technical changes to the CY 2011 ESRD PPS 

final rule. 

1. Proposals Related to the Composite Rate Portion of the ESRD 

PPS Blended Payment 

This proposed rule would implement the second year of the 

transition period for those ESRD facilities that elected to go 

through the transition rather than electing to receive payment 

based on 100 percent of the payment amount under the ESRD PPS. 

Specifically, we would implement in CY 2012 the second year of 

the transition where 50 percent of payment is based on the basic 

case-mix adjusted composite payment system and the remaining 50 

percent of payment is based on the payment amount under the ESRD 

PPS. 

As a result of the transition period under the ESRD PPS, we 

must continue to update the composite rate portion of the 

blended payment, which would include updates to the drug add-on 

adjustment required by section 1881(b)(12(F) of the Act, as well 
 

21 

as the wage index values (which include a budget-neutrality 

factor) used to adjust the labor component of the composite 

rate. The proposed updates to the drug add-on adjustment under 

the composite rate portion of the blended rate can be found in 

section I.C.6.d of this proposed rule and the wage index is 

discussed in section I.C.d.7 of this proposed rule. 

Also, the ESRD bundled (ESRDB) market basket increase 

factor (which is further reduced, beginning in 2012, by the 

productivity adjustment described in section 

1886(b)(3)(B)(xi)(II) of the Act) is used to update the 

composite rate portion of the blended payment in accordance with 

section 1881(b)(14)(F)(ii) of the Act. A discussion of the 

proposed market basket increase factor for CY 2012 can be found 

in section I.C.2 of this proposed rule. A discussion of the 

proposed productivity adjustment can be found in section I.C.2.c 

of this proposed rule. We are also proposing to update the 

second part of the transition budget-neutrality adjustment for 

CY 2012 that is applied to both the blended payments under the 

transition and payments under the ESRD PPS. The discussion 

regarding the proposed transition budget-neutrality adjustment 

can be found in section I.C.4 of this proposed rule. 

In this proposed rule, we also are proposing to add the 

$.49 for the Part D drugs to the composite rate portion of the 

blended payment during the transition, which represents the 
 

22 

first part of the transition budget-neutrality adjustment, and 

update it using the ESRDB market basket minus productivity 

adjustment. We discuss this proposal in the update to the 

composite rate and the proposed CY 2012 transition budgetneutrality adjustment in I.C.1.a and I.B.4, respectively, of 

this proposed rule. 

Finally, we are proposing to revise the national average 

used in calculating the BSA adjustment under the basic case-mix 

adjusted composite payment system. This change is discussed in 

detail in section I.C.9 of this proposed rule. 

2. Proposals Related to the ESRD PPS 

As discussed above in section I.A, section 

1881(b)(14)(F)(i) of the Act, as added by section 153(b) of 

MIPPA and amended by section 3401(h) of the Affordable Care Act, 

beginning in 2012, requires the ESRD bundled payment amounts to 

be annually increased by an ESRD market basket increase factor 

that is reduced by the productivity adjustment described in 

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

CY 2012, an ESRD market basket increase factor that is reduced 

by a productivity adjustment would be applied to the ESRD PPS 

payment rate portion of the blended payment under the transition 

and under the full ESRD PPS. A discussion of the proposed 

market basket increase factor for CY 2012 can be found in 

section I.C.2 of this proposed rule. A discussion of the 
 

23 

proposed productivity adjustment can be found in section I.C.2.c 

of this proposed rule. 

We are also proposing to update the transition budgetneutrality adjustment for CY 2012 which is applied to both the 

blended payments under the transition and payments under the 

full ESRD PPS. The discussion regarding the proposed transition 

budget-neutrality adjustment can be found in section I.C.4 of 

this proposed rule. 

This proposed rule would also update the wage index which 

is applied to both the ESRD PPS portion of the blended payments 

under the transition and payments under the full ESRD PPS. We 

are proposing to apply a wage index budget-neutrality adjustment 

factor to the ESRD PPS base rate. The discussion regarding the 

wage index can be found in section I.C.7 of this proposed rule. 

Also, for CY 2012, we are proposing the following revisions 

to the ESRD PPS outlier policy: (1) eliminate the drug-specific 

list of eligible outlier services; (2) make modifications to the 

computation of the separately billable Medicare Allowable 

Payment (MAP) amounts to exclude access management drugs that 

are composite rate drugs and include certain anemia management 

drugs; and (3) stop using the 50 percent rule and eliminate the 

Automated Multi-Channel Chemistry (AMCC) laboratory tests from 

the definition of outlier services. In addition, we are 

proposing to consider anti-infective drugs when used at home by 
 

24 

a patient to treat an infection of the catheter site or 

peritonitis associated with peritoneal dialysis as non-composite 

rate ESRD-related drugs, and reiterating that under the current 

regulation, all non-composite rate ESRD-related drugs are 

considered outlier services. That is, all non-composite rate 

ESRD-related drugs are considered outlier services for purposes 

of determining outlier payments. The discussion regarding the 

proposed changes to the outlier policy can be found in section 

I.C.10 of this proposed rule. 

3. Clarifications and Proposals Regarding the Low-Volume 

Adjustment Policy Under the ESRD PPS 

In this proposed rule, we are clarifying that the term 

“payment year” is the period of time that we use for determining 

payment to ESRD facilities, which is a calendar year. We 

propose to establish a process for CY 2012 and each year 

thereafter that facilities would need to follow, when submitting 

its attestation to notify its FI/MAC that it is eligible for the 

low-volume adjustment. We are clarifying the term “year” that 

is used for purposes of establishing the treatment threshold for 

low-volume eligibility. A discussion of the low-volume payment 

adjustment can be found in section I.c.5 of this proposed rule. 

4. Technical Corrections to the CY 2011 ESRD PPS Final Rule 

 In the CY 2011 ESRD PPS final rule, we inadvertently made 

two technical errors: (1) the training add-on amount was listed 
 

25 

incorrectly as $33.38 instead of $33.44; and (2) the composite 

rate laboratory test, “Assay of protein by other source,” which 

is identified by the Current Procedural Terminology code 84157, 

was inadvertently omitted from the list of ESRD-related 

laboratory tests. For more information regarding these 

technical corrections please see section I.B.4 of this proposed 

rule. 

5. Clarifications Regarding the ESRD PPS 

In this proposed rule, we are clarifying the method for 

updating ICD-9-CM codes in accordance with ICD-9-CM annual 

updates and clarifying whether certain renal dialysis service 

furnished in an emergency room or department are considered 

renal dialysis services covered under the ESRD PPS. 

C. Provisions of the Proposed Regulations for the ESRD PPS

1 Proposed Updates to the Composite Rate and ESRD PPS Base Rate 

a. Proposed Composite Rate 

Under section 1881(b)(14)(E)(i) of the Act, we are required 

to provide a 4-year transition under the new ESRD PPS. For CY 

2012, under 42 CFR §413.239(a)(2), facilities that go through 

the transition will receive a blended rate equal to the sum of 

50 percent of the full ESRD PPS amount and 50 percent of the 

basic case-mix adjusted payment amount. Accordingly, we 

continue to need to update the composite rate portion of the 

blended payment during the 4-year transition (that is, CYs 2011 
 

26 

through 2013). For a historical perspective of the basic casemix adjusted composite payment system for ESRD facilities, 

including the CY 2011 update to the composite rate portion of 

the ESRD PPS blended rate, please see the CY 2011 Physician Fee 

Schedule (PFS) final rule (75 FR 40164) and the CY 2011 PFS 

proposed rule (75 FR 40164 through 40168). In addition, we 

discuss the proposed CY 2012 drug add-on and the updated wage 

index values for the composite rate portion of the blended 

payment in sections I.C.6 and I.C.7, respectively. 

 As discussed in section i.B.2 of this proposed rule, 

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

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

Care Act, provides that, for years during which the transition 

applies, the composite rate portion of the blend shall be 

annually increased by the ESRDB market basket for CY 2012 and 

each subsequent year shall be reduced by the productivity 

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

Act. In sections I.C.2.b and I.C.2.c of this proposed rule, we 

describe the basis for the proposed CY 2012 ESRDB market basket 

increase of 3.0 percent, and the productivity offset of 1.2 

percent, yielding a proposed forecasted rate of increase in the 

base rate of 1.8 percent. In addition, as discussed in the 

transition budget-neutrality adjustment in section I.C.a of this 

proposed rule, we are proposing to add the CY 2011 Part D per 
 

27 

treatment amount (that is, $0.49) to the CY 2011 composite rate 

in order to update the Part D amount for CY 2012 using the ESRDB 

market basket minus the productivity adjustment. The basis for 

the first part of the transition budget-neutrality adjustment 

(that is, the calculation of the $0.49 Part D add-on) was set 

forth in the CY 2011 ESRD PPS final rule at 75 FR 49082. 

Consequently, for CY 2012, the composite rate portion of 

the ESRD PPS blended payment would be $141.52. The $141.52 

reflects the addition of the CY 2011 Part D per treatment amount 

($0.49) to the CY 2011 composite rate of $138.53, and 

application of the ESRD market basket minus productivity 

($138.53 +0.49 = $139.02; $139.02 x 1.018 = $141.52). 

b. ESRD PPS Base Rate 

We described the development of the ESRD PPS per-treatment 

base rate in the CY 2011 ESRD PPS final rule (75 FR 49071) under 

Medicare regulations at 42 CFR §§413.220 and 413.230. The CY 

2011 ESRD PPS final rule has a detailed discussion of the 

methodology used to calculate the ESRD PPS base rate and the 

computation of reduction factors used to adjust the ESRD PPS 

base rate for projected outlier payments and budget-neutrality 

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

1881(b)(14)(A)(ii) of the Act, respectively (75 FR 49071 through 

49082). Specifically, the ESRD PPS base rate was developed from 

CY 2007 claims (that is, the lowest per patient utilization 
 

28 

year), updated to CY 2011, and represented the average per 

treatment Medicare allowable payment (MAP) for composite rate 

and separately billable services. In addition, in accordance 

with §413.230, the per treatment base rate is adjusted for, the 

patient-specific case-mix adjustments, any applicable facility 

adjustments, wages to reflect ESRD facility differences in area 

wage levels using an area wage index, as well as any outlier 

payment or training add-on. For CY 2011, the ESRD PPS base rate 

was $229.63 (75 FR 49082). 

As discussed previously, 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. Accordingly, we applied 

the 1.8 percent increase to the CY 2011 ESRD PPS base rate of 

$229.63, which results in a CY 2012 ESRD PPS base rate of 

$233.76 ($229.63 x 1.018 = $233.76). The proposed CY 2012 ESRD 

PPS Base Rate applies to the ESRD PPS portion of the blend. 

In addition, as discussed in section I.C.7.c of this 

proposed rule, we are proposing to apply the wage index budgetneutrality adjustment factor of 1.001126 to the CY 2012 ESRD PPS 

base rate (that is, $233.76), yielding a proposed CY 2012 ESRD 

PPS wage-index budget-neutrality adjusted base rate of $234.02 
 

29 

($233.76 X 1.001126 = $234.02). 

2. ESRD Bundled Market Basket 

a. Overview and Background 

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

section 153(b) of MIPPA and amended by section 3401(h) of the 

Affordable Care Act, beginning in 2012, the ESRD bundled payment 

amounts are required to be annually increased by an ESRD market 

basket increase factor that is reduced by the productivity 

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

Act. The statute further 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. Under section 

1881(b)(14)(F)(ii) of the Act, as added by section 153(b) of 

MIPPA and amended by section 3401(h) of the Affordable Care Act, 

the ESRD bundled (ESRDB) rate market basket increase factor will 

also be used to update the composite rate portion of ESRD 

payments during the ESRD PPS transition period from 2011 through 

2013; though beginning in 2012, such market basket increase 

factor will be reduced by the productivity adjustment. As a 

result of amendments by section 3401(h) of the Affordable Care 

Act, a full market basket was applied to the composite rate 

portion of the blended payment in CY 2011 during the first year 

of the transition. 
 

30 

b. Proposed Market Basket Update Increase Factor and Laborrelated share for ESRD facilities for CY 2012 

 As required under section 1881(b)(14)(F) of the Act, 

effective beginning CY 2012 (and for purposes of the transition, 

effective beginning CY 2011), CMS developed an all-inclusive 

ESRDB input price index (75 FR 49151 through 49162). Although 

“market basket” technically describes the mix of goods and 

services used to produce ESRD care, this term is also commonly 

used to denote the input price index (that is, cost categories, 

their respective weights, and price proxies combined) derived 

from that market basket. Accordingly, the term “ESRDB market 

basket”, as used in this document, refers to the ESRDB input 

price index. 

 For this proposed rule, we have used the same methodology 

described in the CY 2011 ESRD PPS final rule (75 FR 49151 

through 49162) to compute the CY 2012 ESRDB market basket 

increase factor and labor-related share. Using this method and 

the IHS Global Insight, Inc. (IGI) forecast for the first 

quarter of 2011 of the CY 2008-based ESRDB market basket, the 

proposed CY 2012 ESRDB market basket increase factor is 3.0 

percent. IGI is an economic and financial forecasting firm that 

contracts with CMS to forecast the components of providers’ 

market baskets. 
 

31 

 The labor-related share of a market basket is determined by 

identifying the national average proportion of its operating 

costs that are related to, influenced by, or vary with the local 

labor market. In the CY 2011 ESRD PPS final rule, we finalized 

a labor-related share for CY 2011 of 41.737 percent using the 

base year cost weights for the CY 2008-based ESRDB market basket 

(75 FR 49161 through 49162). Table 1 below contains the 

calculation of the labor-related share. This labor-related 

share represented the sum of Wages and Salaries, Benefits, 

Housekeeping and Operations, All Other Labor-related Services, 

87 percent of the cost weight for Professional Fees, and 46 

percent of the cost weight for Capital-related Building and 

Equipment expenses. The 87 percent of Professional fees was 

determined based on a survey that CMS conducted of ESRD 

facilities. Based on the survey results, we determined that, on 

average, 87 percent of professional services are purchased from 

local firms and 13 percent are purchased from businesses located 

outside of the ESRD’s local labor market. The 46 percent of 

Capital-related Building and Equipment expenses is based on 

regressions run for the inpatient hospital capital PPS (56 FR 

43375). We use a similar methodology to calculate capitalrelated 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). 
 

32 

Table 1—ESRDB Market Basket Labor-Related Share

Cost Category 2008-based ESRDB LaborRelated Share (Percent) 

Wages and Salaries 26.755% 

Benefits 6.754% 

Housekeeping and Operations 2.029% 

All Other Labor-related Services 1.219% 

Professional Fees Labor-related 1.549% 

Capital Labor-related 3.431% 

Total 41.737% 

In this proposed rule, we are not proposing to make any 

further changes to the labor-related share since we have not 

proposed to update the cost weights of the ESRDB market basket. 

Therefore, we are proposing to continue to use a labor-related 

share of 41.737 percent for CY 2012 for the ESRDB PPS. 

 If an ESRD facility elected to transition to the bundled 

PPS system, then the CY 2012 payment to these providers will be 

based on a 50/50 blended payment of the composite rate and the 

ESRD PPS bundled rate. The labor-related share under the 

composite portion of the blended payment is 53.711 percent. 

This labor-related share was developed from the labor-related 

components of the 1997 ESRD composite rate market basket that 

was finalized in the 2005 PFS final rule (70 FR 70168). We 

propose to continue to use the labor-related share of 53.711 for 

the ESRD composite rate portion of the ESRD payment for all 

years of the transition. This labor-related share is consistent 
 

33 

with the mix of labor-related services paid under the composite 

rate and is consistent with the method finalized in the CY 2011 

ESRD PPS final rule (75 FR 49116). 

c. Proposed Productivity Adjustment 

 Section 3401(h) of the Affordable Care Act requires that, 

in CY 2012 (and in subsequent calendar years), the market basket 

percentage under the ESRD prospective payment system as 

described in section 1881(b)(14)(F) of the Act be annually 

adjusted by changes in economy-wide productivity. Specifically, 

section 3401(h) of the Affordable Care Act amends section 

1881(b)(14)(F)(i) of the Act to add clause (II) which sets forth 

the application of this productivity adjustment, which is 

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

statute defines the productivity adjustment to be equal to the 

10-year moving average of changes in annual economy-wide private 

nonfarm business multifactor productivity (MFP) (as projected by 

the Secretary for the 10-year period ending with the applicable 

fiscal year, 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. 

 CMS notes that the proposed methodology for calculating and 

applying the MFP adjustment to the ESRD payment update is 
 

34 

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, an 

economic forecasting firm. In order to generate a forecast of 

MFP, IGI replicated the MFP measure calculated by the BLS using 

a series of proxy variables derived from IGI’s U.S. 

macroeconomic models. These models take into account a very 

broad range of factors that influence the total U.S. economy. 

IGI forecasts the underlying proxy components such as gross 

domestic product (GDP), capital, and labor inputs required to 

estimate MFP and then combines those projections according to 

the BLS methodology. In Table 2 below, we identify each of the 

major MFP component series employed by the BLS to measure MFP. 

We also provide the corresponding concepts forecasted by IGI and 

determined to be the best available proxies for the BLS series. 

TABLE 2—MULTIFACTOR PRODUCTIVITY COMPONENT SERIES EMPLOYED BY 

THE BUREAU OF LABOR STATISTICS AND IHS GLOBAL INSIGHT 

BLS series IGI series 

Real value-added output, constant 2005 

dollars 

Non-housing non-government non-farm real GDP, 

Billions of chained 2005 dollars – annual rate 

Private non-farm business sector labor 

input; 2005=100.00 

Hours of all persons in private nonfarm 

establishments, 2005=100.00, adjusted for labor 

composition effects 

Aggregate capital inputs; 2005=100.00 Real effective capital stock used for full employment 

GDP, Billions of chained 2005 dollars 
 

35 

 IGI found that the historical growth rates of the BLS 

components used to calculate MFP and the IGI components 

identified are consistent across all series and therefore 

suitable proxies for calculating MFP. We have included below a 

more detailed description of the methodology used by IGI to 

construct a forecast of MFP, which is aligned closely with the 

methodology employed by the BLS. For more information regarding 

the BLS method for estimating productivity, please see the 

following link: http://www.bls.gov/mfp/mprtech.pdf. 

 During the development of this proposed rule, the BLS 

published a historical time series of private nonfarm business 

MFP for 1987 through 2009, with 2009 being a preliminary value. 

Using this historical MFP series and the IGI forecasted series, 

IGI has developed a forecast of MFP for 2010 through 2021, as 

described below. 

 To create a forecast of BLS’ MFP index, the forecasted 

annual growth rates of the “non-housing, nongovernment, nonfarm, real GDP,” “hours of all persons in private nonfarm 

establishments adjusted for labor composition,” and “real 

effective capital stock” series (ranging from 2010 to 2021) are 

used to “grow” the levels of the “real value-added output,” 

“private non-farm business sector labor input,” and “aggregate 

capital input” series published by the BLS. Projections of the 

“hours of all persons” measure are calculated using the 
 

36 

difference between the projected growth rates of real output per 

hour and real GDP. This difference is then adjusted to account 

for changes in labor composition in the forecast interval. 

Using these three key concepts, MFP is derived by subtracting 

the contribution of labor and capital inputs from output growth. 

However, in order to estimate MFP, we need to understand the 

relative contributions of labor and capital to total output 

growth. Therefore, two additional measures are needed to 

operationalize the estimation of the IGI MFP projection: labor 

compensation and capital income. The sum of labor compensation 

and capital income represents total income. The BLS calculates 

labor compensation and capital income (in current dollar terms) 

to derive the nominal values of labor and capital inputs. IGI 

uses the “nongovernment total compensation” and “flow of capital 

services from the total private non-residential capital stock” 

series as proxies for the BLS’ income measures. These two proxy 

measures for income are divided by total income to obtain the 

shares of labor compensation and capital income to total income. 

 In order to estimate labor’s contribution and capital’s 

contribution to the growth in total output, the growth rates of 

the proxy variables for labor and capital inputs are multiplied 

by their respective shares of total income. These contributions 

of labor and capital to output growth is subtracted from total 
 

37 

output growth to calculate the “change in the growth rates of 

multifactor productivity:” 

MFP = Total output growth — ((labor input growth*labor 

compensation share) + (capital input growth * capital income 

share)) 

 The change in the growth rates (also referred to as the 

compound growth rates) of the IGI MFP are multiplied by 100 in 

order to calculate the percent change in growth rates (the 

percent change in growth rates are published by the BLS for its 

historical MFP measure). Finally, the growth rates of the IGI 

MFP are converted to index levels based to 2005 to be consistent 

with the BLS’ methodology. For benchmarking purposes, the 

historical growth rates of IGI’s proxy variables were used to 

estimate a historical measure of MFP, which was compared to the 

historical MFP estimate published by the BLS. The comparison 

revealed that the growth rates of the components were consistent 

across all series, and therefore validated the use of the proxy 

variables in generating the IGI MFP projections. The resulting 

MFP index was then interpolated to a quarterly frequency using 

the Bassie method for temporal disaggregation. The Bassie 

technique utilizes an indicator (pattern) series for its 

calculations. IGI uses the index of output per hour (published 

by the BLS) as an indicator when interpolating the MFP index. 

d. Multifactor Productivity-Adjusted Market Basket Update 
 

38 

 Under section 1881(b)(14)(F)(i) of the Act, as amended by 

section 3401 (h) of the Affordable Care Act, the Secretary 

“shall annually increase payment amounts established under this 

paragraph by an ESRD market basket percentage increase factor 

for a bundled payment system for renal dialysis services that 

reflects changes over time in the prices of an appropriate mix 

of goods and services included in renal dialysis services”. 

Also, under section 1881(b)(14)(F)(ii)(II), as amended by 

section 3401(h) of the Affordable Care Act, for years in which 

the transition of the payment system is applicable, the 

Affordable Care Act states that the Secretary “shall annually 

increase such composite rate by the ESRD market basket 

percentage increase factor described in clause (i)(I)” subject 

to this factor being reduced by a productivity adjustment 

beginning in 2012. 

 As described in section I.C.2.b of this proposed rule, we 

are proposing to estimate the ESRDB market basket percentage for 

CY 2012 based on the CY 2008-based ESRDB market basket. Section 

3401(h) of the Affordable Care Act amends section 

1881(b)(14)(F)(i) of the Act by adding a new clause (II), which 

requires that after establishing the percentage for a calendar 

year 2012 (and each subsequent year), “the Secretary shall 

reduce such percentage by the productivity adjustment described 
 

39 

in section 1886(b)(3)(B)(xi)(II)” (which we refer to as the 

multifactor productivity adjustment or MFP adjustment). 

 In order to calculate the MFP-adjusted update for the ESRDB 

market basket during the transition period, we propose that the 

MFP percentage adjustment be subtracted from the CY 2012 market 

basket update calculated using the CY 2008-based ESRDB market 

basket. We propose that the end of the 10-year moving average 

of changes in the MFP should coincide with the end of the 

appropriate CY update period. Since the market basket update is 

reduced by the MFP adjustment to determine the annual update for 

the ESRDB PPS and the ESRD composite rate during the transition, 

we believe it is appropriate for the numbers associated with 

both components of the calculation (the market basket and the 

productivity adjustment) to coincide so that changes in market 

conditions are aligned. Therefore, for the CY 2012 update, we 

propose that the MFP adjustment be calculated as the 10-year 

moving average of changes in MFP for the period ending December 

31, 2012. We propose to round the final annual adjustment to 

the one-tenth of one percentage point level up or down as 

applicable according to conventional rounding rules (that is, if 

the number we are rounding is followed by 5, 6, 7, 8, or 9, we 

will round the number up; if the number we are rounding is 

followed by 1, 2, 3, or 4, we will round the number down). 
 

40 

 The market basket percentage we are proposing for CY 2012 

for the ESRDB market basket is based on the 1st quarter 2011 

forecast of the CY 2008-based ESRDB market basket update, which 

is estimated to be 3.0 percent. This market basket percentage 

would then reduced by the MFP adjustment (the 10-year moving 

average of MFP for the period ending CY 2012) of 1.2 percent, 

which is calculated as described above and based on IGI’s 1st

quarter 2011 forecast. The resulting MFP-adjusted ESRDB market 

basket update is equal to 1.8 percent, or 3.0 percent less 1.2 

percent. We propose that if more recent data are subsequently 

available (for example, a more recent estimate of the market 

basket and MFP adjustment), we would use such data, if 

appropriate, to determine the CY 2012 market basket update and 

MFP adjustment in the CY 2012 ESRD PPS final rule. 

3. Transition Budget-Neutrality Adjustment for CY 2011 

Section 1881(b)(14)(E)(iii) of the Act requires that an 

adjustment to payments be made for renal dialysis services 

provided by ESRD facilities during the transition so that the 

estimated total payments under the ESRD PPS, including payments 

under the transition, equal the estimated total amount of 

payments that would otherwise occur under the ESRD PPS without 

such a transition. In the CY 2011 ESRD PPS final rule, we 

explained that because we would not know the actual number of 
 

41 

ESRD facilities that would elect to opt out of the transition 

prior to publishing the final rule, we would simulate payments 

under the existing basic case-mix adjusted composite payment 

system and under the ESRD PPS to determine the number of ESRD 

facilities that we believed would elect to receive payment under 

100 percent ESRD PPS. We explained that based on our 

simulations using 2007 data, we estimated that 43 percent of 

ESRD facilities would financially benefit from receiving full 

payment under the ESRD PPS. We also indicated that based on the 

simulation of estimated payments, a 3.1 percent reduction would 

be applied to all payment made to ESRD facilities for renal 

dialysis services furnished on January 1, 2011 through December 

31, 2011 (75 FR 49082 through 49083). 

On April 6, 2011, we published an interim final rule with 

comment period in the Federal Register (76 FR 18930), entitled 

“Changes to the End-Stage Renal Disease Prospective Payment 

System Transition Budget-Neutrality Adjustment”, which revised 

the ESRD transition budget-neutrality adjustment finalized for 

CY 2011. In the interim final rule, we indicated that based on 

the election data submitted by ESRD facilities, 87 percent of 

ESRD facilities elected to opt out of the transition. When we 

applied the actual number of ESRD facilities electing to receive 

payment under the ESRD PPS, the transition budget-neutrality 

adjustment was determined to be zero rather than a 3.1 reduction 
 

42 

in payments. We revised the 3.1 percent transition budgetneutrality adjustment reduction to a zero percent transition 

budget-neutrality adjustment for renal dialysis services 

furnished on April 1, 2011 through December 31, 2011. We will 

respond to comments submitted on the interim final rule in the 

CY 2012 ESRD PPS final rule. 

4. Proposed Transition Budget-Neutrality Adjustment for CY 2012 

As we discussed in the background section of this proposed 

rule, section 1881(b)(14)(E)(i) of the Act requires the 

Secretary to provide “a four year phase-in” of the payments 

under the ESRD PPS for renal dialysis services furnished on or 

after January 1, 2011, with payments under the ESRD PPS “fully 

implemented for renal dialysis services furnished on or after 

January 1, 2014.” Also, we indicated that instead of using the 

term “phase-in”, we are using the term “transition” to be 

consistent with other Medicare payment systems. 

Section 1881(b)(14)(E)(ii) of the Act permits ESRD 

facilities to make a one-time election to be excluded from the 

transition. An ESRD facility that elected to be excluded from 

the transition would receive payment for renal dialysis services 

provided on or after January 1, 2011, based on 100 percent of 

the payment rate under the ESRD PPS rather than a blended 

payment based in part on the payment rate under the basic case-
 

43 

mix adjusted composite payment system and in part on the payment 

rate under the ESRD PPS. 

Section 1881(b)(14)(E)(iii) of the Act also requires that 

we make an adjustment to payments for renal dialysis services 

provided by ESRD facilities during the transition so that the 

estimated total amount of payments under the ESRD PPS, including 

payments under the transition, equals the estimated total amount 

of payments that would otherwise occur under the ESRD PPS 

without such a transition. We refer to this provision as the 

transition budget-neutrality adjustment. 

As described in the CY 2011 ESRD PPS final rule (75 FR 

49082), the transition budget-neutrality adjustment is comprised 

of two parts. For the first part, we created a payment 

adjustment under the basic case-mix adjusted composite payment 

system portion of the blended rate during the transition to 

account for the per treatment costs of drugs that are currently 

paid under Part D. For the second part, we computed a factor 

that would make the estimated total amount of payments under the 

ESRD PPS, including payments under the transition, equal the 

estimated total amount of payments that would otherwise occur 

without such a transition. In this proposed rule, we are 

addressing both parts of the transition budget-neutrality 

adjustment. 
 

44 

For the first part of the transition budget-neutrality 

adjustment, for CY 2012, we propose to add the $0.49, which 

represents the CY 2011 Part D payment amount, to the composite 

rate portion of the ESRD PPS blended payment. We then propose 

to apply the ESRDB market basket minus productivity adjustment 

to the updated composite rate (which includes the $0.49). Since 

the composite rate is updated by the ESRDB market basket minus 

productivity and we are proposing to add the $0.49 to the 

composite rate, it would be consistent to use the same update. 

We believe that this approach is preferable to applying a growth 

factor to the $0.49 that is based on the rates for overall 

prescription drug prices that were used in the National Health 

Expenditure Projections, as we did for the establishment of the 

CY 2011 ESRD PPS base rate, because it is consistent with the 

update applied to the ESRD PPS base rate, which includes a per 

treatment amount for former Part D drugs (that is, $0.49). We 

discuss the addition of the $0.49 to the composite portion of 

the ESRD PPS payment in section I.c.1.a of this proposed rule. 

For the first part of the transition budget-neutrality 

adjustment, we are seeking comment on our proposal to add the 

CY 2011 Part D payment amount (that is, $0.49) to the composite 

rate portion of the blended payment and update it using the 

ESRDB market basket minus productivity adjustment. 
 

45 

For the second part, as described in the CY 2011 ESRD PPS 

proposed rule (74 FR 49946), to calculate the transition budgetneutrality adjustment, we first determined the estimated 

increases in payments under the transition and then determined 

an offset factor, based on estimates of which facilities would 

choose to opt out of the transition. We estimated the number of 

facilities that would choose to opt out of the transition by 

comparing payment under the transition to payment under the PPS 

and choosing the option that was financially beneficial to each 

facility. Using that approach, we estimated that 43 percent of 

facilities would choose to opt out of the transition and 

determined the transition budget-neutrality adjustment to be a 

reduction of 3.1 percent. In the April 6, 2011 interim final 

rule with comment (76 FR 18930 through 18934) published in the 

Federal Register, however, we revised the number of facilities 

that chose to opt out of the transition to 87 percent, based on 

actual election data that we received, and recalculated a 

transition budget-neutrality adjustment of 0 percent. 

Given that the transition budget-neutrality adjustment required 

under section 1881(b)(14)(A)(ii) of the Act applies in each year 

of the of the transition, we must update the transition budgetneutrality adjustment for CY 2012, the second year of the 

transition. As discussed in detail below, and in accordance 

with section 1881(b)(14)(E)(iii) of the Act, that requires an 
 

46 

adjustment to be made to payments so that total payments under 

the transition equal total payment amounts without such a 

transition, that results in the reduction of all payments to 

ESRD facilities in CY 2012 by a factor that is equal to 1 minus 

the ratio of estimated payments under the ESRD PPS if there were 

no transition to the total estimated payments under the 

transition. In this proposed rule, we are not proposing for 

CY 2012 to change the methodology used to calculate the second 

part of the budget-neutrality adjustment. We are, however, 

proposing to use more updated data. 

For CY 2012, we started with 2009 utilization data from 

claims, as 2009 is the latest complete year of claims data 

available. We updated the CY 2009 utilization data to CY 2011 

and CY 2012 payments by using the price growth factors for CY 

2011 and CY 2012, as discussed in the impact analysis in section 

VII of this proposed rule. We then took the estimated payments 

under the full CY 2012 ESRD PPS and the blended payments under 

the transition based on actual facility election data and 

compared these estimated payments to the total estimated 

payments in CY 2012 as if all facilities had elected to receive 

payment under the ESRD PPS. We then calculated the transition 

budget-neutrality factor to be 1 minus the ratio of estimated 

payments under the ESRD PPS if there were no transition to the 

total estimated payments under the transition, which results in 
 

47 

0 percent. Therefore, for CY 2012, we are proposing a 0 percent 

reduction to all payments made to ESRD facilities (that is, the 

0 percent adjustment would be applied to both the blended 

payments made under the transition and payments made under the 

100 percent ESRD PPS) for renal dialysis items and services 

furnished January 1, 2012 through December 31, 2012. We solicit 

comments on the proposed second part of CY 2012 transition 

budget-neutrality adjustment. 

5. Proposed Low-Volume Facility Provisions 

 In the CY 2011 ESRD PPS final rule, we established a lowvolume payment adjustment as required by section 

1881(b)(14)(D)(iii) of the Act, 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” (75 FR 49117). 

 We explained in the CY 2011 ESRD PPS final rule (75 FR 

49120) that we analyzed the effect of facility size on cost by 

analyzing the total treatment counts from ESRD facility cost 

reports for 2006, 2007, and 2008. We used all treatments 

including non-Medicare treatments from the cost reports because 

we believe that inclusion of all treatments regardless of payer 
 

48 

type represents the true volume of treatments that an ESRD 

facility furnishes (75 FR 49122). Because the analysis included 

data that spanned a 3-year period, we defined a low-volume ESRD 

facility as a facility that is able to maintain its low-volume 

status each year of the 3-year period because we believed that 

this timeframe provided us with a sufficient span of time to 

view consistency in business operations through the data (75 FR 

49123). 

 Our analysis showed that when compared to larger 

facilities, facilities that would be eligible for the low-volume 

adjustment are more likely to be located in a rural area, less 

likely to be part of a large dialysis organization (LDO), more 

likely to be hospital-based, likely to have a somewhat higher 

percentage of Medicare patients, more likely to be a pediatric 

facility, more likely to have previously received an isolated 

essential facility composite rate payment exception, and more 

likely to concentrate on home dialysis (75 FR 49120). 

 Under 42 CFR §413.232(b), a low-volume facility is as an 

ESRD facility that: (1) furnished less than 4,000 dialysis 

treatments in each of the 3 years preceding the payment year and 

(2) has not opened, closed, or received a new provider number 

due to a change in ownership during the 3 years preceding the 

payment year. Under §413.232(c), for purposes of determining 

the number of treatments furnished by the ESRD facility, the 
 

49 

number of treatments shall be equal to the aggregate number of 

treatments furnished by the 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 are Medicare certified 

on or after January 1, 2011. Section 413.232(f) requires an 

ESRD facility to provide an attestation statement to their 

respective fiscal intermediary medicare administrative 

contractor (FI/MAC) that the facility has met all the criteria 

in order to receive the low-volume adjustment. We note that 

furnishing 4,000 treatments in a year equates to approximately 

25 patients per year receiving three dialysis treatments a week 

(or hemo-equivalent treatments). The regulation at §413.232 

provides the criteria that an ESRD facility must meet to be 

eligible for the low-volume adjustment and uses the term 

“payment year.” Although we believe the meaning of this term is 

clear, in response to questions that we received subsequent to 

the publication of the CY 2011 ESRD PPS final rule demonstrating 

confusion between the payment year and eligibility year, we are 

clarifying that the term “payment year” is the period of time 

that we use for determining payment to ESRD facilities, which is 

a calendar year. We are also clarifying that the eligibility 

years means the 3 years preceding the payment year and that the 

eligibility years are based on cost reporting years. We are 
 

50 

making this clarification to ensure that ESRD facilities and 

their respective FI/MACs understand the distinction between 

eligibility (which is based on cost reporting years) and the 

payment year (when ESRD facilities can begin to receive the lowvolume payment adjustment). 

 In this proposed rule, we also are proposing to establish 

the process, for CY 2012 and each year thereafter that an ESRD 

facility would be required to follow when submitting its 

attestation to notify its FI/MAC that it is eligible for the 

low-volume payment adjustment. The attestation is required 

because: (1) the ESRD facility’s cost reporting periods vary and 

may not be based on the calendar year; and (2) the cost reports 

are due 5 months after the close of the cost reporting period 

(that is, there is a lag in the cost reporting submission). 

Thus, the FI/MACS may not have the cost report for the third 

year to determine eligibility and will need to rely on the 

attestation for that year. If an ESRD facility believes that it 

is eligible for the low-volume adjustment, we are proposing that 

the ESRD facility would be required to submit an attestation to 

its respective FI/MAC no later than November 1st of each year. 

This timeframe provides 60 days for a FI/MAC to verify the cost 

report information and update the systems. For example, for 

payment year 2012 (January 1, 2012 through December 31, 2012), 

ESRD facilities that believe they are eligible for the low-
 

51 

volume adjustment must submit an attestation to their respective 

FI/MAC no later than November 1, 2011 (with regard to its lowvolume status based on services furnished in its cost reporting 

period ending in 2009, 2010, and 2011). 

 ESRD facilities that are receiving the low-volume 

adjustment for the CY 2011 payment year should submit another 

attestation to their respective FI/MAC no later than 

November 1, 2011, to qualify for the low-volume adjustment for 

the CY 2012 payment year. Thus, for an attestation applicable 

to the 2012 payment year, the ESRD facility would attest that it 

meets the low-volume facility requirements based on its cost 

reporting periods ending in 2009, 2010, and 2011. The ESRD 

facility would continue to attest that it is a low-volume 

facility for each subsequent payment year it believes it is 

eligible for the low-volume facility adjustment. 

 As we indicated above, we propose that attestations be 

submitted to the FI/MAC no later than November 1 preceding each 

payment year to allow the FI/MACs time to review the attestation 

and ensure that accurate payment is made for renal dialysis 

services provided on or after January 1. We suggest that ESRD 

facilities submitting a low-volume attestation verify that the 

attestation has been received by the appropriate FI/MAC prior to 

the November 1 deadline. In the event that a dialysis 

organization submits the low-volume attestation on behalf of its 
 

52 

ESRD facilities, the dialysis organization will be required to 

identify each ESRD facility by name and provider number and 

submit them by the November 1 deadline. 

 If the FI/MAC does not receive an ESRD facility’s 

attestation stating that the ESRD facility is eligible for the 

low-volume adjustment on or before November 1 prior to the 

payment year, the ESRD facility would not receive the low-volume 

adjustment for that payment year. 

 In this proposed rule, with regard to the deadline for 

attestation submission, we are proposing to amend the regulation 

text at §413.232(f) to require an ESRD facility to submit its 

attestation no later than November 1. This requirement would 

provide FI/MACs time to review and verify ESRD facilities lowvolume eligibility. We are soliciting comment on the proposed 

regulation text changes at §413.232(f). 

 Under §413.232(b)(1) and (b)(2), a low-volume facility is 

defined as an ESRD facility that “furnished less than 4,000 

treatments in each of the 3 years preceding the payment year” 

and “has not opened, closed, or had a change in ownership in the 

3 years preceding the payment year” (emphasis added). In 

response to comments we received subsequent to the CY 2011 ESRD 

PPS final rule, we are clarifying the meaning of the term 

“years” in this regulation, with regard to the treatment 

threshold that determines low-volume eligibility, and how it 
 

53 

relates to the “payment year.” We are providing this additional 

clarification to emphasize because there are ESRD facilities 

that do not have cost reporting periods that fall on a calendar 

year period (January 1 through December 31), and there may be 

confusion about how the eligibility year relates to the payment 

year. Specifically, we emphasize again that for the purpose of 

low-volume eligibility, the term “years” refers to cost 

reporting periods because low-volume eligibility is determined 

based on the ESRD facility’s cost report. For example, an ESRD 

facility’s cost reporting period could span a fiscal year rather 

than a calendar year. However, the low-volume payment 

adjustment is paid according to the ESRD PPS payment year (that 

is, the calendar year). Accordingly, FI/MACs are reviewing the 

ESRD facility’s cost reporting periods ending in the 3 years 

preceding the payment year for low-volume eligibility, and those 

cost reporting periods may not necessarily be calendar years 

(January 1 to December 31). 

 We believe that it is also important to reiterate that the 

ESRD facility’s cost reports for the cost reporting periods 

ending in the 3 years immediately preceding the payment year, as 

discussed above, must report costs for 12-consecutive months. 

For example, an FI/MAC would not consider a short period cost 

report (that is, reporting costs for less than 12 months which 

may occur for new facilities or facilities under new ownership), 
 

54 

for low-volume eligibility. Specifically, when an ESRD facility 

is assessing its eligibility for the low-volume adjustment and 

preparing its attestation, the ESRD facility would look at its 

12-consecutive month cost reports for the cost reporting periods 

that end in the 3 years immediately preceding the payment year. 

 We acknowledge that the FI/MAC may not have a final-settled 

cost report for all 3 years needed to complete the ESRD 

facility’s verification. For example, using a June 30th cost 

reporting period year end, for purposes of determining lowvolume eligibility, the ESRD facility would need to have met the 

low-volume criteria for their cost reporting periods ending on 

June 30, 2009, June 30, 2010, and June 30, 2011, to begin to 

receive the low-volume adjustment January 1, 2012. The FI/MAC 

should have the ESRD facility’s cost reports for 2009 and 2010 

and both years should be either final-settled or as-filed (that 

is, submitted to and accepted by the FI/MAC) and such cost 

reports should be for 12-consecutive months in each of the 

2 years. The facility would be required to submit an 

attestation for all 3 years, including the third eligibility 

year because the cost report for that year is not available and 

no cost report has been submitted. 

 Therefore, in this rule, we propose to amend the 

regulations text at §413.232(b)(1) and (b)(2) to clarify the 

type of year that is used for determining low-volume 
 

55 

eligibility. This change in the regulations text also provides 

clarification to the ESRD facilities and the FI/MACs that in the 

absence of an ESRD facility’s final settled cost report, an 

FI/MAC can review the ESRD facility’s as-filed cost report when 

determining if an ESRD facility meets the low-volume criteria. 

We believe that it is appropriate for the FI/MAC to determine 

eligibility based upon an as-filed cost report because the 

number of total treatments should not change between submission 

of the as-filed cost report and the final settled cost report. 

We are soliciting comment on the proposed changes at 

§413.232(b)(1) and (b)(2). 

 Continuing with the example discussed above in which we 

address an ESRD facility with a cost reporting year that ends on 

June 30, the ESRD facility attests to its FI/MAC that it met the 

low-volume criteria for its cost reporting periods ending in 

2009 and 2010 and that it expects to meet the low-volume 

criteria for its cost reporting period ending in 2011. The ESRD 

facility’s cost report for its cost reporting period ending in 

2011 is the third year that is needed to meet the criteria 

specified at §413.232 for purposes of the 2012 payment year. If 

the FI/MAC receives the ESRD facility’s cost report for 2011 and 

finds that the ESRD facility did not meet the low-volume 

criteria in its cost reporting period ending on June 30, 2011 

(that is, the third eligibility year), the FI/MAC will 
 

56 

discontinue application of the low-volume adjustment to the 

facility’s payments for CY 2012 because the facility was not 

eligible for the adjustment. If the ESRD facility does not 

remain low-volume for each of the 3 years (12-consecutive month 

cost reporting periods) immediately preceding the payment year, 

the ESRD facility will not be eligible for the low-volume 

adjustment until it can demonstrate again that for 3 years (12-

consecutive month cost reporting periods) it met the low-volume 

criteria.

6. Proposed Update to the Drug Add-on to the Composite Rate 

Portion of the ESRD Blended Payment Rate 

 Section 1881(b)(14)(E)(i) of the Act requires a four-year 

transition under the ESRD PPS. Under §413.239, ESRD facilities 

were permitted to make a one-time election by November 1, 2011, 

to be excluded from the transition and receive full payment 

under the ESRD PPS. Under §413.239, in CY 2012, ESRD facilities 

that elected to receive payment under the transition will be 

paid a blended amount that will consist of 50 percent of the 

basic case-mix adjusted composite payment system and 50 percent 

on the ESRD PPS payment. Thus, we must continue to update the 

composite rate portion of the blended payment amount during the 

ESRD PPS 4-year transition (CYs 2011 through 2013), which 

includes an update to the drug add-on, the application of the 

wage index, and an update to the composite rate portion of the 
 

57 

ESRD PPS blended payment amount for the second year (CY 2012) of 

the ESRD PPS. The proposed wage index and composite rate 

portion of the ESRD PPS blended payment are discussed in 

sections I.C.7 and I.C.1.a of this proposed rule. 

 As required under section 1881(b)(12) of the Act, the basic 

case-mix adjusted composite payment system includes services 

comprising the composite rate and an add-on to the composite 

rate component to account for the difference between pre-MMA 

payments for separately billed drugs and the revised drug 

pricing specified in the statute. For the drug add-on for CY 

2012, in this proposed rule, we are not proposing any changes to 

the methodology but are merely updating the data used in 

computing the drug add-on as described below. 

a. Estimating Growth in Expenditures for Drugs and Biologicals 

in CY 2012 

 Section 1881(b)(12)(F) of the Act specifies that the drug 

add-on increase must reflect “the estimated growth in 

expenditures for drugs and biologicals (including 

erythropoietin) that are separately billable... ”. By referring 

to “expenditures”, we believe the statute contemplates that the 

update would account for both increases in drug prices, as well 

as increases in utilization of those drugs. 

In order to account for increases in drug prices and 

utilization, since we now have 5 years of drug expenditure data 
 

58 

based on ASP pricing, for CY 2012, we continue estimating growth 

in drug expenditures based on the trends in available data. We 

then removed growth in enrollment for the same time period from 

the expenditure growth so that the residual reflects the per 

patient expenditure growth (which includes price and utilization 

combined). 

To estimate drug expenditure growth using trend analysis, 

for CY 2012, we looked at the average annual growth in total 

drug expenditures between 2006 and 2010. First, we estimated 

the total drug expenditures for all ESRD facilities in CY 2010. 

We used the final CY 2006 through CY 2009 ESRD claims data and 

the latest available CY 2010 ESRD facility claims, updated 

through December 31, 2010 (that is, claims with dates of service 

from January 1 through December 31, 2010, that were received, 

processed, paid, and passed to the National Claims History File 

as of December 31, 2010). For the CY 2012 PPS final rule, we 

intend to use additional updated CY 2010 claims with dates of 

service for the same timeframe. This updated CY 2010 data file 

will include claims received, processed, paid, and passed to the 

National Claims History File as of June 30, 2011. While the 

CY 2010 claims file used in this proposed rule is the most 

current available, we recognize that it does not reflect a 

complete year, as claims with dates of service towards the end 

of the year have not all been processed. To more accurately 
 

59 

estimate the update to the drug add-on, completed aggregate drug 

expenditures are required. 

 Next, for CY 2012, based on an analysis of the 2009 claims 

data, we inflated the CY 2010 drug expenditures to estimate the 

June 30, 2011 update of the 2010 claims file. We used the 

relationship between the December 2009 and the June 2010 

versions of 2009 claims to estimate the more complete 2010 

claims that will be available in June 2011 and applied that 

ratio to the 2010 claims data from the December 2010 claims 

file. The net adjustment to the CY 2010 claims data is an 

increase of 11.62 percent to the 2010 expenditure data. This 

adjustment allows us to more accurately compare the 2009 and 

2010 drug expenditure data to estimate per patient growth. 

 Using the completed full-year 2010 drug expenditure figure, 

we calculated the average annual change in drug expenditures 

from 2006 through 2010. This average annual change showed an 

increase of 1.4 percent in drug expenditures from 2006 through 

2010. We used this 1.4 percent increase to project drug 

expenditures for both 2011 and 2012. 

b. Estimating Per Patient Growth 

 Once we had the projected growth in drug expenditures from 

2011 to 2012, we calculated per patient growth between CYs 2011 

and 2012 by removing the estimated growth in enrollment data 

between CY 2011 and CY 2012. We estimate a 4.2 percent 
 

60 

estimated growth in enrollment between CY 2011 and CY 2012. To 

obtain the per-patient estimated growth in expenditures, we 

divided the total drug expenditure change between 2011 and 2012 

(1.014) by enrollment growth of 4.2 percent (1.042) for the same 

timeframe. The result is a per-patient growth factor equal to 

0.973 (1.014/1.042 = 0.973). Thus, we are projecting a 

2.7 percent decrease (2.7% =.027=0.973-1) in per patient growth 

in drug expenditures between 2011 and 2012. 

c. Applying the Proposed Growth Update to the Drug Add-On 

Adjustment 

In the CY 2006 PFS final rule (71 FR 69683), we applied the 

projected growth update percentage to the total amount of drug 

add-on dollars established for CY 2005 to establish a dollar 

amount for the CY 2006 growth update. In addition, we projected 

the growth in dialysis treatments for CY 2006 based on the 

projected growth in ESRD enrollment. We divided the projected 

total dollar amount of the CY 2006 growth by the projected 

growth in total dialysis treatments to develop the per treatment 

growth update amount. This growth update amount, combined with 

the CY 2005 per treatment drug add-on amount, resulted in an 

average drug add-on amount per treatment of $18.88 (or a 14.5 

percent adjustment to the composite rate) for CY 2006. 

In the CY 2007 PFS final rule with comment period (71 FR 

69684), as a result of public comments, we revised our update 
 

61 

methodology by applying the growth update to the per treatment 

drug add-on amount. That is, for CY 2007, we applied the growth 

update factor of 4.03 percent to the $18.88 per treatment drug 

add-on amount resulting in an updated per treatment drug add-on 

amount of $19.64 per treatment (71 FR 69684). For CY 2008, the 

per treatment drug add-on amount was updated to $20.33. In the 

CY 2009, 2010 and 2011 PFS final rule with comment period (73 FR 

69755 through 69757, 74 FR 61923, and 75 FR 73485, 

respectively), we applied a zero update to the per treatment 

drug add-on amount resulting in a per treatment drug add-on 

amount of $20.33. As discussed in detail below, for CY 2012, we 

are again proposing no update to the per treatment drug add-on 

amount of $20.33 established in CY 2008. 

d. Proposed Update to the Drug Add-On Adjustment for CY 2012 

 As discussed above, we estimate a 1.4 percent increase in 

drug expenditures between CY 2011 and CY 2012. Combining this 

increase with a 4.2 percent increase in enrollment, as described 

above, we are projecting a 2.7 percent decrease in per patient 

growth of drug expenditures between CY 2011 and CY 2012. 

Therefore, we are projecting that the combined growth in per 

patient utilization and pricing for CY 2012 would result in a 

decrease to the drug add-on equal to 0.4 percentage points. 

This figure is derived by applying the 2.7 percent decrease to 

the CY 2011 drug add-on of $20.33. This would result in a 
 

62 

revised drug add-on of $19.78, which is 14.0 percent of the 

proposed CY 2012 base composite rate of $141.52. If we were to 

apply no decrease to the drug add-on of $20.33, this would 

result in 14.4 percent drug add-on. However, similar to last 

year and as indicated above, we are proposing a zero update to 

the drug add-on adjustment. We believe this approach is 

consistent with the language under section 1881(b)(12)(F) of the 

Act which states in part that “the Secretary shall annually 

increase” the drug add-on amount based on the growth in 

expenditures for separately billed ESRD drugs. Our 

understanding of the statute contemplates “annually increase” to 

mean a positive or zero update to the drug add-on. Therefore, 

we propose to apply a zero update and maintain the $20.33 per 

treatment drug add-on amount for CY 2012. We are seeking 

comment on our proposed zero update to the drug add-on. 

The current $20.33 per treatment drug add-on reflected a 

14.7 percent drug add-on adjustment to the composite rate in 

effect for CY 2011. As discussed in section I.c.2.b of this 

proposed rule, section 1881(b)(14)(F) of the Act requires that 

an ESRDB market basket minus productivity adjustment be used to 

update the composite rate portion of the ESRD PPS payment 

(forecast of 1.8 percent in 2012 effective January 1, 2012), 

resulting in a decrease to the CY 2012 drug add-on adjustment 

from 14.7 to 14.4 percent to maintain the drug add-on at $20.33. 
 

63 

This decrease occurs because the drug add-on adjustment is a 

percentage of the composite rate. Since the proposed CY 2012 

composite rate is higher than the CY 2011 composite rate, and 

since the drug add-on remains at $20.33, the percentage 

decreases. Therefore, we are proposing a drug add-on 

adjustment to the composite rate for CY 2012 of 14.4 percent. 

7. Updates to the Wage Index Values and Wage Index Floor For 

the Composite Portion of the ESRD PPS Blended Payment and Under 

the ESRD PPS Payment 

Section 1881(b)(14)(D)(iv)(II) of the Act provides that the 

ESRD PPS may include such other payment adjustments as the 

Secretary determines appropriate, such as a payment adjustment 

by a geographic wage index, such as in the index referred to in 

section 1881(b)(12)(D), as the Secretary determines appropriate. 

In the CY 2011 ESRD PPS final rule (75 FR 49117 through 49117) 

and CY 2011 PFS final rule (75 FR 73486), we finalized the wage 

index policy under the ESRD PPS. Specifically, under the ESRD 

PPS, we have adopted the same method and source of wage index 

values used previously for the basic case-mix adjusted composite 

payment system. 

We use Office of Management and Budget’s (OMB’s) Core Based 

Statistical Area (CBSA)-based geographic area designations to 

define urban/rural areas and corresponding wage index values. 

In addition, the wage index values used under the ESRD PPS are 
 

64 

the inpatient prospective payment system (IPPS) wage index 

values calculated without regard to geographic reclassifications 

authorized under sections 1881(d)(8) and (d)(10) of the Act, and 

utilize pre-floor hospital data that are unadjusted for 

occupational case mix. The CBSA-based geographic area 

designations are described in OMB Bulletin 03-04, originally 

issued June 6, 2003, and available online at 

http://www.whitehouse.gov/omb/bulletins/b03-04.html. In 

addition, OMB has published subsequent bulletins regarding CBSA 

changes, including changes in CBSA numbers and titles. We wish 

to point out that this and all subsequent ESRD rules and notices 

are considered to incorporate the CBSA changes published in the 

most recent OMB bulletin that applies to the hospital wage index 

used to determine the current ESRD wage index. The OMB 

bulletins may be accessed online at 

http://www.whitehouse.gov/omb/bulletins/index.html. 

Under the ESRD PPS, we have adopted a wage index floor 

during the transition, though as we previously noted, we intend 

to gradually reduce the ESRD wage index floor (75 FR 49117, 75 

FR 73486). We also use the labor-related share for both the 

ESRD PPS and the composite rate portion of the blend, as 

measured by the ESRDB market basket (see section I.c.2.b of this 

proposed rule). Finally, the wage data used to construct the 

wage index under the ESRD PPS is updated annually, based on the 
 

65 

most current data available and based on OMB’s rural definitions 

and corresponding wage index values. 

With regard to the transition, as we noted in the CY 2011 

PFS final rule (75 FR 40163), because ESRD facilities could 

elect to receive a blended payment during the transition, we 

would continue to update the composite rate portion of the ESRD 

PPS blended payment, including adjusting payments for geographic 

differences in area wage levels, as noted above. We also 

discussed the application of the wage index budget-neutrality 

adjustment factor to the area wage index values for the 

composite rate portion of the ESRD PPS blended payment. In this 

proposed rule, we are not proposing any changes to the 

methodology for the wage index used to adjust the composite rate 

portion of the ESRD PPS blended payment. However, we are 

proposing to update the wage index values and the wage index 

budget-neutrality adjustment factor for CY 2012 for the 

composite rate portion of the blended payment under the 

transition. 

In addition, in this proposed rule, we are not proposing to 

make any changes to the methodology for updating the CY 2012 

wage index under the ESRD PPS (that is, for full ESRD PPS 

payments and the ESRD PPS portion of the blended payment under 

the transition). However, we are proposing a wage index budgetneutrality adjustment factor to be applied in CY 2012 and in 
 

66 

subsequent years for the ESRD PPS which is discussed in detail 

below. 

a. Proposed Reduction to the ESRD Wage Index Floor 

In the CY 2011 ESRD PPS final rule, we stated our intention 

to continue to reassess the need for a wage index floor (75 FR 

49117). The wage index floor for CY 2011 is 0.600. For CY 2012 

and CY 2013, we propose to continue to reduce the wage index 

floor by 0.05 for each of the remaining years of the transition 

(that is, for CY 2012, the wage index value would be reduced 

from 0.600 to 0.550, and further reduced to 0.500 for CY 2013). 

The ESRD wage index floor value of 0.550 would be applied to 

areas that are below the proposed wage index floor of 0.550. 

Beginning January 1, 2014, we propose that the wage index floor 

would no longer be applied because the wage index floor would be 

equal to or lower than areas with low wage index values. We 

continue to believe that a gradual reduction in the floor is 

needed to support continuing patient access to dialysis in areas 

that have low wage index values, especially in areas where the 

wage index values are below the current wage index floor – 

specifically, ESRD facilities located in Puerto Rico. 

b. Proposed Policies for Areas With no Hospital Data 

In the CY 2011 ESRD PPS final rule (75 FR 49117), we 

finalized the same methodology we have used for areas with no 

hospital data in the past, that is, we compute the average wage 
 

67 

index value of all urban areas within the State and use that 

value as the wage index. In this proposed rule, we are not 

proposing to change the methodology that we have used in the 

past to compute a wage index value for areas with no hospital 

data 

We are for CY 2012 and for future years, proposing to 

continue to use the methodology we adopted for identifying the 

small number of ESRD facilities in both urban and rural 

geographic areas where there are no hospital wage data from 

which to calculate ESRD wage index values that we have used for 

CYs 2006 through 2010 under the composite payment system and for 

CY 2011 and which we described in the ESRD PPS final rule (75 FR 

49116). Thus far, we note the following affected areas: rural 

Puerto Rico, Yuba, CA (CBSA 49700) and the urban area 

Hinesville-Fort Stewart, GA (CBSA 25980). 

For rural Puerto Rico, because all wage index values in 

Puerto Rico are below the wage index floor, we previously used 

the wage index floor as the wage index value for Puerto Rico. 

For CY 2012 and CY 2013, we propose to continue to use the 

methodology we have previously used for computing the wage index 

for Puerto Rico, that is, use the ESRD wage index floor. 

c. Proposed Wage Index Budget-Neutrality Adjustment 

As noted above, we have broad discretion under section 

1881(b)(14)(D)(iv)(II) of the Act to develop a geographic wage 
 

68 

index. In addition, that section cites the wage index under the 

basic case-mix adjustment payment system as an example. We have 

previously interpreted the statute for the prior basic case-mix 

adjusted composite payment system (section 1881(b)(12)(D) of the 

Act) as requiring that the geographic adjustment be made in a 

budget-neutral manner. In CY 2011, we did not apply a wage 

index budget-neutrality adjustment factor under the ESRD PPS 

because budget-neutrality was achieved through the overall 98 

percent budget-neutrality requirement in section 

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

Given our authority to develop a wage index under section 

1881(b)(14)(D)(iv)(II) of the Act, as well as the authority to 

use the geographic index under section 1881(b)(12)(D) of the Act 

(for purposes of the ESRD PPS geographic payment adjustment 

under section 1881(b)(14)(D)(iv)(II) of the Act), we propose to 

apply the wage index in a budget-neutral manner under the ESRD 

PPS using a wage budget-neutrality adjustment factor. However, 

as we discuss in greater detail below, with regard to the 

application of the wage index budget-neutrality adjustment 

factor, we are proposing that under the ESRD PPS, we would apply 

a wage index budget-neutrality adjustment factor to the ESRD PPS 

base rate. 

Under the basic case-mix adjustment composite payment 

system, we began applying the wage index budget-neutrality 
 

69 

adjustment factor in CY 2006 (70 FR 70171). During the 

transition, we are not proposing to change the application of 

the wage index budget-neutrality adjustment to the wage index of 

the composite rate portion of the ESRD PPS blended payment, 

because we do not believe that we should make changes to the 

methodology for updating the composite rate portion of the ESRD 

PPS blended payment as the composite rate portion of the blended 

payment will no longer apply after the transition ends in CY 

2014. We believe that continuing to apply the budget-neutrality 

adjustment to the wage index for the composite rate portion of 

the ESRD PPS blended payment allows ESRD facilities going 

through the transition to continue to use a methodology that 

they are accustomed to and one that may have been the basis for 

facilities electing to receive a blended payment during the 

transition. However, under the ESRD PPS, we believe by applying 

the wage index budget-neutrality adjustment factor to the ESRD 

PPS base rate, we would be consistent with the application of 

the wage index budget-neutrality adjustment factor in other 

prospective payment systems. We also believe that applying the 

wage index budget-neutrality adjustment factor to the ESRD PPS 

base rate is simpler and more straightforward in application and 

calculation. Applying the wage index budget-neutrality 

adjustment factor to the ESRD PPS base rate produces results 

that are not measurably different from applying the adjustment 
 

70 

factor to the wage index, as is done for the composite rate 

portion of the blended payment during the transition. 

We are seeking comment on our proposal to apply the wage 

index budget-neutrality adjustment factor to the ESRD PPS base 

rate for purposes of the ESRD PPS payments and the ESRD PPS 

component of the ESRD PPS payments during the transition. 

As discussed above, we are not proposing any changes to the 

wage index budget-neutrality adjustment factor application for 

the composite rate portion of the ESRD PPS payment. We would 

continue to apply the wage-index budget-neutrality adjustment 

factor directly to the ESRD wage index values for the composite 

rate portion of the ESRD PPS blended payment for CY 2012 and CY 

2013. Because the ESRD wage index is only applied to the laborrelated portion of the composite rate, we computed the wage 

index budget-neutrality adjustment factor based on that portion. 

That is, the labor portion of the composite rate portion of the 

ESRD PPS blended payment of 53.711 percent. This labor-related 

share was developed from the labor-related components of the 

1997 ESRD composite rate market basket that was finalized in the 

2005 PFS final rule (70 FR 70168). 

As we discussed above, in CY 2012, we are proposing to 

apply the wage index budget-neutrality adjustment factor to the 

ESRD PPS base rate. That is, the wage index budget-neutrality 

adjustment factor, which includes 41.737 percent labor portion 
 

71 

of the ESRD PPS payment rate. 

To compute the proposed CY 2012 wage index budgetneutrality adjustment factors, we used the fiscal year (FY) 2012 

pre-floor, pre-reclassified, non-occupational mix-adjusted 

hospital data to compute the wage index values, 2010 outpatient 

claims (paid and processed as of December 31, 2010), and 

geographic location information for each facility which may be 

found through Dialysis Facility Compare Web page on the CMS 

Website at http://www.cms.hhs.gov/DialysisFacilityCompare/. The 

FY 2012 hospital wage index data for each urban and rural locale 

by CBSA may also be accessed on the CMS Website at 

http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp. The 

wage index data are located in the section entitled, ”FY 2012 

Proposed Rule Occupational Mix Adjusted and Unadjusted Average 

Hourly Wage and Pre-Reclassified Wage Index by CBSA.” 

For this proposed rule, using treatment counts from the 

2009 claims and facility-specific CY 2011 payment rates, we 

computed the estimated total dollar amount each ESRD provider 

would have received in CY 2011. The total of these payments 

became the target amount of expenditures for all ESRD facilities 

for CY 2012. Next, we computed the estimated dollar amount that 

would have been paid for the same ESRD facilities using the 

proposed ESRD wage index for CY 2012. The total of these 

payments becomes the new CY 2012 amount of wage-adjusted payment 
 

72 

rate expenditures for all ESRD facilities. 

After comparing these two dollar amounts (target amount 

divided by the new CY 2012 amount), we calculated two wage index 

budget-neutrality adjustment factors that when multiplied by the 

applicable CY 2012 estimated payments would result in aggregate 

payments to ESRD facilities that would remain budget-neutral 

when compared against the target amount of payment rate 

expenditures. One factor would be applied to the ESRD PPS base 

rate. The second factor would be applied to the wage index 

value for the composite rate portion of the ESRD PPS payment. 

Therefore, in this proposed rule, for CY 2012, we are proposing 

a wage index budget-neutrality adjustment factor for the 

composite portion of the ESRD PPS blended payment of 1.002096, 

which would be applied directly to the ESRD wage index values. 

For the ESRD PPS (that is, for the full ESRD PPS payments and 

the ESRD PPS portion of the blended payments during the 

transition), we are proposing to apply a wage index budgetneutrality adjustment factor of 1.001126 to the ESRD PPS base 

rate. 

Because we are proposing to apply the wage index budgetneutrality adjustment factor to the wage index values to ensure 

budget-neutrality under the composite rate portion of the ESRD 

PPS blended payment, we also applied the wage index budgetneutrality adjustment factor to the wage index floor of 0.550 
 

73 

which results in an adjusted wage index floor of 0.551(0.550 x 

1.002096) for CY 2012. 

d. ESRD PPS Wage Index Tables 

The CY 2012 ESRD proposed wage index tables, referred to as 

Addendum A (ESRD facilities located in urban areas), and 

Addendum B (ESRD facilities located in rural areas) are posted 

on the CMS Website at: 

http://www.cms.gov/ESRDPayment/PAY/list.asp. The wage index 

tables list two separate columns of wage index values. One 

column represents the wage index values for the composite 

portion of the blended payment to which the wage index budgetneutrality adjustment factor has been applied. Another column 

lists the wage index values for the ESRD PPS, which does not 

reflect the application of the wage index budget-neutrality 

adjustment factor, because as we discussed above, we are 

proposing to apply the wage index budget-neutrality adjustment 

factor to the ESRD PPS base rate. 

8. Drugs 

a. Vancomycin 

In the CY 2011 ESRD PPS final rule (75 FR 49050 through 

49052), we stated that antibiotics used for the treatment of 

venous access infections and peritonitis, are renal dialysis 

services under the ESRD PPS. Payments for anti-infective drugs 

in injectable forms (covered under Part B) and oral or other 
 

74 

forms of administration (formerly covered under Part D) used in 

the treatment of ESRD, were included in computing the final ESRD 

PPS base rate and, therefore, would not be separately paid under 

the ESRD PPS. We also noted that the oral versions of 

Vancomycin are not used for ESRD-related conditions and, 

therefore, would not be considered a renal dialysis service. We 

further stated that any anti-infective drugs or biologicals used 

for the treatment ESRD-related conditions would be considered a 

renal dialysis service and, therefore, not eligible for separate 

payment. This policy also applies to any drug or biological 

that may be developed in the future. 

Since the publication of the CY 2011 ESRD PPS final rule, 

we received numerous comments indicating that Vancomycin is 

indicated for both ESRD and non-ESRD conditions, such as skin 

infections. After consultation with our medical experts, we 

concur with our commenters. Therefore, in this proposed rule, 

we are proposing to eliminate the restriction on Vancomycin to 

allow ESRD facilities to receive separate payment by placing the 

AY modifier on the claim for Vancomycin when furnished to treat 

non-ESRD related conditions. In accordance with ICD-9 

guidelines as described in the ESRD PPS final rule (75 FR 

49107), the ESRD facility would also be required to indicate the 

diagnosis code for which the Vancomycin is indicated. We note 

that treatment of any skin infection that is related to renal 
 

75 

dialysis access management would be considered a renal dialysis 

service and would continue to be paid under the ESRD PPS, and no 

separate payment would be made. We are soliciting public 

comments on our proposal to eliminate the restriction on 

Vancomycin to allow ESRD facilities to receive separate payment 

for these drugs when furnished to treat non-ESRD related 

conditions. 

b. Drug Overfill 

In the CY 2011 PFS final rule (75 FR 73466), we explained 

the methodology for Part B payment for drugs and biologicals 

which includes intentional overfill, and that the Medicare 

average sales price (ASP) payment limit is based on the amount 

of drug conspicuously indicated on the labeling approved by the 

Food and Drug Administration (FDA). We indicated that we have 

become aware of situations where manufacturers intentionally 

included a small amount of overfill in drug containers, and that 

this overfill is provided at no extra charge to the provider. 

We also noted that the intent of the intentional overfill was to 

compensate for product loss during the proper preparation and 

administration of a drug. We explained that ASP calculations 

are based on data reported by manufacturers, including “volume 

per item”. Therefore, providers may only bill for the amount of 

drug product actually purchased and the cost that the product 

represents (75 FR 73467). 
 

76 

This Part B provision applies under the ESRD PPS. ESRD 

facilities receiving blended payments under the ESRD PPS 

transition will receive payments based on ASP for separately 

billable ESRD drugs and biologicals for the composite rate 

portion of the blend. In addition, under the ESRD PPS outlier 

policy, the ESRD-related drugs that ESRD facilities report on 

claims are priced for the outlier policy based on ASP. 

Therefore, ESRD facilities may only report units and charges for 

drugs or biologicals actually purchased. 

9. Proposed Revisions to Patient-Level Adjustment for Body 

Surface Area (BSA) 

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

bundled ESRD PPS must include a payment adjustment based on 

case-mix that may take into account patient weight, body mass 

index (BMI), body surface area (BSA), and other appropriate 

factors. In the CY 2077 ESRD PPS final rule, we explained that 

we evaluated height and weight because the combination of these 

two characteristics allows us to analyze two measures of body 

size: BSA and BMI. We further explained that both body size 

measures are strong predictors of variation in payment for ESRD 

patients (75 FR 49089 through 49090). As a result, in 

developing the ESRD PPS, we established a case-mix patient level 

adjustment for BSA that would be applied to each 0.1 m2 change 

in BSA compared to the national average (1.02). 
 

77 

 In this proposed rule, we are proposing to make one change 

related to the use of the national BSA average value used in the 

calculation of the BSA adjustment applied to the composite rate 

portion of the blended payment for those dialysis facilities 

that undergo the transition. We believe this change is 

necessary because we believe that the BSA national average used 

to compute payment under the composite portion of the ESRD PPS 

blended rate and under the ESRD PPS should be both the most 

recent and consistent measurement available. For CY 2011, the 

BSA adjustment we calculated for the composite rate portion of 

the ESRD PPS blended rate used the BSA national average of 1.84, 

which reflected the average among Medicare dialysis patients in 

2002. However, the BSA national average we used for computing 

the BSA under the ESRD PPS was 1.87, which reflects the average 

among Medicare dialysis patients in 2007. We did not realize 

that we had used 2 different national averages in CY 2011, nor 

was it brought to our attention during the comment period. We 

are proposing that for CY 2012 and in subsequent years, to use 

one national average for computing the BSA under the composite 

portion of the blended payment during the transition and under 

the ESRD PPS. 

In the CY 2004 PFS final rule (69 FR 66329), we explained 

that the BSA factor was defined as an exponent equal to the 

value of the patient’s BSA minus the reference. If, for 
 

78 

example, a beneficiary with a BSA of 1.94 using the CY 2011 

national average of 1.84 under the composite rate would yield a 

BSA adjustment factor of 1.0370. For the same patient using the 

national average used for the CY 2011 ESRD PPS BSA computation 

using 1.87 would yield a BSA adjustment factor of 1.0258, or a 

ratio or proportional difference of 1.0258 divided by 1.0370 

equals .9892 difference the between the two BSA adjustment 

factors. This corresponds to a reduction of 1.08 percent (1 - 

0.9892 = 0.0108) in the composite rate payment for ages 18 and 

older by increasing the BSA reference value from 1.84 to 1.87. 

The impact on facility payments of increasing the composite 

rate BSA reference value from 1.84 to 1.87 is shown in Table 3 

for each year from 2011 to 2014. These results apply only to 

dialysis facilities that go through the transition. The impact 

on facility payments would have been greatest in 2011, where the 

blended payment during the transition period was weighted more 

heavily towards the composite rate/separately billable system, 

and declines through 2014 when there is no impact on facility 

payments under a fully implemented expanded PPS. 

The impact on the average payment in 2012 was calculated as 

-0.0108 * 0.9979 * 0.6498 * 0.50 = -0.350 percent. That is, the 

average facility payment for those facilities electing the ESRD 

PPS transition would be reduced by approximately 0.35 percent in 

2012. We derived the -0.350 percent reduction from the 
 

79 

following factors: the estimated reduction in BSA multipliers 

due to the increase in the BSA reference value (-0.0108); the 

proportion of patients 18 and older (0.9979); the percentage of 

composite rate and separately billable payments that are 

composite rate payments (0.6498); and the percentage of 

composite rate payments in CY 2012 (0.50). This reduction only 

applies to those ESRD facilities that elected to receive blended 

payments during the transition. 

Therefore, we are proposing for CY 2012, to use the latest 

national average (that is, 1.87) as the reference point for the 

computation of the BSA adjustment for both the composite rate 

portion of the ESRD PPS blended payment and for the ESRD PPS. 

We are also proposing that we will review the BSAs on CY 2012 

claims (and every 5 years thereafter) to determine if any 

adjustments to the national average will be required in the 

future. We are seeking comments on the proposal to use one 

national BSA average to compute the BSA under the composite 

Table 3

Year

CR/SB portion of total

facility payments during 

transition period

Change in average

facility payment

2011 0.75 -0.525%

2012 0.50 -0.350%

2013 0.25 -0.175%

2014 0.00 0.000%

Impact on average facility payments of increasing the 

composite rate BSA reference value from 1.84 to 1.87
 

80 

portion of the ESRD PPS blended payment and under the ESRD PPS. 

We are also seeking comment on the proposal to review CY 2012 

ESRD claims and every 5 years thereafter, to determine if a 

change to the BSA national average is warranted. 

10. 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. In the CY 2011 ESRD PPS final rule, 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 (75 FR 49142). 

Medicare regulation §413.237(a)(1) provides that ESRD 

outlier services include: (1) ESRD-related drugs and biologicals 

that were or would have been, prior to January 1, 2011, 

separately billable under Medicare Part B; (2) ESRD-related 

laboratory tests that were or would have been, prior to 

January 1, 2011, separately billable under Medicare Part B; (3) 

medical/surgical supplies, including syringes used to administer 

ESRD-related drugs, that were or would have been, prior to 

January 1, 2011, separately billable under Medicare Part B; and 
 

81 

(4) 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. Drugs, laboratory 

tests, and medical/surgical supplies that we would recognize as 

outlier services were specified in Attachment 3 of Change 

Request 7064, issued August 20, 2010 under Transmittal 2033. 

Transmittal 2033 was rescinded and replaced by Transmittal 2094, 

dated November 17, 2010. The replacement document involved the 

(1) deletion of several drugs; (2) identified drugs that may be 

eligible for ESRD outlier payment; (3) provided a list of 

laboratory tests that comprise the AMCC tests; (4) deleted 

several laboratory tests; and (5) included the latest version of 

the ESRD PRICER layout file. 

Transmittal 2094 was subsequently rescinded and was 

replaced by Transmittal 2134 issued January 14, 2011. That 

transmittal was issued to correct the subject on the transmittal 

page and made no other changes. 

Medicare regulations at §413.237(a)(2) through (a)(6), and 

(b) 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 
 

82 

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) MAP plus the 

fixed dollar loss amount. In accordance with §413.237(c) of the 

regulation, 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). 

a. Proposed Revisions Related to Outlier ESRD Drugs and 

Biologicals 

 Attachment 3 of Change Request 7064 issued August 20, 2010 

under Transmittal 2033, as modified by Transmittal 2094 issued 

November 17, 2010 and Transmittal 2134 issued January 14, 2011, 

specified the former separately billable Part B drugs that are 
 

83 

recognized as ESRD-related eligible outlier services. These 

drugs are classified under the categories of anemia management, 

antiemetics, anxiolytics, bone and mineral metabolism, cellular 

management, pain management, and anti-infectives (see Pub. 100-

04, Chapter 8, section 60.2.1.1). Attachment 3 also identified 

the former Part D drugs by National Drug Code (NDC) for the 

three vitamin D analogues (calcitriol, paracalcitol, and 

doxercalciferol) and levocarnitine that are recognized as 

eligible outlier service drugs. 

 We had intended to update both the lists of former Part B 

drugs and biologicals and former Part D drugs that are outlier 

services (75 FR 49138). However, we have since concluded that 

any CMS prepared lists of drugs and biologicals recognized as 

outlier services may be difficult to keep up-to-date. This is 

attributed to the lag in the receipt of claims data; changes in 

ESRD practice patterns; and inadvertent omissions and 

oversights. Because of the number of Part B drugs and 

biologicals that may be considered ESRD outlier services, we are 

proposing to eliminate the issuance of a list of former 

separately payable Part B drugs and biologicals that would be 

eligible for outlier payments. 

Medicare regulations at §413.237(a)(1)(i) and (iv) specify 

that any ESRD-related drug or biological furnished by an ESRD 

facility that was or would have been considered separately 
 

84 

billable under Part B or formerly covered under Part D prior to 

January 1, 2011, is an ESRD outlier service, excluding ESRDrelated oral-only drugs. Because the regulation defines 

eligible outlier service drugs, we believe there is no need for 

CMS to issue a list of former separately payable Part B ESRD 

outlier services drugs. In addition, because the list of drugs 

is derived from paid ESRD claims, it would not be comprehensive, 

completely represent drugs and biologicals furnished to ESRD 

patients, accurate, or up-to-date. We note that, consistent 

with current policy, all composite rate drugs, as defined in the 

Medicare Benefit Policy Manual, Pub. 100-02, chapter 11, section 

30.4.1, would not be eligible for an outlier payment, as these 

drugs would not have been separately paid under Part B or Part D 

prior to January 1, 2011, and do not meet the definition for 

ESRD outlier services. 

Under current policy, antibiotics furnished in the home are 

considered to be composite rate drugs and therefore, not 

eligible for outlier payment. As discussed above, Pub. 100-02, 

chapter 11, section 30.4.1 lists the drugs covered under the 

composite rate. The list includes a statement that antibiotics 

when used at home by a patient to treat an infection of the 

catheter site or peritonitis associated with peritoneal dialysis 

are considered composite rate drugs. Because composite rate 

drugs and their administration (both the staff time and the 
 

85 

supplies) are covered under the composite rate, antibiotics 

furnished in the patient’s home used for the reasons noted above 

may not be billed and paid separately. However, antibiotics 

furnished in an ESRD facility were considered separately payable 

in accordance the Medicare Claims Processing Manual, Pub. 100-

04, chapter 8, section 60.2.1.1. 

In addition, Pub. 100-02, chapter 11, section 50.9 states 

that an antibiotic used at home by a patient to treat an 

infection of the catheter site or peritonitis associated with 

peritoneal dialysis is covered as home dialysis supplies 

included in the Method II (Direct Dealing) payment cap for home 

dialysis supplies administered by the Durable Medical Equipment 

(DME) Supplier. Prior to January 1, 2011, under Method II, 

durable medical equipment suppliers received direct payment from 

Medicare for furnishing dialysis services to home dialysis 

patients. Effective January 1, 2011, as indicated in 

§413.210(b) of the regulations, CMS will not pay any entity or 

supplier other than ESRD facilities for covered items and 

services furnished to a Medicare beneficiary. Therefore, 

payment to medical equipment suppliers for antibiotics under 

Method II could no longer be made. Additionally, under the ESRD 

PPS, the dialysis facility is responsible for furnishing all 

renal dialysis services, regardless of the site of service. 

Under the ESRD PPS, there is no payment distinction made as to 
 

86 

the site where a renal dialysis service is provided (that is, in 

the home or in a facility). Therefore, we do not believe that 

it is appropriate to have a distinction in which antibiotics 

administered in an ESRD facility, used to treat an infection of 

the catheter or other access site, or peritonitis associated 

with peritoneal dialysis, would be considered as separately 

billable under the composite rate portion of the ESRD PPS and 

eligible for outlier payments under the ESRD PPS, while 

antibiotics used at home by home patients for the same purpose 

would be considered to be included in the composite rate and not 

eligible for outlier payments. Consequently, we are proposing 

to eliminate the inclusion of antibiotics when used in the home 

to treat an infection of the catheter site or peritonitis 

associated with peritoneal dialysis as part of the composite 

rate drugs, and allow them to be separately paid under the 

composite portion of the ESRD PPS blended payment for ESRD 

facilities receiving payment during the transition. We are also 

proposing that antibiotic drugs used at home to treat catheter 

site infections or peritonitis associated with peritoneal 

dialysis will qualify as separately billable and eligible as 

ESRD outlier services. Antibiotics furnished in facility would 

continue to be recognized as separately billable for ESRD 

outlier payment purposes. 

We are soliciting comments on our proposal to recognize 
 

87 

antibiotics furnished in the home for catheter infections or 

peritonitis as ESRD outlier services and eligible for outlier 

payment. As we indicated above, we would no longer issue a list 

of ESRD-related drugs and biologicals eligible for outlier 

payments. However, under separate administrative issuances, we 

plan 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 believe that the 

elimination of a list of certain ESRD outlier services drugs we 

mentioned above and the inclusion of antibiotics used by home 

dialysis patients as outlier services would reduce confusion 

over drugs and biologicals that are eligible outlier services 

and eliminate the distinction in the eligibility of a drug for 

outlier eligibility based on where it is furnished. 

Accordingly, we are soliciting public comments on our proposal 

to eliminate 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. 

As new drugs emerge, we intend to update the HCPCS codes 

corresponding to new drugs and biologicals for billing purposes, 

and to determine whether any of those drugs are considered to be 

composite rate drugs. Drugs and biologicals which were or would 

have been considered composite rate drugs are not eligible ESRD 
 

88 

outlier services under §413.237. 

 We are also proposing two modifications to the computation 

of the separately billable MAP amounts used to calculate outlier 

payments for the reasons described below. Subsequent to the 

publication of the CY 2011 ESRD PPS final rule, our clinical 

review of the 2007 ESRD claims used to develop the ESRD PPS 

revealed that dialysis facilities routinely used Alteplase and 

other thrombolytic drugs for access management purposes. As 

discussed in the ESRD Benefit Policy Manual, Pub. 100-02, 

chapter 11, section 30.4.1, drugs that are used as a substitute 

for any of the listed items or are used to accomplish the same 

effect, are covered under the composite rate. Because heparin, 

as a composite rate drug, could be used for access management, 

any drug or biological used for the same purpose may not be 

separately paid. As outlier payments are restricted, under 

§413.237(a), to those items or services that were or would have 

been considered separately billable prior to January 1, 2011, we 

have recalculated the average outlier services MAP amounts to 

exclude these composite rate drugs. 

In developing the outlier service MAP amounts for 2011, we 

excluded testosterone and anabolic steroids. We have 

subsequently learned from discussions with clinicians and ESRD 

facilities that these drugs can be used for anemia management. 

Because drugs used for anemia management in ESRD patients were 
 

89 

or would have been considered separately billable under Medicare 

Part B, these drugs would be outlier eligible drugs under 

§413.237(a)(1). Consequently, we have recomputed the outlier 

service MAP amounts for CY 2012 to include these drugs. As 

shown in Table 4, when comparing the outlier service MAP amounts 

based on the current definition of ESRD outlier services to the 

revised ESRD outlier definition, the net effect of these two 

revisions (the exclusion of thrombolytic drugs and inclusion of 

anabolic steroids) results in an increase to the outlier service 

MAP amounts by $2.21 for adult patients and a decrease of $4.58 

for pediatric patients. 

b. Proposed Exclusion of Automated Multi-Channel Chemistry 

(AMCC) Laboratory Tests From the Outlier Calculation 

Medicare regulations at §413.237 provide that ESRD-related 

laboratory tests that were or would have been considered 

separately billable under Medicare Part B prior to January 1, 

2011, are eligible outlier services. Those laboratory tests 

were specified in Attachment 3 of Change request 7064 issued 

under Transmittal 2033, as modified by Transmittals 2094 and 

2134. In the CY 2011 ESRD PPS final rule (75 FR 49135 through 

49138), we indicated that in order to compute the outlier 

payment for laboratory tests, the 50 percent rule is required. 

In addition, because the 50 percent rule is necessary to 

calculate the composite rate portion of the blended payment 
 

90 

during the 3-year transition period, we retained the 50 percent 

rule to determine whether Automated Multi-Channel Chemistry 

(AMCC) panel tests would be considered composite rate or 

separately billable for the ESRD portion of the blended payment 

(75 FR 49137). The AMCC panel tests and an explanation of the 

50 percent rule are identified in Pub. 100-2, chapter 11, 

section 30.2.2. ESRD laboratory billing rules can be found in 

Pub 100.04, chapter 16, section 40.6. 

The 50 percent rule provides that if 50 percent or more of 

covered laboratory tests comprising a panel of AMCC tests are 

included under the composite payment rate, then all submitted 

tests are included within the composite payment and, therefore, 

no laboratory tests are considered separately billable. 

Conversely, if less than 50 percent of the covered panel tests 

are composite rate tests, then all AMCC tests submitted for the 

date of service for that beneficiary are considered separately 

billable. In addition, Pub. 100-2, chapter 8, section 60.1 

provides that an AMCC test that is a composite rate test, but is 

furnished beyond the normal frequency covered under the 

composite rate, is separately billable based on medical 

necessity. 

After publication of the CY 2011 ESRD PPS final rule, we 

received numerous requests to eliminate the 50 percent rule due 

to the commenters’ assertions that they were confused about its 
 

91 

application. Unlike specific drugs which are classified as 

either composite rate or separately billable for purposes of 

eligibility as an ESRD outlier service as discussed above, AMCC 

laboratory tests may be classified as either composite rate or 

separately billable depending upon the application of the 50 

percent rule or the frequency at which the laboratory test is 

ordered. Therefore, the determination of ESRD-related laboratory 

tests as eligible outlier services depends upon the number of 

panel tests furnished or their subsequent classification based 

on the application of the 50 percent rule. 

Because the AMCC laboratory tests included as eligible for 

an outlier payment are determined by the 50 percent rule, we 

believe that in the interests of administrative simplification 

and to minimize confusion, we propose to eliminate use of the 50 

percent rule for the outlier policy and exclude the 23 AMCC 

laboratory tests, from the definition of eligible outlier 

services and from the computation of outlier payments. The 

elimination of the 50 percent rule for the ESRD PPS outlier 

payment policy with respect to the AMCC panel tests would result 

in the de facto treatment of those tests as composite rate 

tests. Accordingly, we propose to revise §413.237(a)(1)(ii) of 

the regulations accordingly to exclude these laboratory tests 

from the definition of ESRD outlier services. The 50 percent 

rule would continue to apply to AMCC laboratory tests for 
 

92 

classification as either composite rate or separately billable 

for the purpose of computing the composite rate portion of the 

blended rate for ESRD facilities which have elected to receive 

payments under the ESRD PPS blended rate. Because the 

transition period under the ESRD PPS ends on January 1, 2014, 

this provision would be time limited, and would expire when the 

transition period ends. This would occur because all ESRD 

payments would be under the ESRD PPS, there would no longer be a 

need to maintain the distinction between composite rate and 

separately billable laboratory services for application of the 

50 percent rule, because the transition period will have ended. 

We are seeking comment on our proposal to exclude the AMCC 

laboratory tests and the 50 percent rule from the definition of 

eligible ESRD outlier services. 

c. Impact of Proposed Changes to the Outlier Policy 

Table 4 shows the impact of modifying the ESRD PPS outlier 

payment policy to: (1) exclude vascular access management drugs 

and include anabolic steroids as eligible outlier service drugs; 

and (2) exclude the 23 AMCC laboratory tests from the ESRD 

outlier services definition. The outlier services MAP amounts 

and fixed dollar loss amounts were inflation adjusted to reflect 

projected 2011 prices for outlier services for the first three 

columns (that is, outlier policy based on the current definition 

for ESRD outlier services, the revised ESRD outlier services 
 

93 

definition with regard to drugs, and the revised ESRD outlier 

services definition plus the exclusion of the AMCC laboratory 

tests). The revised ESRD outlier services definitions are 

described in the first footnote to Table 4. For the last 

column, which describes the impact of the revised ESRD outlier 

services definition and the exclusion of the AMCC laboratory 

tests for CY 2012, the outlier services MAP amounts and fixed 

dollar loss amounts were inflation adjusted to reflect projected 

2012 prices for outlier services. 

Table 4 

Outlier policy: Impact of revising the ESRD outlier services definition and excluding separately billable 

AMCC laboratory tests^ 

Outlier policy 

based on current 

definition 

for ESRD outlier 

services, price 

inflated to 

2011* 

Revise ESRD 

outlier services 

definition, price 

inflated to 

 2011* 

Revise ESRD 

outlier services 

definition and 

exclude 

AMCC lab tests, 

price inflated to 

 2011* 

Revise ESRD 

outlier services 

definition and 

exclude 

AMCC lab tests, 

price inflated to 

2012** 

Age 

< 18 

Age 

>= 18 

Age 

< 18 

Age 

>= 18 

Age 

< 18 

Age 

>= 18 

Age 

< 18 

Age 

>= 18 

Average outlier services 

MAP amount per 

treatment1 $50.85 $85.62 $45.14 $84.71 $44.67 $84.40 $46.27 $87.83 

Adjustments 

Standardization for 

outlier services2 1.0136 0.9728 1.0136 0.9728 1.0136 0.9728 1.0136 0.9728 

 MIPPA reduction 0.98 0.98 0.98 0.98 0.98 0.98 0.98 0.98 

Adjusted average 

outlier services 

MAP amount3 $50.51 $81.62 $44.84 $80.75 $44.37 $80.46 $45.96 $83.73 

Fixed dollar loss 

amount that is added to 

the predicted MAP to 

determine the outlier 

threshold4 $113.99 $139.20 $77.72 $136.93 $77.60 $136.88 $82.58 $145.25 

Patient months 

qualifying for outlier 

payment 3.9% 5.6% 5.0% 5.6% 5.1% 5.6% 5.0% 5.5% 

^ The revised ESRD outlier services definition excludes vascular access management drugs and includes 

anabolic steroids. Vascular access management drugs billed separately include the following: alteplase, 

reteplase, heparin, lepiridun, and urokinase. Anabolic steroids billed separately include the following: 

testosterone and nandrolone. Payments for separately billable automated multi-channel chemistry (AMCC) tests 

were identified using modifier codes ‘CE’ and ‘CF’ (where ‘CE’ indicates composite rate tests beyond the 

frequency covered under the rate but separately billable based on medical necessity, and ‘CF’ indicates tests 

that are separately billable). 
 

94 

* The outlier services MAP amounts and fixed dollar loss amounts were inflation adjusted to reflect 2011 prices 

for outlier services.

** The outlier services MAP amounts and fixed dollar loss amounts were inflation adjusted to reflect projected 

2012 prices for outlier services.

1

Excludes patients for whom not all data were available to calculate projected payments under an expanded 

bundle. The outlier services MAP amounts are based on 2009 data. The medically unbelievable edits of 

400,000 units for EPO and 1,200 mcg for Aranesp that are in place under the ESA claims Monitoring policy were 

applied. 

2

Applied to the average outlier MAP per treatment. Standardization for outlier services is based on existing Case 

Mix Adjusters for adult and pediatric patient groups. 

3

This is the amount to which the separately billable (SB) payment multipliers are applied to calculate the 

predicted outlier services MAP for each patient. 

4

The fixed dollar loss amounts were calculated using 2009 data to yield total outlier payments that 

represent 1% of total projected payments for the ESRD PPS. 

 Based on these proposals, using the average outlier service 

MAP amount per treatment which is based on payment amounts 

reported on 2009 claims and adjusted to reflect projected prices 

for 2011, in CY 2012, the average outlier services MAP per 

treatment amounts would be increased from $85.62 to $87.83 for 

adult patients and a reduction from $50.85 to $46.27 for 

pediatric patients. The primary reason for the difference in 

directionality of the changes is that there are differences in 

the types of outlier services that tend to be used by each age 

group. In particular, the exclusion of vascular access 

management drugs from the ESRD outlier services definition leads 

to a much larger decrease in the outlier services MAP amounts 

for ages <18 (decrease from $50.85 to $45.14) versus ages 18 and 

older (decrease from $85.62 to $84.71). This reflects 

relatively greater use of separately billable vascular access 

management drugs among ages <18. Unlike ages 18 and older, the 

decrease in the outlier services MAP for ages <18 when excluding 
 

95 

these drugs is large enough to more than offset the increase 

that results in the last step when we adjust for 2012 price 

inflation. 

Similarly, the fixed dollar loss amounts which were added 

to the predicted MAP amounts per treatment to determine the 

outlier thresholds would be revised from $139.20 to $145.25 for 

adult patients and from $113.99 to $82.58 for pediatric 

patients. We estimate that the patient months qualifying for 

outlier payments under the current policy (5.6 percent of those 

adult patient facility months and 3.9 percent of the pediatric 

patient facility months previously estimated to be eligible for 

outlier payments), would remain approximately the same for adult 

patients (5.5 percent), but would increase for pediatric 

patients (5.0 percent) in CY 2012 under our proposed revised 

outlier payment policy. 

The variation seen in the pediatric fixed dollar loss 

amounts tend to be lower based on the 2009 data used for this 

proposed rule as compared with the 2007 data used in CY 2011. 

There is generally greater sensitivity in pediatric results due 

to the relatively small number of pediatric patients. This is 

even more true with the pediatric fixed dollar loss amounts, 

since the magnitude of the pediatric fixed dollar loss amounts 

is basically determined by a relatively small number of the 

highest cost pediatric patients. The much lower pediatric fixed 
 

96 

dollar loss amounts based on data from 2009 (as compared with 

2007), reflect the tendency to have less extreme high cost cases 

for pediatric patients in the 2009 claims. The expected result 

based on this update is that more pediatric claims will qualify 

for outlier payments based on 2009 data, but the average outlier 

payment among the pediatric outlier cases will be lower. 

With the exception of the proposed revisions to the average 

outlier services MAP amounts per treatment and changes in the 

fixed dollar loss amounts, as set forth in Table 4, we are not 

proposing to make any other changes to the methodology for the 

calculation of outlier payments. These proposed revisions would 

only affect the ESRD PPS portion of the blended payment, not the 

basic case-mix adjusted portion. Because of the limited 3-year 

period in which the basic case-mix adjusted portion of the 

blended payment amount will apply, the 50 percent rule would 

automatically expire when the fully implemented ESRD PPS applies 

to all facilities. We believe the proposed changes to our 

outlier payment policy would simplify the identification and 

reporting of eligible outlier services. 

D. Technical Corrections

1. Training Add-on 

 In the CY 2011 ESRD PPS final rule (75 FR 49062 through 

49063), we explained the rationale for costs associated with 

self-dialysis training. We inadvertently listed an incorrect 
 

97 

training add-on amount of $33.38. The correct training add-on 

amount is $33.44. Therefore, in this proposed rule, we are 

correcting the training add-on amount to $33.44 for costs 

associated with self-dialysis training on or after January 1, 

2011. The geographic wage index will be applied to the $33.44. 

As described in the CY 2011 ESRD PPS final rule (75 FR 49063), 

the training add-on amounts after application of the wage index 

would range from $20.03 to $45.84. 

2. ESRD-Related Laboratory Test 

In the CY 2011 ESRD PPS final rule (Table F: ESRD-Related 

Laboratory Tests of the Appendix), we finalized a specific list 

of routine ESRD-related laboratory tests included as part of 

consolidated billing (75 FR 49213). However, we inadvertently 

omitted an ESRD-related laboratory test from Table F of the CY 

2011 ESRD PPS final rule. In this proposed rule, we are 

correcting Table F by adding the “Assay of protein by other 

source,” which is identified by the Current Procedural 

Terminology code 84157. This laboratory tests was a composite 

rate service under the basic case-mix adjusted composite payment 

system and, consequently, is considered a renal dialysis service 

under the ESRD PPS effective January 1, 2011. Therefore, the 

“Assay of protein by other source” should be furnished by the 

ESRD facility, either directly or under arrangement by another 

entity, to the ESRD patient and paid for through the ESRD PPS 
 

98 

payment rate. 

E. Clarifications to the CY 2011 ESRD PPS

1. ICD-9-CM Diagnosis Codes 

In the CY 2011 ESRD PPS final rule, we discussed the ICD-9-

CM diagnosis codes that are eligible for the co-morbidity 

payment adjustments (75 FR 49094 through 49107). We explained 

that it is important for ESRD facilities to report all patient 

co-morbidities accurately, regardless of whether or not these 

codes are or are not eligible for an ESRD PPS adjustment. We 

stated that the ICD–9–CM diagnosis codes should be reported in 

compliance with coding requirements on the ESRD 72x claim as 

well as the official ICD–9–CM Coding Guidelines (75 FR 49095). 

In the CY 2011 ESRD PPS final rule, we provided the list of 

ICD–9–CM codes that are recognized for purposes of the comorbidity payment adjustments in Table E: ICD-9-CM Codes 

Recognized for a Co-morbidity Payment Adjustment of the Appendix 

(75 FR 49211). Although we discussed ICD-9-CM coding to be used 

to identify co-morbidity conditions on ESRD claims, we did not 

indicate that we would update the existing diagnostic categories 

and ICD-9-CM codes on an annual basis. 

In this proposed rule, we are clarifying that the ICD-9-CM 

codes are subject to the annual ICD-9-CM coding changes that 

occur in the hospital inpatient PPS final rule and effective 

October 1st of every year. Any changes that affect the 
 

99 

categories of co-morbidities and the diagnoses within the comorbidity categories that are eligible for the co-morbidity 

payment adjustments, will be communicated to ESRD facilities 

through sub-regulatory guidance. In response to comments we 

have received, we believe that it is important to reiterate the 

discussion of co-morbidities that was detailed in the CY 2011 

ESRD PPS final rule. ESRD facilities should continue to provide 

documentation in the patient’s medical/clinical record to 

support any diagnosis recognized for a payment adjustment as 

this is a requirement to receive the co-morbidity payment 

adjustment (75 FR 49097). As we discussed in the CY 2011 ESRD 

PPS final rule, we have been and will continue to monitor the 

prevalence of any co-morbidity diagnoses recognized for the comorbidity payment adjustment under the ESRD PPS as compared to 

the prevalence of these categories over the past several years. 

Therefore, we would be able to identify any changes in the 

prevalence of any of the co-morbidity diagnoses recognized for 

purposes of the co-morbidity payment adjustment as compared to 

previous trends (75 FR 49099). We are monitoring the comorbidities eligible for payment adjustment to determine if the 

co-morbidity adjustments need to be refined in future 

rulemaking. 

2. Emergency Services to ESRD Beneficiaries 

 As we explained in the CY 2011 ESRD PPS final rule (75 FR 
 

100 

49056), inpatient services, emergency services, and outpatient 

services furnished in a hospital or in an ambulatory surgical 

center furnished to ESRD beneficiaries were not included in the 

ESRD PPS base rate, and none of these services are considered 

renal dialysis services for inclusion in the ESRD PPS payment 

bundle. These services are reimbursed under other Medicare 

payment systems. We also explained that certain outpatient 

procedures necessary to maintain vascular access (that is, those 

which cannot be addressed by the ESRD facilities using 

procedures that are considered part of routine vascular access), 

are excluded from the definition of renal dialysis services and 

are not included in the ESRD PPS payment. However, we consider 

the furnishing of certain medications, such as those used to 

flush a vascular access site of an ESRD patient, to fall within 

the definition of renal dialysis services. 

 As we discussed in the section on consolidated billing 

rules and edits in the CY 2011 ESRD PPS final rule (75 FR 

49168), the ESRD PPS payment is an all-inclusive payment for 

renal dialysis services and the ESRD facility is responsible for 

all of the ESRD-related services that a patient receives. 

Payment for renal dialysis services under the ESRD PPS, 

including those that were formerly paid separately under the 

basic case-mix adjusted composite rate payment system, is no 

longer made to entities (such as laboratories and DME suppliers) 
 

101 

other than the ESRD facility. 

 Subsequent to the publication of the CY 2011 ESRD PPS final 

rule, we have received requests that we further clarify whether 

certain renal dialysis services furnished in an emergency room 

or emergency department are considered renal dialysis services 

covered under the ESRD PPS. Accordingly, we are providing 

additional clarification below. 

 Renal dialysis services defined at §413.171 of the 

regulations include diagnostic laboratory tests. In developing 

the ESRD PPS base rate, we included payments for outpatient 

laboratory tests billed on ESRD facility claims, as well as 

laboratory tests ordered by monthly capitation payment (MCP) 

physicians and billed on carrier claims (75 FR 49055), because 

we believe that these diagnostic laboratory tests furnished by 

ESRD facilities and MCPs meet the definition of renal dialysis 

services. We did not include laboratory tests ordered for 

Medicare ESRD patients undergoing treatment in hospital 

emergency departments or emergency rooms, because these tests 

are usually administered as part of a patient’s clinical 

assessment of the condition requiring emergency room admission, 

which we believe are not generally related to the treatment of 

ESRD. Therefore, laboratory tests that are performed for 

Medicare ESRD beneficiaries in an emergency situation in an 

emergency room or emergency department as part of the general 
 

102 

work-up of the patient, were excluded from the ESRD PPS payment 

bundle, and would not be considered renal dialysis services 

under the ESRD PPS. 

We recognize that laboratory tests that could be used 

during dialysis and ordered for the treatment of ESRD also may 

be ordered for ESRD patients in an emergency department or 

emergency room for reasons other than ESRD (that is, as part of 

the assessment of the patient to obtain a diagnosis of the 

underlying condition which required emergency intervention). 

For example, an ESRD beneficiary in an emergency department 

because the beneficiary is unconscious or otherwise in crisis 

may have a CBC and other laboratory tests ordered to arrive at a 

diagnosis. Although such tests also may be used in dialysis 

treatment and in the treatment of ESRD, because laboratory tests 

ordered for ESRD patients treated in emergency departments or 

emergency rooms are needed to arrive at a diagnosis of the 

condition requiring emergency treatment, we do not consider the 

laboratory tests as renal dialysis services under the ESRD PPS. 

Accordingly, these laboratory tests were not used to develop the 

ESRD base rate. We would not expect that the laboratory tests 

provided in that circumstance to be subject to consolidated 

billing edits, resulting in denial of payment. That is, we 

would not consider such tests to be renal dialysis services in 

this emergency situation because they were not ordered for the 
 

103 

treatment of ESRD, but instead, furnished as part of the general 

work-up of the patient necessary for diagnosis. 

The exclusion of laboratory tests ordered in hospital 

emergency rooms or emergency departments from the consolidated 

billing edits does not mean that renal dialysis facilities 

should attempt to circumvent the application of the bundled ESRD 

PPS rate by directing patients to emergency rooms or emergency 

departments for obtaining ESRD-related laboratory tests, or the 

provision of other renal dialysis services. Because ESRD 

facilities are financially responsible for all ESRD-related 

laboratory tests, referring ESRD patients to the emergency room 

or emergency department for ESRD-related laboratory tests would 

be inappropriate. We note that it would also be inappropriate 

for ESRD facilities to refer its patients to the emergency room 

or emergency department for maintenance of access sites 

(including treatment for access infections) or the 

administration of ESRD-related drugs that are considered renal 

dialysis services under the ESRD PPS. We are monitoring the 

provision of renal dialysis services to ESRD patients in an 

emergency room or emergency department. 

II. End-Stage Renal Disease Quality Incentive Program for 

Payment Years (PYs) 2013 and 2014 

A. Background for the End-Stage Renal Disease Quality Incentive 

Program for PY 2013 and PY 2014 
 

104 

1. Overview of Quality Monitoring Initiatives 

 For over 30 years, monitoring the quality of care provided 

to end-stage renal disease (ESRD) patients and provider/facility 

accountability have been important components of the Medicare 

ESRD payment system. We view the ESRD Quality Incentive Program 

(QIP), required by section 1881(h) of the Social Security Act 

(the Act), as the next step in the evolution of the ESRD quality 

program that began more than three decades ago. Our vision is 

to continue to implement a robust, comprehensive ESRD QIP that 

builds on the foundation that has already been established. The 

payment year (PY) 2012 ESRD QIP was finalized in two 

regulations: one that finalized the three measures (75 FR 49030, 

49182 (August 12, 2010) (hereinafter referred to as the “CY 2011 

ESRD PPS final rule”)); and one that finalized other aspects of 

the 2012 ESRD QIP, including the scoring methodology and payment 

reduction scale (76 FR 628 through 646) (hereinafter referred to 

as the “2012 ESRD QIP final rule”)). 

2. Statutory Authority for the ESRD QIP 

 Section 1881(h) of the Act, as added by section 153(c) of 

MIPPA, requires the Secretary to develop a QIP that will result 

in payment reductions to providers of services and dialysis 

facilities that do not meet or exceed a total performance score 

with respect to performance standards established for certain 

specified measures. As provided under this section, payment 
 

105 

reductions of up to 2.0 percent of the payments otherwise made 

to providers and facilities under section 1881(b)(14) of the Act 

will apply to payment for renal dialysis services furnished on 

or after January 1, 2012. Under section 1881(h)(1)(C) of the 

Act, payment reductions will only apply with respect to the year 

involved for a provider/facility and will not be taken into 

account when computing future payment rates for the impacted 

provider/facility. 

 For the ESRD QIP, section 1881(h) of the Act generally 

requires the Secretary to: (1) select measures; (2) establish 

the performance standards that apply to the individual measures; 

(3) specify a performance period with respect to a year; (4) 

develop a methodology for assessing the total performance of 

each provider and facility based on the performance standards 

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

apply an appropriate payment reduction to providers and 

facilities that do not meet or exceed the established total 

performance score. 

3. Payment Year (PY) 2012 ESRD QIP 

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

selected three measures for the payment year (PY) 2012 QIP. We 

finalized two anemia management measures that reflect the 

labeling approved by the Food and Drug Administration (FDA) for 

the administration of erythropoiesis stimulating agents (ESAs) 
 

106 

and one hemodialysis adequacy measure. The following are the 

three measures (finalized in the CY 2011 ESRD PPS final rule) 

for the PY 2012 ESRD QIP: 

• Percentage of Medicare patients with an average 

Hemoglobin <10.0g/dL (Hemoglobin Less Than 10g/dL 

Measure) 

• Percentage of Medicare patients with an average 

Hemoglobin >12.0g/dL (Hemoglobin Greater Than 12g/dL 

Measure) 

• Percentage of Medicare patients with an average Urea 

Reduction Ratio (URR) >65 percent (URR Hemodialysis 

Adequacy Measure). 

 A full description of the methodologies used for the 

calculation of the measures can be reviewed at: 

www.dialysisreports.org/pdf/esrd/public/DFRGuide.pdf (see the 

“Facility Modality, Hemoglobin, and Urea Reduction Ratio” 

section of the document). 

Other aspects of the PY 2012 ESRD QIP finalized in the 

PY 2012 ESRD QIP final rule included the establishment of 

performance standards for these measures (including applying the 

special rule under section 1881(h)(4)(E) of the Act) and 

establishing a scoring methodology for calculating individual 

total performance scores ranging from 0–30 points based on the 

three finalized measures. As part of our methodology for 
 

107 

calculating the provider/facility total performance score, we 

weighted the Hemoglobin Less Than 10g/dL Measure at 50 percent 

of the score, while the other hemoglobin measure and the URR 

Hemodialysis Adequacy Measure were weighted at 25 percent of the 

score. We also finalized a policy under which 

providers/facilities that did not meet or exceed a total 

performance score of 26 points would receive a payment reduction 

ranging from 0.5 percent to 2.0 percent. 

B. Provisions of the Proposed Regulations for End-Stage Renal 

Disease (ESRD) Quality Incentive Program (QIP) for PY 2013 and

PY 2014 

This proposed rule proposes to adopt new ESRD QIP 

requirements for payment years (PYs) 2013 and 2014. We believe 

that this approach is the most efficient way to make 

improvements to the program, adopt additional measures for the 

program in a timely fashion, and provide sufficient notice to 

ESRD providers and facilities so that they can most effectively 

and efficiently implement any changes needed to meet the 

requirements of the ESRD QIP. 

1. Proposed PY 2013 ESRD QIP Requirements 

a. Overview of the Proposed PY 2013 ESRD QIP 

 This section summarizes the requirements that we are 

proposing implement for the PY 2013 ESRD QIP. We are proposing 

that ESRD providers and facilities that do not meet these 
 

108 

requirements would receive a reduction to the payments otherwise 

made under section 1881(b)(14) with respect to PY 2013 services, 

in accordance with section 1881(h)(1)(A) of the Act. In 

general, for the PY 2013 ESRD QIP, we propose to calculate 

individual total performance scores ranging from 0-30 points for 

providers and facilities based on two of the three measures that 

we adopted for the PY 2012 ESRD QIP. We propose to weight the 

total performance score for each provider/facility such that the 

proposed Hemoglobin Greater Than 12g/dL measure makes up 50 

percent of the total performance score and the proposed URR 

Hemodialysis Adequacy measure makes up 50 percent of the total 

performance score. We are proposing that a provider/facility 

that does not meet or exceed a total performance score of 30 

would receive a payment reduction in PY 2013 ranging from 0.5 

percent to 2.0 percent, depending upon how far below this 

minimum total performance score its performance falls. Our 

specific proposals are discussed below. 

b. Proposed Performance Measures for the PY 2013 ESRD QIP 

Section 1881(h)(2)(A) of the Act requires that the measures 

specified for the ESRD QIP include measures on anemia management 

that reflect the labeling approved by the FDA for such 

management; measures on dialysis adequacy; to the extent 

feasible, a measure or measures on patient satisfaction; and 

such other measures that the Secretary specifies, including (to 
 

109 

the extent feasible) measures on iron management, bone mineral 

metabolism, and vascular access, including for maximizing the 

placement of arterial venous fistula. As explained in detail 

below, we are proposing to adopt a number of new measures for 

the PY 2014 ESRD QIP, including a Kt/V measure, a vascular 

access infections measure, a vascular access type measure, a 

Standardized Hospitalization Ratio (SHR) Admissions measure, a 

patient experience of care reporting measure, a bone mineral 

metabolism reporting measure, and a NHSN dialysis event blood 

stream infection reporting measure. We are also continuing to 

develop additional measures on topics such as fluid weight 

management and pediatric ESRD treatment. However, in selecting 

measures for the PY 2013 ESRD QIP, we examined whether it would 

be feasible to propose to adopt any new measures for the 

program. In light of our proposal to select CY 2011 as the 

performance period (discussed more fully below), and that it is 

not feasible to adopt any of the measures mentioned above until 

the PY 2014 ESRD QIP, we have determined that there are no new 

measures available for adoption at this time. 

We also carefully reexamined the three measures that we 

adopted for the 2012 ESRD QIP, and for the reasons discussed 

below, we are proposing to continue including only two of them, 

the Hemoglobin Greater Than 12g/dL measure and the URR 

Hemodialysis Adequacy measure, in the PY 2013 ESRD QIP measure 
 

110 

set. We are proposing to retire the Hemoglobin Less Than 10g/dL 

measure beginning with the PY 2013 ESRD QIP. 

We have recently reassessed the evidence for the use of 

ESAs in patients with kidney disease through a National Coverage 

Analysis (CAG-00413N) and, while we did not seek to limit the 

coverage of these agents at this time, we could not identify a 

specific hemoglobin lower bound level that has been proven safe 

for all patients treated with ESAs. We found that randomized, 

controlled trials targeting patients to higher, rather than 

lower hemoglobin levels, or comparing the effect of ESAs against 

a placebo have indicated an increased risk of myocardial 

infarction, stroke, venous thromboembolism, thrombosis of 

vascular access, and overall mortality, and, in patients with a 

history of cancer, tumor progression or recurrence. The 

mechanism underlying this increased risk is not yet fully 

understood but could result from the actual hemoglobin level 

itself, the rate at which the hemoglobin level rises, the 

variability in hemoglobin levels achieved as a result of ESA 

use, or the ESA dose required. Regardless of the reason(s) for 

these risks, such findings indicate that safety is a valid 

concern for a subset of patients treated with ESAs. Because we 

cannot yet identify which patients would be included in this 

subset, and accordingly exclude them from the specifications for 

the Hemoglobin Less Than 10g/dL measure, we have concluded that 
 

111 

it would not be appropriate to continue to incentivize ESRD 

providers and facilities to achieve hemoglobin levels above 

10g/dL in all patients. In addition we believe that this change 

is reflective of the FDA modified dosing recommendation for 

erythropoiesis stimulating agents (http://www.fda.gov/Drugs/Drug 

Safety/ucm259639.htm. We have discussed with the FDA our 

proposal to retire the Hemoglobin Greater Than 10 g/dL measure 

starting in PY 2013. Since this measure encourages providers to 

keep hemoglobin above 10 g/dL in all patients, the FDA agrees 

that removing this measure is consistent with the new labeling 

for erythropoeisis stimulating agents approved by the FDA. The 

previous labeling recommendations to maintain hemoglobin levels 

between 10 and 12 g/dL are no longer appropriate and have been 

removed from the drug label. We, therefore, propose to retire 

the Hemoglobin Less Than 10g/dL measure from the ESRD QIP 

measure set, beginning with the PY 2013 program. 

We propose to maintain the Hemoglobin Greater Than 12g/dL 

measure as a measure of anemia management because studies have 

been unable to establish that higher hemoglobin levels are 

clinically beneficial. In addition, the studies continue to 

show that targeting hemoglobin levels above this level through 

the use of ESAs can contribute to adverse patient outcomes.1

 

This measure, consistent with the requirement under section 

 

1 KDOQI Clinical Practice Guideline and Clinical Practice Recommendations for 

Anemia in Chronic Kidney Disease: 2007 Update of Hemoglobin Target, American 

Journal of Kidney Diseases, 50(3): Pages 471-530 (September 2007).
 

112 

1881(h)(2)(A)(i) of the Act, also continues to reflect the 

labeling approved by the FDA for anemia management. The FDA has 

stated that using ESAs to target a hemoglobin level of greater 

than 11g/dL increases the risk of serious adverse cardiovascular 

events and has not been shown to provide additional patient 

benefit. The Hemoglobin Greater Than 12g/dL measure focuses on 

achieved hemoglobin levels, not simply hemoglobin level targets, 

and these levels also reflect patient factors such as underlying 

causes of anemia and sensitivity to treatment. Since these 

factors can vary over time in an unpredictable fashion, even 

within an individual patient, we believe that the current anemia 

measure allows for these unanticipated excursions of the 

achieved hemoglobin while continuing to highlight that higher 

hemoglobin targets can result in adverse patient outcomes. We 

plan to revisit this measure with the input of stakeholders and 

will replace or update the measure for future years of the ESRD 

QIP if deemed appropriate. We seek public input on the 

continued inclusion of the Hemoglobin Greater Than 12g/dL 

measure in the PY 2013 ESRD QIP. 

We are also proposing to retain the URR Hemodialysis 

Adequacy measure, which assesses the percentage of Medicare 

patients with an average URR > 65 percent for PY 2013. Section 

1881(h)(2)(A)(i) states that the measures specified under the 

ESRD QIP for a payment year shall include measures on dialysis 
 

113 

adequacy. For the reasons stated in the CY 2011 ESRD PPS final 

rule (75 FR 49182) we believe that URR hemodialysis adequacy 

continues to be an appropriate and accurate measure of 

hemodialysis adequacy, although we note that we are proposing 

below to adopt an alternative measure of dialysis adequacy for 

the PY 2014 ESRD QIP. 

Therefore, for the PY 2013 ESRD QIP, we propose to continue 

to use the following two measures previously adopted for the PY 

2012 ESRD QIP: 

• Hemoglobin Greater Than 12g/dL Measure. 

• URR Hemodialysis Adequacy Measure. 

We also propose to continue to use the specifications for 

these measures that we finalized for the PY 2012 ESRD QIP. 

Consistent with the PY 2012 ESRD, we are also proposing to 

require providers/facilities to have at least 11 cases that meet 

the reporting criteria for a measure in order to be scored on 

the measure. As we noted in the 2012 ESRD QIP final rule (76 FR 

639), we believe that this minimum case threshold will help 

prevent the possibility that a small number of poor outcomes 

artificially, and for reasons unrelated to the quality of care, 

skews a small provider/facility’s performance score. 

Additionally, eleven cases is a statistically valid threshold 

that will give us confidence that a provider or facility’s total 
 

114 

performance score is an accurate reflection of the quality of 

care it furnishes. 

We seek public comments on our proposed selection of these 

two measures for the PY 2013 ESRD QIP. 

c. Proposed Performance Period for the PY 2013 ESRD QIP 

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

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

that performance period to occur prior to the beginning of such 

year. We selected all of CY 2010 as the performance period for 

the PY 2012 ESRD QIP because we believe that it best balanced 

the need to collect and analyze sufficient data, allowed 

sufficient time to calculate total performance scores and 

prepare the pricing files needed to implement applicable payment 

reductions beginning on January 1, 2012, and allowed providers 

and facilities time to preview their performance scores and 

inquire about their scores prior to finalizing their scores and 

making performance data public (76 FR 631). 

 In determining what performance period to propose to select 

for the PY 2013 ESRD QIP, we carefully considered the impact of 

selecting all or part of CY 2011 as well as including part of CY 

2012. We determined that using less than a 12-month period 

could reduce the validity of provider/facility performance data 

and that using data from multiple calendar years (and still 

making payments on time) would necessitate using data from 
 

115 

multiple data sets collected over two different payment periods, 

and, therefore, would not provide sufficient time to compile the 

data files to make accurate provider/facility payments beginning 

with January 1, 2013 services. In light of the new ESRD PPS, we 

believe that it is important to assess the quality of care being 

furnished to ESRD patients, and that a year’s worth of data will 

provide us with enough data to accurately and fairly determine 

whether a provider/facility has met or exceeded the proposed 

performance standards with respect to the proposed measures. 

For these reasons, we propose to select all of CY 2011 as the 

performance period for the PY 2013 ESRD QIP. We seek public 

comments on this proposal. 

d. Proposed Performance Standards for the PY 2013 ESRD QIP 

For the PY 2012 ERSD QIP, we established the performance 

standard for the measures using the special rule under section 

1881(h)(4)(E) of the Act (76 FR 629). We selected as the 

performance standard for PY 2012 the lesser of (1) the 

performance of a provider or facility on each measure during 

2007 (the year selected by the Secretary under the second 

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

as the base utilization year), or (2) the national performance 

rate (calculated at the national aggregate level as the number 

of Medicare patients for whom the measure was achieved divided 

by the total number of Medicare patients eligible for inclusion 
 

116 

in the measure) for each measure in a period determined by the 

Secretary. With respect to the second prong of this standard, 

the period we selected for the PY 2012 ESRD QIP was calendar 

year 2008 because data from that year was, at that time, the 

most recent publicly available data prior to the beginning of 

the performance period. As reported on the Dialysis Facility 

Compare website in November 2009, the 2008 national performance 

rates for the anemia management measures and the URR 

hemodialysis adequacy measure were: 

• For the Hemoglobin Less Than 10g/dL measure (which is 

based on the national performance percentage of Medicare 

patients who have an average hemoglobin value less than 

10g/dL): 2 percent. 

• For the Hemoglobin More Than 12g/dL measure (which is 

based on the national performance percentage of Medicare 

patients who have an average hemoglobin value greater 

than 12g/dL): 26 percent. 

• For the URR Hemodialysis Adequacy Measure (which is based 

on the national percentage of Medicare patients who have 

an average URR level of at least 65 percent): 96 percent. 

In considering what performance standards to select for the 

PY 2013 ESRD QIP, we took into account the fact that we had 

selected a one year period for the PY 2012 ESRD QIP and that for 
 

117 

the reasons discussed above, we would be proposing to select the 

next one year performance period for the PY 2013 ESRD QIP. We 

determined that comparing provider/facility performance over 

time based on data from successive years would be beneficial as 

this method would allow the public to most accurately gauge 

provider/facility improvement. We also noted that due to 

operational issues, it was not feasible for us to establish 

performance standards prior to the beginning of the proposed 

performance period, as required in order to establish 

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

For these reasons, we propose to continue using the performance 

standard under section 1881(h)(4)(E) of the Act for the PY 2013 

QIP. Under this proposed standard, providers/facilities would 

be evaluated based on the lesser of (1) the performance of the 

provider/facility in 2007, which is the year selected by the 

Secretary under the second section of section 

1881(b)(14)(A)(ii), or (2) a performance standard based on the 

national performance rates for the measures in a period 

determined by the Secretary. With respect to the second prong, 

we propose to select CY 2009 because that is the most recent 

year-long period for which data is publicly available prior to 

the beginning of the proposed performance period. As reported 

on the Dialysis Facility Compare website, the 2009 national 

performance rates for the Hemoglobin Greater Than 12g/dL measure 
 

118 

and the URR Hemodialysis Adequacy measure are: 

• For the Hemoglobin Greater Than 12g/dL measure: 16 

percent. 

• For the URR Hemodialysis Adequacy Measure: 96 percent. 

We seek public comments about the proposed selection of 

this performance standard for the PY 2013 ESRD QIP. 

e. Proposed Methodology for Calculating the Total Performance 

Score for the PY 2013 ESRD QIP 

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

to develop a methodology for assessing the total performance of 

each provider and facility based on performance standards with 

respect to the measures selected for a performance period. 

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

methodology must include a process to weight the performance 

scores with respect to individual measures to reflect priorities 

for quality improvement, such as weighting scores to ensure that 

providers/facilities have strong incentives to meet or exceed 

anemia management and dialysis adequacy performance standards, 

as determined appropriate by the Secretary. 

For the PY 2012 ESRD QIP, we finalized a scoring 

methodology under which we will calculate the performance of 

each provider and facility on each of the three measures by 

assigning 0-10 points based on how well the provider/facility 
 

119 

performed on the measure during the CY 2010 performance period. 

For example, if a provider or facility meets or exceeds the 

performance standard for one measure, then it will receive 10 

points for that measure. Providers or facilities that do not 

meet or exceed the performance standard for a measure will 

receive fewer than 10 points for that measure, with the exact 

number of points corresponding to how far below the performance 

standard the provider/facility’s actual performance falls. Two 

points will be subtracted for every one percentage point the 

provider’s/facility’s performance falls below the performance 

standard (76 FR 632). The full rationale for this scoring 

methodology is presented in detail in the PY 2012 ESRD QIP final 

rule (76 FR 629 through 634). 

For the PY 2013 ESRD QIP, we propose to adopt the same 

methodology for scoring provider/facility performance on each of 

the proposed measures that we adopted for the PY 2012 ESRD QIP. 

As discussed in the 2012 ESRD QIP final rule (76 FR 633), we 

believe that it is important to provide a clear-cut method for 

calculating scores initially while providers and facilities are 

becoming familiar with the program. Under this methodology, we 

would calculate the performance of each provider/facility on 

each measure by assigning points based on how well it performed 

on the measure in CY 2011 relative to the proposed performance 

standard (discussed above). If a provider or facility meets or 
 

120 

exceeds the performance standard for a measure, then it would 

receive 10 points for that measure. We would award points for 

each measure based on a 0 to 10 point scale and would subtract 2 

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

performance during 2011, the proposed performance period, falls 

below the performance standard. 

For the PY 2012 ESRD QIP, we also finalized a weighting 

methodology that weighted the Hemoglobin Less Than 10g/dL 

measure at 50 percent of the total performance score, with the 

remaining 50 percent of the total performance score divided 

equally between the Hemoglobin Greater Than 12g/dL measure (25 

percent) and the URR Hemodialysis Adequacy Measure (25 percent) 

(76 FR 633). 

For the PY 2013 ESRD QIP, we are proposing to weight the 

total performance score for each provider/facility such that the 

proposed Hemoglobin Greater Than 12g/dL measure makes up 50 

percent of the score and the proposed URR Hemodialysis Adequacy 

measure makes up 50 percent of the score. To be consistent with 

the scoring methodology that we finalized for the PY 2012 ESRD 

QIP, we propose award up to 30 points to a provider/facility 

based on its performance on the proposed measures. However, 

because we are only proposing to adopt two measures for the PY 

2013 ESRD QIP measure set, we propose to calculate a 

provider’s/facility’s total performance score by multiplying 
 

121 

each measure score (0-10 points) by 1.5, and adding both measure 

scores together to result in a 0-30 point range. 

We seek public comments about the proposed scoring and 

weighting methodologies for the PY 2013 ESRD QIP. 

f. Proposed Payment Reductions for the PY 2013 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 reductions in payments 

among providers and facilities achieving different levels of 

total performance scores, with providers and facilities 

achieving the lowest total performance scores receiving the 

largest reductions. 

We implemented a sliding scale of payment reductions for 

the PY 2012 ESRD QIP, setting the minimum total performance 

score that providers/facilities will need to achieve in order to 

avoid a payment reduction at 26 points (76 FR 634). 

Providers/facilities that score between 21-25 points will 

receive a 0.5 percent payment reduction; between 16-20 points, a 

1.0 percent payment reduction; between 11-15 points, a 1.5 

percent payment reduction; and between 0-10 points, 

providers/facilities will receive the full 2.0 percent payment 

reduction (76 FR 634). 

To ensure that providers/facilities are properly 

incentivized to provide quality care, we propose to implement a 
 

122 

more rigorous sliding scale of payment reductions for the PY 

2013 ESRD QIP and raise the minimum total performance score that 

providers/facilities would need to achieve in order to avoid a 

payment reduction from 26 to 30 points. Providers/facilities 

that score between 26-29 points would receive a 1.0 percent 

payment reduction; between 21-25 points, a 1.5 percent payment 

reduction; and between 0-20 points, providers/facilities would 

receive the full 2.0 percent payment reduction (see Table 5 

below). We believe that applying a payment reduction of 2.0 

percent to providers/facilities whose performance falls 

significantly below the performance standards, coupled with 

applying two intermediate payment reduction levels to 

providers/facilities based on lesser degrees of performance 

deficiencies, will provide proper incentives for all 

providers/facilities to improve the quality of their care. 

Table 5. Proposed PY 2013 Payment Reduction Scale 

Total Performance 

Score 

2013 Percent of 

Payment 

Reduction 

30 Points 0.0 Percent 

26-29 1.0 Percent 

21-25 1.5 Percent 

0-20 2.0 Percent 

Table 6. Finalized PY 2012 Payment Reduction Scale 

Total Performance 

Score 

2012 Percent of 

Payment 

Reduction 

30-26 Points 0.0 Percent 

21-25 0.5 Percent 
 

123 

16-20 1.0 Percent 

11-15 1.5 Percent 

0-10 2.0 Percent 

We seek public comments on this proposal. 

2. Proposed PY 2014 ESRD QIP 

a. Overview of the Proposed PY 2014 ESRD QIP 

This proposed rule also proposes to implement requirements 

that will apply to the PY 2014 ESRD QIP. In general, we propose 

to calculate individual total performance scores ranging from 0-

100 points for providers and facilities based on eight measures 

that we propose to adopt for the PY 2014 ESRD QIP. We propose 

to continue using the Hemoglobin Greater Than 12g/dL measure 

that we are proposing to use for the PY 2013 ESRD QIP, and to 

adopt four additional clinical measures: Kt/V Dialysis Adequacy 

measure; Vascular Access Type measure; Vascular Access 

Infections measure; and Standardized Hospitalization Ratio (SHR) 

Admissions measure. We also propose to adopt three additional 

measures that would be scored differently from the proposed 

clinical measures. These proposed measures are the National 

Health Safety Network (NHSN) Dialysis Event reporting measure, 

the Patient Experience of Care reporting measure (using the InCenter Hemodialysis Consumer Assessment of Healthcare Advisors 

(ICH CAHPS) survey tool), and the Mineral Metabolism reporting 

measure. Providers/facilities that do not meet or exceed a 
 

124 

certain total performance score would receive a payment 

reduction ranging from 0.5 percent to 2.0 percent. 

b. Proposed Performance Measures for the PY 2014 ESRD QIP 

For the PY 2014 ESRD QIP, we propose to continue using the 

Hemoglobin Greater Than 12g/dL measure, adopt seven new measures 

(Kt/V Dialysis Adequacy, Vascular Access Type, Vascular Access 

Infections, SHR Admissions, NHSN Dialysis Event reporting, 

Patient Experience of Care reporting, and Mineral Metabolism 

reporting) and to retire the URR Hemodialysis Adequacy measure. 

We strongly believe that the eight proposed measures 

individually and collectively provide information useful for 

assessing provider/facility quality, for informing patient 

decision-making, and for furthering CMS and HHS priorities for 

quality improvement activities. 

We note that we are proposing for the first time to adopt 

measures under section 1881(h)(2)(A)(iii) of the Act. In 

specifying such measures, we recognize that section 

1881(h)(2)(B)(i) of the Act requires that they must have been 

endorsed by the entity with a contract under section 1890(a) of 

the Act (that entity is currently the National Quality Forum 

(NQF)) unless the exception in clause (ii) applies. That 

provision provides that in the case of a specified area or 

medical topic determined appropriate by the Secretary for which 

a feasible and practicable measure has not been endorsed by the 
 

125 

entity with a contract under section 1890(a) of the Act, 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 consensus organizations identified by the 

Secretary. 

i. Proposed Anemia Management Measure (Hemoglobin Greater Than 

12g/dL) 

Section 1881(h)(2)(A)(i) of the Act requires that the 

measures specified for the ESRD QIP include measures on anemia 

management that reflect the labeling approved by the FDA for 

such management. For the PY 2014 ESRD QIP, we propose to retain 

the Hemoglobin Greater Than 12g/dL measure that we adopted for 

the PY 2012 ESRD QIP and that we are proposing to retain for the 

PY 2013 ESRD QIP. We are making this proposal for the same 

reasons (discussed above) we proposed to retain this measure for 

the PY 2013 ESRD QIP measure set. 

We also propose to continue to use the specifications for 

this measure that we finalized for the PY 2012 ESRD QIP and 

which we have proposed for the PY 2013 ESRD QIP. We also 

propose to continue requiring that providers/facilities have at 

least 11 cases that meet the reporting criteria in order to be 

scored on the measure. As noted above, we believe that this 

minimum case threshold will help prevent the possibility that a 

small number of poor outcomes artificially, and for reasons 
 

126 

unrelated to the quality of care, skew a small 

provider/facility’s performance score. Also, eleven cases is a 

statistically valid threshold that will give us confidence that 

a provider or facility’s total performance score is an accurate 

reflection of the quality of care it furnishes. As a result, 

this threshold will help preserve beneficiary access to care at 

much needed small providers/facilities in rural and/or underserved areas. 

Technical details on the methodology used to calculate the 

Hemoglobin Greater Than 12g/dL measure are available on the 

Arbor Research Collaborative for Health and University of 

Michigan Kidney Epidemiology and Cost Center Web site: 

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

We seek public comment on the use of the Hemoglobin Greater 

Than 12g/dl measure in the PY 2014 ESRD QIP. 

ii. Proposed Kt/V Dialysis Adequacy Measure 

For the PY 2014 ESRD QIP, we are proposing to retire the 

URR Hemodialysis Adequacy measure we adopted for the PY 2012 

ESRD QIP and proposed to retain for the PY 2013 ESRD QIP. In 

its place, we are proposing to adopt a Kt/V measure of dialysis 

adequacy (K = dialyzer clearance, t = dialysis time, and V = 

volume of distribution) for the PY 2014 ESRD QIP. We note that 

we have asked all providers/facilities to report the Kt/V value 

and the date of the value on all ESRD claims since July 1, 2010 
 

127 

(see Change Request (CR) 6782). 

Kt/V has been advocated by the renal community as a more 

widely accepted measure of dialysis adequacy. Specifically, 

Kt/V more accurately measures how much urea is removed during 

dialysis, primarily because the Kt/V calculation also takes into 

account the amount of urea removed with excess fluid. Further, 

this proposed measure assesses Kt/V levels in both hemodialysis 

(HD) patients (in-center and home (HHD)) and peritoneal dialysis 

(PD) patients, and is based on two Kt/V measures of dialysis 

adequacy that have been endorsed by the National Quality Forum 

(#0250 and #0321). Specifically, the proposed measure assesses 

the percent of Medicare dialysis patients (PD, HD and HHD) 

meeting the modality specific Kt/V threshold. For hemodialysis 

patients (home and in-center patients), we would measure the 

percentage of adult (≥ 18 years old) Medicare patients who have 

been on hemodialysis for 6 months or more and dialyzing thrice 

weekly whose average delivered dose of hemodialysis (calculated 

from the last measurements of the month using the UKM or 

Daugirdas II formula) was a Kt/V of at least 1.2 during the 

proposed performance period. For peritoneal dialysis patients, 

we would measure the percentage of adult (≥ 18 years old) 

Medicare patients whose average delivered peritoneal dialysis 

dose was a weekly Kt/V urea of at least 1.7 (dialytic + 

residual) during the proposed performance period. At this time, 
 

128 

the measure specifications exclude pediatric patients because 

there is not a consensus on what an adequate Kt/V level should 

be in this patient population. 

In light of the fact that the renal community has advocated 

the use of this measure, it is based on two NQF endorsed 

measures of Kt/V dialysis adequacy, and our belief that Kt/V is 

an accurate measure of dialysis adequacy, we propose to adopt 

the Kt/V Dialysis Adequacy measure for the PY 2014 ESRD QIP. We 

also propose to require that providers/facilities have at least 

11 cases that can be reported under the measure specifications 

to be scored on this measure. As stated above, we believe that 

this minimum case threshold will help prevent the possibility 

that a small number of poor outcomes artificially, and for 

reasons unrelated to the quality of care, skew a small 

provider/facility’s performance score. Technical details on the 

proposed methodology we would use to calculate this measure are 

available at: 

http://www.arborresearch.org/ESRD_QMS.aspx

We seek public comments on the retirement of the URR 

Hemodialysis Adequacy measure and the proposed adoption of the 

Kt/V Dialysis Adequacy measure for the PY 2014 ESRD QIP. We 

also seek public comments on the exclusion of pediatric patients 

from this proposed measure. 

iii. Proposed Vascular Access Type Measure 
 

129 

Section 1881 (h)(2)(A)(iii) of the Act states, in part, 

that the measures specified for the ESRD QIP shall include other 

measures as the Secretary specifies, including, to the extent 

feasible, measures on vascular access, including for maximizing 

the placement of arterial venous fistula. 

Arteriovenous fistulas (AV fistulas) are the preferred type 

of vascular access for patients on maintenance hemodialysis. 

Because of the lower complication rates (including reduced 

infections), decreased risk of patient mortality, and greater 

cost efficiency associated with this type of vascular access for 

eligible patients,2,3 we propose to adopt a Vascular Access Type 

measure, which is based on two measures that are endorsed by the 

NQF. These measures assess 1. the percentage of a 

provider’s/facility’s patients on hemodialysis using an 

autogenous AV fistula with two needles during the last HD 

treatment of the month (NQF #0257); and 2. the percentage of 

provider’s/facility’s hemodialysis patients who have an 

intravenous catheter in place for 90 days or longer prior to the 

last hemodialysis session (NQF #0256). 

While catheter reduction and increased use of arteriovenous 

fistula are both important steps to improve patient care, we 

recognize that these two events are tightly interrelated and do 

 

2http://www.kidney.org/professionals/kdoqi/guideline_uphd_pd_va/va_guide2.htm

3http://www.fistulafirst.org/AboutAVFistulaFirst/History.aspx
 

130 

not want to penalize providers/facilities twice for related 

outcomes. We are therefore proposing to combine these two 

separate measures into one measure to contribute jointly to the 

Total Performance Score. Because the rates and goals for each 

subcomponent measure are very different, we are proposing to 

calculate two measure rates for the measure, based on a 

provider/facility’s performance on each subcomponent measure, 

and to adopt a different methodology (discussed below) for 

purposes of setting performance standards and scoring 

providers/facilities on this measure. We seek public comment on 

the proposed combination of these two measures into one overall 

score for the Vascular Access Type measure versus separating the 

measures into two separate measures which would then contribute 

separate scores to the overall Total Performance Score equally 

weighted with the other clinical measures. 

As explained above, 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)(iii) of the Act must 

have been endorsed by the entity with a contract under section 

1890(a) of the Act (which is currently the NQF). Under the 

exception set forth in section 1881(h)(2)(B)(ii), in the case of 

a specified area or medical topic determined appropriate by the 

Secretary for which a feasible and practical measure has not 
 

131 

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 as long as due consideration is given to 

measures that have been endorsed or adopted by a consensus 

organization identified by the Secretary. We believe that 

assessing the type of vascular access used in hemodialysis 

patients is important because clinical evidence, as noted 

previously, has shown that proper vascular access reduces the 

risk of adverse outcomes such as infections. In determining how 

to best measure vascular access type for purposes of the ESRD 

QIP, we considered proposing to adopt the two NQF-endorsed 

measures noted above (#0256 and #0257). However, under the NQFendorsed specifications for each of these measures, data must be 

collected from all hemodialysis patients. We currently collect 

this data via claims forms for Medicare patients only. We 

believe that expanding this data collection to all patients 

would be overly burdensome for ESRD providers/facilities and 

would not allow us to collect this data in time for the PY 2014 

program. For these reasons, we are proposing to limit the 

patient population to which this proposed measure applies to the 

Medicare hemodialysis patient population, and to collect the 

data via Medicare claims. Accordingly, we are proposing to 

adopt this measure under section 1881(h)(2)(B)(ii) of the Act. 

We note that since July 1, 2010, we have asked dialysis 
 

132 

providers/facilities to submit vascular access type data on ESRD 

claims (Change Request 6782). We also note that hemodialysis 

patients with acute renal failure, peritoneal dialysis patients, 

and patients under 18 years of age would be excluded from this 

proposed measure. Medicare patients with acute renal failure 

receive treatment for a relatively short period of time as 

kidney function is usually restored after an acute episode, thus 

making a fistula unnecessary; those on peritoneal dialysis 

require access through the peritoneal cavity; and the access 

considerations are different for those in the pediatric 

population. We also believe that adoption of this measure would 

be consistent with the efforts of the Fistula First initiative, 

which advances the use of fistulas proven to reduce the risk of 

infection/morbidity and mortality.4 

Finally, we propose to require that providers/facilities 

have at least 11 cases that meet the reporting criteria for this 

proposed measure to be scored on it. As stated above, we 

believe that this minimum threshold will help prevent the 

possibility that a small number of poor outcomes artificially, 

and for reasons unrelated to the quality of care, skew a small 

provider/facility’s performance score. Technical details on 

the methodology we propose to use to calculate this measure are 

available at: 

 

4 See http://www.fistulafirst.org/ for further information regarding this initiative. 
 

133 

http://www.arborresearch.org/ESRD_QMS.aspx

We seek public comment on the proposed adoption of this 

measure for the PY 2014 ESRD QIP. 

iv. Proposed Vascular Access Infections Measure 

Infections are one of the leading causes of 

hospitalizations and death among hemodialysis patients.5 The 

reduction of healthcare-associated infections (HAI), which are 

infections that may have been contracted in process of receiving 

care, is a key priority area for the Department of Health and 

Human Services. We have engaged in national efforts such as the 

National Patient Safety Initiative and the Partnership for 

Patients to reduce the number of preventable infections across 

healthcare settings, and have worked with dialysis 

providers/facilities as part of this effort. Use of effective 

infection control measures have proven successful in reducing 

the risk of life-threatening infections. 

We propose to measure dialysis access-related infection 

rates by assessing the number of months in which a monthly 

hemodialysis claim reports a dialysis access-related infection 

using HCPCS modifier V8, and we note that since July 1, 2010, we 

have asked dialysis providers/facilities to code all Medicare 

claims for dialysis access-related infections using this 

modifier (Change Request 6782). Pediatric patients (patients < 

 

5 http://www.cdc.gov/media/releases/2011/p0301_vitalsigns.html
 

134 

18 years of age) would be excluded from this measure because 

pediatric access considerations are greatly different than those 

of the adult patient population. Peritoneal dialysis patients 

would also be excluded from the calculation of the measure 

because there is no consensus on how to best measure dialysis 

access-related infection rates from catheters in these patients. 

We plan, however, to convene an expert panel for the purpose of 

trying to determine how to best address this issue in the 

pediatric and peritoneal dialysis patient populations. 

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)(iii) of the Act must have been endorsed by the 

entity with a contract under section 1890(a) of the Act (which 

is currently the NQF). Under the exception set forth in section 

1881(h)(2)(B)(ii), 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 as long 

as due consideration is given to measures that have been 

endorsed or adopted by a consensus organization identified by 

the Secretary. While the proposed Vascular Access Infections 

measure is not NQF endorsed, we believe that the incidence of 
 

135 

dialysis access-related infections is a significant patient 

safety concern. We are not aware of any measures endorsed by a 

consensus entity for vascular access infections for the ESRD 

population, and, at this time, the proposed Vascular Access 

Infections measure is also the only measure for which we have 

the necessary data to measure provider/facility performance. 

Thus, we are proposing to adopt this measure in order to promote 

patient safety in this area. 

Technical details on the methodology used to calculate this 

measure are available at: 

http://www.arborresearch.org/ESRD_QMS.aspx

We seek public comments on our proposal to adopt this 

measure in the PY 2014 ESRD QIP. 

v. Proposed Standardized Hospitalization Ratio – Admissions 

Measure 

Hospitalizations are an important indicator of patient 

quality of life and morbidity. According to 2009 data provided 

by the United States Renal Disease Data System, dialysis 

patients are hospitalized, on average, twice a year. The 

proposed Standardized Hospitalization Ratio-Admissions (SHRAdmissions) measure is a risk-adjusted measure of 

hospitalizations for Medicare dialysis patients. The data 

needed to calculate the proposed SHR-Admissions measure has been 

regularly reported to Dialysis Facility Reports (DFR) since 1995 
 

136 

(previously known as Unit-Specific Reports) and has been used by 

providers/facilities and ESRD Networks for quality improvement 

activities. These reports contain critical information on 

topics such as patient characteristics, treatment patterns, 

hospitalizations, mortality, and provider/facility 

characteristics. 

As explained above, 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)(iii) of the Act must 

have been endorsed by the entity with a contract under section 

1890(a) of the Act (which is currently the 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 as long as due consideration is 

given to measures that have been endorsed or adopted by a 

consensus organization identified by the Secretary. We reviewed 

the NQF’s consensus-endorsed measures and were unable to 

identify any NQF-endorsed measures for hospital admissions 

applicable to the ESRD population. We are unaware of any other 

measures for hospital admissions that have been approved by 
 

137 

voluntary consensus standards bodies and/or endorsed by NQF for 

ESRD patients. Therefore, we are proposing to adopt this SHRAdmissions measure as it is directly applicable to the Medicare 

ESRD population. This measure is undergoing NQF review for 

endorsement, and we intend to revisit this measure in the future 

if this review results in substantive changes to this measure. 

While we recognize that this is an “all-cause” measure, 

meaning that hospitalizations related to other medical 

conditions outside of ESRD are included in the measure, our 

review of the data listing the most frequent 100 in-patient 

diagnoses for ESRD patients demonstrate that a clear majority, 

estimated at 90 percent or greater, of admitting diagnoses are 

related to ESRD. The use of a subset of diagnoses was 

considered when the measure was reviewed by a Technical Expert 

Panel in 2007 convened by us, in part, to discuss this issue, 

but the panel concluded that use of specific diagnoses were more 

prone to poor inter-rater variation and variation in diagnosis 

coding, and for this reason, recommended that the measure be 

calculated using all admissions, regardless of the cause. 

The proposed SHR-Admissions measure is claims-based and 

describes, as a ratio, the number of ESRD Medicare patient 

actual admissions versus expected hospitalizations adjusted for 

the provider’s/facility’s Medicare patient case mix. For 

inclusion in this measure, patients must have received services 
 

138 

from the provider/facility for 60 days or more, and the 

provider/facility must have at least 5 patient years at risk 

(meaning the provider/facility must have at least 5 years of 

patient data aggregated across all patients at the facility 

during the performance period, for example, 10 patients with 6 

months of data each, or 5 patients with 12 months of data each) 

to receive an SHR score. Technical details on the methodology 

we are proposing to use to calculate this measure, including the 

adjustment for patient mix, are available at: 

http://www.arborresearch.org/ESRD_QMS.aspx

We seek public comments on our proposal to adopt this 

measure for the PY 2014 ESRD QIP. 

vi. Proposed National Healthcare Safety Network (NHSN) Dialysis 

Event Reporting Measure 

Healthcare-associated infections (HAI) are a leading cause 

of preventable mortality and morbidity across different settings 

in the healthcare sector, including at dialysis facilities. In 

a national effort to reduce this outcome, Department of Health 

and Human Services agencies, including CMS, are partnering with 

the Centers for Disease Control and Prevention (CDC) to 

encourage providers to report to the National Healthcare Safety 

Network (NHSN) as a way to track and facilitate action for 

reducing HAIs. 
 

139 

The NHSN is currently a voluntary, secure, internet-based 

surveillance system that integrates patient and healthcare 

personnel safety surveillance systems managed by the Division of 

Healthcare Quality Promotion at the CDC. NHSN has been 

operational since 2008 with acute care hospitals, long term 

acute care hospitals, psychiatric hospitals, rehabilitation 

hospitals, outpatient dialysis centers, ambulatory surgery 

centers, and long term care facilities. We believe that 

reporting dialysis events to the NHSN by all 

providers/facilities would support national goals for patient 

safety, and particularly goals for the reduction of healthcareassociated infections. Accordingly, we have developed a measure 

that would assess whether providers/facilities enroll and report 

dialysis event data to the NHSN. 

By measuring only whether providers/facilities report 

dialysis event data to the NHSN, we believe that we can allow 

providers/facilities time to become familiar with the NHSN 

reporting process. We intend in the future to propose to adopt 

a measure that would score providers/facilities based on actual 

dialysis events reported to the NHSN. 

Specifically, we are proposing that providers/facilities: 

(1) enroll in the NHSN and complete any training required by the 

CDC; and (2) submit three or more consecutive months of dialysis 

event data to the NHSN. Under this proposal, 
 

140 

providers/facilities would be able submit data to the NHSN until 

the end of the month following the month for which it collected 

data. For example, if a provider/facility chose to submit data 

for October 2012, it would have until November 30, 2012 to 

submit that data. Information regarding NHSN enrollment and 

training can be accessed at: 

http://www.cdc.gov/nhsn/enroll.html Section 1881(h)(2)(B)(i) 

of the Act requires that unless the exception set forth in 

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

specified for the ESRD QIP under section 1881(h)(2)(A)(iii) of 

the Act must have been endorsed by the entity with a contract 

under section 1890(a) of the Act (which is currently the 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 as long as due 

consideration is given to measures that have been endorsed or 

adopted by a consensus organization identified by the Secretary. 

Although a measure calculated using NHSN dialysis event data 

results is currently under review by the NQF, we are not aware 

that any measure similar to the reporting measure we are 

proposing to adopt has been endorsed or adopted by any consensus 
 

141 

building entity. As we explained above, we are proposing to 

adopt a limited reporting measure because we believe it is 

important to incentivize providers/facilities to report so that 

providers/facilities will have a process for such reporting 

should we consider measuring providers/facilities on the 

incidence of these dialysis events in future years. 

Accordingly, we are proposing to adopt this measure under the 

exception authority in section 1881(h)(2)(B)(ii) of the Act. We 

note that because HAIs are a significant patient safety concern, 

we intend to propose to adopt one or more measures that assess 

actual dialysis event rates in the future. 

We seek public comments on our proposal to adopt the NHSN 

Dialysis Event reporting measure for the PY 2014 ESRD QIP. 

vii. Proposed Patient Experience of Care Survey Usage Measure 

Section 1881(h)(2)(A)(ii) of the Act states that the 

measures specified for the ESRD QIP shall include, to the extent 

feasible, a measure (or measures) of patient satisfaction as the 

Secretary shall specify. Information on patient experience with 

care at a provider/facility is an important quality indicator to 

help providers/facilities improve services to their patients and 

to assist patients in choosing a provider/facility at which to 

seek care. We propose to adopt a measure for the PY 2014 ESRD 

QIP that assesses provider/facility usage of the In-Center 

Hemodialysis (ICH) Consumer Assessment of Healthcare Providers 
 

142 

and Systems (CAHPS) Survey. The intent of including this 

reporting measure is to assess the degree to which 

providers/facilities are providing their patients with a voice 

in their quality of hemodialysis care. 

The ICH CAHPS Survey was developed by the Agency for 

Healthcare Research and Quality (AHRQ) to assess the experience 

of hemodialysis patients receiving in-center dialysis. The areas 

evaluated by the ICH CAHPS Survey include: 

• Nephrologists’ communication and caring. 

• Quality of dialysis center care and operations. 

• Providing information to patients. 

• Rating of kidney doctors. 

• Rating of dialysis center staff. 

• Rating of dialysis center. 

The results of this survey have been used since January 

2006 by many providers/facilities as well as ESRD Networks for 

improving the care and services furnished to beneficiaries 

receiving hemodialysis. We have also required that 

providers/facilities include patient experience of care or 

satisfaction as a component of their quality assessment and 

performance improvement program as part of the conditions for 

coverage since 2008. While we did not specifically require use 

of the standardized ICH CAHPS tool, we strongly encouraged 
 

143 

providers/facilities to use it to assess patient experience of 

care (73 FR 20415). 

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)(iii) of the Act must have been endorsed by the 

entity with a contract under section 1890(a) of the Act (which 

is currently the 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 as long 

as due consideration is given to measures that have been 

endorsed or adopted by a consensus organization identified by 

the Secretary. Although the ICH CAHPS Survey itself has been 

endorsed by the NQF (#0258), the measure we are proposing to 

adopt, which assesses the extent to which providers/facilities 

use the survey, has not, and we are not aware that such a 

measure has been endorsed or adopted by any consensus building 

organization. However, as explained above, we believe it is 

important to incentivize providers/facilities to administer the 

survey. Therefore, we are proposing to adopt this measure under 

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

144 

note that we intend to propose to adopt in the future a measure 

that would be calculated using the actual ICH CAHPS survey 

results. 

Specifically, we propose to measure whether a 

provider/facility has attested that it successfully administered 

the ICH CAHPS survey during the proposed performance period for 

the PY 2014 program. 

We propose that providers/facilities would be required to 

submit this attestation through CROWNWeb, which will be 

implemented nationally in 2012, by January 30, 2013 at 11:59p.m. 

EST. We seek comments on the feasibility of this electronic 

submission through CROWNWeb and further request comments on 

whether providers/facilities should be allowed to elect to 

submit these attestations in paper format. 

As noted above, we are only proposing to measure whether a 

provider/facility administers the survey, and are not proposing 

to measure a provider’s/facility’s actual performance based on 

the survey results. We expect to adopt the ICH CAHPS survey 

itself as a measure for the ESRD QIP in future rulemaking. For 

purposes of reporting this proposed measure for the ESRD QIP, we 

will consider the ICH CAHPS survey to have been administered if 

the provider/facility administered it in accordance with the 

current specifications endorsed for the survey. These 

specifications can be accessed at: 
 

145 

https://www.cahps.ahrq.gov/content/products/ICH/PROD_ICH_Intro.a

sp?p=1022&s=222 We seek public comments on our proposal to 

adopt the Patient Experience of Care Survey reporting measure 

for the PY 2014 ESRD QIP. 

viii. Proposed Mineral Metabolism Reporting Measure 

Section 1881 (h)(2)(A)(iii) of the Act states that the 

measures specified for the ESRD QIP shall include other measures 

as the Secretary specifies, including, to the extent feasible, 

measures of bone mineral metabolism. 

Abnormalities of bone mineral metabolism (calcium and 

phosphorus) are exceedingly common and contribute significantly 

to morbidity and mortality in patients with advanced chronic 

kidney disease. Numerous studies have associated disorders of 

mineral metabolism with morbidity, including fractures, 

cardiovascular disease, and mortality. Overt symptoms of these 

abnormalities often manifest in only the most extreme states of 

calcium-phosphorus dysregulation, which is why we believe that 

routine blood testing of calcium and phosphorus is necessary to 

detect abnormalities.6

 

 

6 Kidney Disease: Improving Global Outcomes (KDIGO) CKD–MBD Work Group. KDIGO clinical practice 

guideline for the diagnosis, evaluation, prevention, and treatment of chronic kidney disease–mineral and bone 

disorder (CKD–MBD). Kidney International 2009; 76 (Suppl 113): S1–S130.) 
 

146 

The Kidney Disease: Improving Global Outcomes (KDIGO) 2009 

guideline7 recommends that the serum phosphorus level in a 

dialysis patient generally be lowered toward the normal range, 

but does not recommend a specific target level that would apply 

to all patients. The guideline also recommends that therapy to 

correct for abnormal levels be administered based on the health 

needs of the individual patient. Accordingly, we do not feel it 

is appropriate at this time to propose to adopt a measure that 

would penalize providers/facilities if they did not achieve a 

specific target serum phosphorus level in all patients. We also 

note that there is currently no NQF endorsed measure dealing 

with the achievement of specific target phosphorus levels. 

The KDIGO recommendation regarding serum calcium levels for 

dialysis patients is also to maintain serum calcium in the 

normal range. We note that the NQF is currently considering 

whether to endorse the following mineral metabolism measure: 

• The percentage of patients in a dialysis facility with 

a 3-month rolling average of total uncorrected serum 

calcium greater than 10.2 mg/dL. 

Go to www.qualityforum.org/Projects/eg/End_Stage_Renal_Disease_2010/End_Stage_Renal_Disease_2010.aspx

 

7 Kidney Disease: Improving Global Outcomes (KDIGO) CKD–MBD Work Group. KDIGO clinical practice 

guideline for the diagnosis, evaluation, prevention, and treatment of chronic kidney disease–mineral and bone 

disorder (CKD–MBD). Kidney International 2009; 76 (Suppl 113): S1–S130.) 
 

147 

to find more information regarding the National Voluntary 

Consensus Standards for ESRD. 

Despite the current lack of consensus on specific target 

ranges for both phosphorus and calcium levels in dialysis 

patients, we believe there is consensus that monthly monitoring 

of calcium and phosphorus is important for early detection of 

abnormalities. We also note that the NQF has endorsed 

phosphorus and calcium monitoring measures (NQF #0261 and NQF 

#0255) and, in 2008, we adopted serum calcium and serum 

phosphorus monitoring as CPM measures 

(http://www.arborresearch.org/ESRD_QMS.aspx). 

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)(iii) of the Act must have been endorsed by the 

entity with a contract under section 1890(a) of the Act(which is 

currently the 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 as long 

as due consideration is given to measures that have been 
 

148 

endorsed or adopted by a consensus organization identified by 

the Secretary. 

Although we gave due consideration to the NQF endorsed 

measures on phosphorus and calcium level monitoring in dialysis 

patients, it is not feasible for us to propose to adopt either 

of them at this time as we do not currently collect data on 

whether these levels are checked for each patient each month to 

allow calculation of the measure rates. We are also not aware 

that any other consensus building entity has endorsed or adopted 

measures on this topic. Therefore, we have developed a mineral 

metabolism reporting measure that is based on the two NQFendorsed measures but requires providers/facilities to attest to 

compliance with monthly monitoring and propose to adopt it under 

section 1881(h)(2)(B)(ii) of the Act. This proposed measure 

will assess whether providers/facilities monitor a patient’s 

phosphorus and calcium levels on a monthly basis throughout the 

portion of the proposed performance period during which the 

patient was treated. Although we will not be collecting actual 

serum calcium and serum phosphorus level data, or data regarding 

how these levels are being managed, we believe that routine 

monitoring of these levels is extremely important for the 

purpose of detecting abnormal states of calcium and phosphorous 

levels in this population, which this proposed measure will help 

address. 
 

149 

 We propose that providers/facilities would be required to 

submit an attestation that they have conducted the appropriate 

monitoring through CROWNWeb, which will be implemented 

nationally in 2012. We further propose that this reporting must 

be electronically submitted by January 30, 2013 at 11:59p.m. 

EST. We seek comments on the feasibility of this electronic 

submission through CROWNWeb and further request comments on 

whether providers/facilities should be allowed to elect to 

submit these attestations in paper format. 

We seek public comment on our proposal to adopt the Mineral 

Metabolism reporting measure for the PY 2014 ESRD QIP. 

We also note that we anticipate adopting for future years 

of the ESRD QIP one or more mineral metabolism clinical measures 

in addition to or in replacement of the proposed Mineral 

Metabolism reporting measure. Those measurement data will be 

collected via CROWNWeb under the authority of the Conditions for 

Coverage ESRD Final Rule (73 FR 20370) published in the Federal 

Register on April 15, 2008. We seek public comment on the 

clinical evidence that would support the establishment of 

specific target levels for serum phosphorus for purposes of 

developing one or more future ESRD QIP measures. We also seek 

public comment on the above calcium measure that has been 

submitted to the NQF for endorsement. 

c. Proposed Performance Period for the PY 2014 ESRD QIP 
 

150 

 Having decided to propose to adopt all of CY 2011 as the 

performance period for the PY 2013 QIP, we examined what 

performance period would be most appropriate for the PY 2014 

ESRD QIP. We believe that a 12-month performance period is most 

appropriate for the ESRD QIP at this point in the program. A 

period of a year accounts for seasonal variations, but also 

provides a timely incentive and feedback for 

providers/facilities, as well as timely performance information 

for Medicare beneficiaries. We have also determined that CY 

2012 is the first feasible period during which we can collect 

sufficient performance period data for all of the proposed 

measures. Therefore, we propose to select all of CY 2012 as the 

performance period for the PY 2014 ESRD QIP. 

 We seek public comments about the proposed selection of CY 

2012 as the performance period for the PY 2014 QIP. We also seek 

public comments on the use of shorter performance periods in 

future years of the ESRD QIP. 

d. Proposed Performance Standards for the PY 2014 ESRD QIP 

For the PY 2014 ESRD QIP, we are proposing to establish 

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

because it is feasible to establish them prior to the beginning 

of CY 2012, the proposed start of the performance period. This 

section generally provides that the Secretary shall establish 

performance standards with respect to measures selected for the 
 

151 

ESRD QIP for a performance period with respect to a year. 

Furthermore, under section 1881(h)(4)(B) of the Act, these 

performance standards must include levels of achievement and 

improvement, as determined appropriate by the Secretary. To 

establish performance standards under section 1881(h)(4)(A) of 

the Act, the Secretary must also comply with section 

1881(h)(4)(C) of the Act, which requires the Secretary to 

establish performance standards prior to the beginning of the 

performance period for the year involved. 

With respect to three of the proposed clinical measures 

(Hemoglobin Greater Than 12g/dL, Kt/V Dialysis Adequacy, and 

Vascular Access Infections), we propose to set the achievement 

performance standard under section 1881(h)(4)(A) of the Act as 

the national performance rate on each measure during a proposed 

baseline period. We propose that the national performance rate 

for each measure would be calculated at the national aggregate 

level as the number of Medicare patients for whom the measure 

was achieved divided by the total number of Medicare patients 

eligible for inclusion in the measure. Additionally, we propose 

to set the improvement performance standard as the national 

performance rate on each measure during the same proposed 

baseline period because we believe that it is important to 

encourage the utmost improvement in quality and care. We 

believe that selecting the national performance rate as the 
 

152 

performance standard for both the improvement and achievement 

performance standards (collectively, the performance standards) 

represents a meaningful and achievable standard of 

provider/facility performance because it represents how well 

providers/facilities are actually performing on each measure 

during a previous baseline period while still allowing 

significant room for improvement. Our goal is to incentivize 

providers/facilities to achieve these national performance 

rates, whether they do so by attaining achievement points or 

improvement points under our proposed scoring methodology 

(discussed below). We expect that the national performance rate 

on each measure will increase in future years of the ESRD QIP 

because it will reflect overall improved levels of performance. 

To ensure that these proposed performance standards are 

based on a full calendar year of performance data that is as 

close as possible to the proposed performance period, we propose 

to use a baseline period from July 1, 2010 to June 30, 2011. 

This proposed baseline period will enable us to calculate 

national performance rate values for these proposed clinical 

measures before the beginning of the performance period, and we 

intend to specify those values in the final rule. 

With respect to the proposed Vascular Access Type measure, 

we are proposing to set performance standards using the same 

methodology and baseline period that we are proposing to use for 
 

153 

the three proposed clinical measures discussed above, however we 

would set performance standards for each of the subcomponent 

measures rather than for the overall combined measure. We seek 

public comment on this methodology for setting the performance 

standards for this measure. 

With respect to the proposed SHR-Admissions measure, we 

also propose to establish the performance standards as the 

national performance rate during a proposed baseline period. 

However, we propose to establish CY 2010 as the baseline period. 

Because this measure would be calculated using hospital claims, 

we have determined that we need additional time to calculate and 

finalize the performance standards in order to specify the 

precise values in the final rule. 

We specify example performance standards, generally using 

data from July 1, 2010 through November 30, 2010 for the 

proposed Hemoglobin Greater Than 12g/dL, Kt/V Dialysis Adequacy, 

Vascular Access Type, and Vascular Access Infections measures, 

and CY 2009 for the proposed SHR-Admissions measure in the 

Table 7, below. We note that because the proposed Vascular 

Access Type measure subcomponents would only include patients 

who have been on a catheter for 90-days, we are only able to 

provide example performance standards from October 1, 2010 

through November 30, 2010 for the catheter subcomponent of the 

Vascular Access Type measure. 
 

154 

Table 7. Example Achievement and Improvement Performance 

Standards for the PY 2014 ESRD QIP 

Proposed Measure Example 

Achievement/Improvement 

Performance Standard 

Hemoglobin Greater Than 

12 g/dL Measure 

15% 

Dialysis Adequacy 

Measure (Kt/V) 

94% 

Vascular Access Type 

Measure 

XX 

%Fistula 55% 

%Catheter 12% 

Vascular Access 

Infections Measure1

0.2 

SHR-Admissions Measure2 1.0 

1

 Measured as hemodialysis access-related bacteremia rate per 1000 hemodialysis days 2

 Measured as ratio of observed hospitalizations to hospitalizations expected based on facility patient case 

mix 

We propose to establish the achievement performance 

standard for the proposed NHSN Dialysis Event reporting measure 

as the successful completion by providers/facilities of: (1) 

enrollment in the NHSN and completion of the required training 

during the performance period (as verified by a digital 

certificate obtained from CDC), or, in the case of 

providers/facilities that have previously enrolled, continued 

enrollment throughout the entirety of the performance period; 

and (2) submission to the NHSN of at least 3-consecutive months 

of dialysis event data gathered during the performance period. 

We propose to establish the achievement performance 

standard for the proposed Patient Experience of Care reporting 
 

155 

measure as an attestation by the provider/facility at the end of 

the performance period that it successfully administered the ICH 

CHAPS survey during the proposed performance period. 

We propose to establish the achievement performance 

standard for the proposed Mineral Metabolism reporting measure 

as whether the provider/facility measured the serum calcium and 

serum phosphorus levels of Medicare patients treated by the 

provider/facility at least once within the month throughout the 

duration of the proposed performance period. 

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

that the performance standards established under section 

1881(4)(A) of the Act must include levels of achievement and 

improvement, as determined appropriate by the Secretary. We have 

determined that an improvement performance standard is not 

appropriate for the proposed reporting measures because it is not 

feasible to measure improvement on these measures at this time 

because we do not have any existing data we can use to compare 

provider/facility performance. 

We seek public comments on the proposed performance 

standards for all of the proposed PY 2014 ESRD QIP measures and 

the proposed baseline periods that we would use to establish the 

performance standards for the five proposed clinical performance 

measures. 

We also note that we do not interpret section 1881(h)(1)(B) 

of the Act to require that providers/facilities meet or exceed 
 

156 

the performance standards we establish with respect to each 

individual ESRD QIP measure. Rather, we are proposing to 

implement a scoring methodology that enables a provider/facility 

to avoid a payment reduction as long as it achieves a minimum 

total performance score that, as discussed more fully below, is 

equal to the total performance score it would have received, if 

it had met the performance standards for all of the proposed 

measures. We believe that this approach best balances the goal 

of incentivizing providers/facilities to provide quality care 

across all of the measures with recognizing the higher quality 

of care provided by those providers/facilities that exceed the 

performance standards on certain measures. We seek comment on 

this proposed approach to scoring providers/facilities. 

Additionally, beginning in PY 2015, we intend to propose to 

establish floors for performance such that performance standards 

would never be lower than those set for the previous year, even 

if provider/facility performance fails to improve, or even 

declines, over time. Although we would consider continuing to 

set the national performance rate as the achievement and/or 

improvement performance standard, we would also consider 

establishing future performance standards that reflect 

performance goals widely recognized by the ESRD medical 

community as demonstrating high quality care for ESRD patients, 
 

157 

should such a consensus be reached. We welcome comments on this 

proposed approach. 

e. Proposed Methodology for Calculating the Total Performance 

Score for the PY 2014 ESRD QIP 

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

to develop a methodology for assessing the total performance of 

each provider and facility based on the performance standards 

with respect to the measures selected for the performance 

period. Section 1881(h)(3)(B) of the Act requires the Secretary 

to calculate separate performance scores for each measure. 

The final rule entitled, “Medicare Programs; Hospital 

Inpatient Value-Based Purchasing Program,” appeared in the 

Federal Register on May 6, 2011 (76 FR 26490). In this final 

rule, we stated our view that value-based purchasing represents 

an important step in revamping how care and services are paid 

for, allowing CMS to move increasingly toward rewarding better 

value, outcomes, and innovations instead of merely paying for 

volume (76 FR 26491). The final rule also set forth principles 

guiding the development of performance scoring methodologies, 

including: 

• Providers should be scored on their overall achievement 

relative to national or other appropriate benchmarks. In 

addition, scoring methodologies should consider 

improvement as an independent goal. 
 

158 

• Measures or measurement domains need not be given equal 

weight, but over time, scoring methodologies should be 

more weighted towards outcome, patient experience and 

functional status measures. 

• Scoring methodologies should be reliable, as 

straightforward as possible, and stable over time and 

enable consumers, providers, and payers to make 

meaningful distinctions among providers’ performance. 

For the first year of the ESRD QIP (PY 2012), we finalized 

a scoring methodology that provides a straightforward approach 

for assessing provider/facility performance intended for use 

with a very limited number of measures, and we are proposing to 

continue using this methodology for the PY 2013 ESRD QIP. We 

have recognized that this straightforward approach might not be 

appropriate as we adopt for the program new measures for which 

there could be wider variability in performance (75 FR 49222). 

For the PY 2014 ESRD QIP, we propose to adopt a new performance 

scoring methodology to replace the methodology we are using for 

the PY 2012 ESRD QIP and that we have proposed to use for the PY 

2013 ESRD QIP. We believe that this scoring methodology will 

more accurately reflect a provider’s/facility’s performance on 

the measures proposed for the FY 2014 ESRD QIP because it will 

enable us to differentiate between providers/facilities that 

simply meet the performance standards, those that exceed the 
 

159 

performance standards by varying amounts, and those that fall 

short of the performance standards. We also believe that this 

scoring methodology more closely aligns with the scoring 

methodology we have adopted for the Hospital Inpatient ValueBased Purchasing Program, and that it can readily accommodate 

the adoption of new ESRD QIP measures in the future. We further 

believe that the proposed methodology will better incentivize 

providers and facilities to both achieve high total performance 

scores and improve the quality of care they provide. The 

proposed performance scoring methodology is based on the 

methodology developed for the Hospital Value-Based Purchasing 

(VBP) program (76 FR 26513 through 26526). It is important to 

note that, while we have attempted to align the two scoring 

methodologies as much as possible, the ESRD QIP and the Hospital 

VBP program present distinct statutory and programmatic 

requirements that necessitate differences between the two 

scoring methodologies. 

i. Setting Performance Benchmarks and Thresholds 

Under the proposed scoring methodology for the PY 2014 ESRD 

QIP, a provider’s/facility’s performance on each of the five 

proposed clinical measures would be determined based on the 

higher of (1) an achievement score or (2) an improvement score. 

In determining the achievement score, we propose that 

providers/facilities would receive points along an achievement 
 

160 

range, defined as a scale that runs from the achievement 

threshold to the benchmark. We are proposing to define the 

achievement threshold for each of these proposed measures as one 

standard deviation below the achievement performance standard 

for the measure (which we proposed above to set as the national 

performance rate on the measure during the baseline period). We 

believe that setting the achievement threshold at one standard 

deviation below the national performance rate will enable us to 

reserve greatest penalty to those providers/facilities whose 

performance is substantially below the national performance 

rate. Performance at this level represents a significant 

deviation in care from the performance standard (performance 

worse than about 84% of providers/facilities based on a normal 

distribution), while at the same time, accounting for the degree 

of variance across provider/facility performance levels. We 

also believe that it will provide an incentive for 

providers/facilities to continuously improve their performance 

while not reducing the payments made to providers/facilities 

that score at or above the national performance rate. We are 

proposing to define the benchmark as provider/facility 

performance at the mean of the top decile of provider/facility 

performance during the baseline period because it represents a 

demonstrably high but achievable standard of excellence that the 

best performing providers/facilities reached during the baseline 
 

161 

period. This approach is consistent with the approach adopted 

in the Hospital Inpatient Value-Based Purchasing Program (76 FR 

26515). 

In determining an improvement score for the five proposed 

clinical measures, we propose that providers/facilities would 

receive points along an improvement range, defined as a scale 

running between the provider’s/facility’s performance on the 

measure (the improvement threshold) during the baseline period 

and the benchmark. The provider/facility’s improvement score 

would be calculated by comparing its performance on the measure 

during the performance period to its performance on the measure 

during the baseline period. 

Under this proposed methodology, we propose to establish 

the benchmarks and achievement thresholds for three of the 

proposed clinical measures (Hemoglobin Less Than 12g/dL, Kt/V 

Dialysis Adequacy, and Vascular Access Infections), using 

national data from a one-year baseline period from July 2010 to 

June 2011 (discussed above in section II.B.2.d of this proposed 

rule). For the proposed Vascular Access Type measure, we 

propose to establish a separate benchmark and achievement 

threshold for each of the two subcomponent measures using 

national data from the proposed July 1, 2010 to June 30, 2011 

baseline period. For the proposed SHR-Admissions measure, we 

propose to establish the benchmark and achievement threshold 
 

162 

using national data from CY 2010 as the baseline period. 

In view of our desire to adopt a scoring methodology that 

will allow us to distinguish between providers and facilities 

that do not meet or exceed the performance standards established 

with respect to an individual measure, we are proposing to set 

the achievement threshold for the 2014 ESRD QIP at one standard 

deviation below the national performance rate of 

provider/facility performance during the baseline period. 

Setting the achievement threshold in this manner complies with 

the ESRD QIP statutory requirements, and enables us to provide 

discrete scores to providers/facilities based on how far their 

performance is below or above the performance standards. This 

proposed methodology will incentivize providers/facilities to 

continuously improve their performance, and will not penalize a 

provider/facility whose total performance score is equal to or 

above the performance standards for all measures. 

ii. Scoring Provider and Facility Performance on Clinical 

Measures Based on Achievement 

For four of the proposed clinical measures (Hemogloblin 

Greater Than 12g/dL, Kt/V Dialysis Adequacy, Vascular Access 

Infections, and SHR-Admissions), we propose to award between 0 

and 10 points for achievement based on where a 

facility’s/provider’s performance falls relative to the proposed 

achievement threshold (which we propose above to define as one 
 

163 

standard deviation below the national performance rate on a 

given proposed measure during the baseline period) and the 

proposed benchmark (which we propose to define above as 

performance at the mean of the top decile of national 

facility/provider performance during the baseline period), 

according to the following formula: 

[9* ((Provider’s performance period score – 

achievement threshold) / (benchmark – achievement 

threshold))] +.5, where the provider performance 

period score falls in the range from the achievement 

threshold to the benchmark. 

All achievement points would be rounded to the nearest integer 

(for example, an achievement score of 4.5 would be rounded up to 

5). If a provider’s/facility’s score was: 

• Equal to or greater than the benchmark, the 

provider/facility would receive 10 points for achievement 

• Equal to or greater than the achievement threshold (but 

below the benchmark), the provider/facility would receive 

a score of 1 to 9 points based on a linear scale 

established for the achievement range (which distributes 

all points proportionately between the achievement 

threshold and the benchmark so that the interval in 

performance between the score needed to receive a given 

number of achievement points and one additional 
 

164 

achievement point is the same throughout the range of 

performance from the achievement threshold to the 

benchmark.) 

• Less than the achievement threshold (that is, the lower 

bound of the achievement range), the provider/facility 

would receive 0 points for achievement. 

iii. Scoring Provider/Facility Performance on Clinical Measures 

Based on Improvement 

Similar to the performance scoring model finalized in the 

Hospital VPB Program final rule (76 FR 26516 through 26526), we 

propose that providers/facilities would earn between 0 and 9 

points on each of the four proposed clinical measures 

(Hemoglobin Greater Than 12/dL, Kt/V Dialysis Adequacy, Vascular 

Access Infections, SHR-Admissions) based on how much their 

performance on the measure during the performance period 

improved from their performance on the measure during the 

proposed baseline period. A unique improvement range for each 

measure would be established for each provider/facility which we 

propose to define as the distance between the 

provider’s/facility’s baseline period score and the benchmark 

for the measure (the mean of the top decile), according to the 

following formula: 

[10 * ((Provider performance period score – provider 

baseline period score) / (Benchmark – provider 
 

165 

baseline period score))] -.5, where the provider 

performance score falls in the range from the 

provider’s baseline period score to the benchmark. 

All improvement points would be rounded up to the nearest 

integer. If a provider’s/facility’s score on the measure during 

the performance period was: 

• Greater than its baseline period score but below the 

benchmark (within the improvement range), the 

provider/facility would receive a score of 0 to 9 points 

based on the linear scale that defines the improvement 

range. 

• Equal to or lower than its baseline period score on the 

measure, the provider/facility would receive 0 points for 

improvement. 

iv. Calculating the Proposed Vascular Access Type Measure Score 

 We propose to calculate the Vascular Access Type measure 

score by first calculating the measure rate according to measure 

specifications for each of the two measure subcomponents. Those 

two rates would then be converted into separate achievement and 

improvement scores for each subcomponent using achievement and 

improvement ranges specific to each subcomponent measure as 

proposed. The higher of the achievement or improvement score 

for each measure component would then be averaged to produce one 

overall score for the Vascular Access Type measure. We believe 
 

166 

that this method of calculating this measure stresses the 

importance of both vascular access sub-measures without 

penalizing providers/facilities for two similar measures or 

unduly weighting a provider’s/facility’s total performance score 

in favor of vascular access type measures. 

v. Calculating the Proposed NHSN Dialysis Event Reporting 

Measure, Patient Experience Survey Usage Reporting Measure and 

Mineral Metabolism Reporting Measure Scores 

We propose to adopt a different scoring methodology for the 

proposed NHSN Dialysis Event reporting measure, Patient 

Experience of Care Survey Usage reporting measure, and Mineral 

Metabolism reporting measure. 

With respect to the proposed NHSN Dialysis Event Reporting 

measure, we propose to assign providers/facilities a score of 0, 

5 or 10 points as follows: 

• Providers/facilities that enrolled or were previously 

enrolled and continue to be enrolled in the NHSN during 

the performance period, completed the required training, 

and successfully reported at least 3-consecutive months 

of dialysis event data to the NHSN before January 30, 

2013 for the period of January 1, 2012-December 31, 2012 

would receive 10 points. 

• Providers/facilities that enrolled in the NHSN and 

completed the required training during the performance 
 

167 

period, but did not report at least 3-consecutive months 

of dialysis event data to the NHSN before January 30, 

2013 for the period January 1, 2012 through December 31, 

2012 would receive 5 points. 

• Providers/facilities that failed to enroll in the NHSN 

and/or complete the required training during the proposed 

performance period would receive 0 points. 

We propose to assign providers/facilities a score of 10 

points if they attest that they successfully administered the 

ICH CAHPS survey during the performance period according to the 

specifications referenced above, while providers/facilities that 

did not provide such an attestation would receive 0 points. 

We propose to assign providers/facilities that measured the 

serum calcium and serum phosphorus levels of all adult Medicare 

patients treated by the provider/facility at least once within 

the month throughout the duration of the proposed performance 

period a score of 10 points, while providers/facilities that did 

not do so would receive 0 points. This will be accomplished by 

a facility furnished attestation at the end of the performance 

period. Those facilities that do not provide this attestation 

will receive 0 points. 

vi. Examples to Illustrate Proposed 2014 ESRD QIP Performance 

Scoring Model As Applied to Clinical Measures 

Three examples are presented to illustrate how the proposed 
 

168 

performance scoring model would be applied in the context of the 

PY 2014 ESRD QIP using previous data from 2008. Figure 1 shows 

Facility A’s performance on the proposed Hemoglobin Greater Than 

12g/dL measure. The example benchmark calculated for this 

measure in this case is 2 percent (mean of the top decile during 

the baseline period), while the example achievement threshold is 

44 percent (one standard deviation below the national 

performance rate during the baseline period). Facility A’s 

performance rate of 2 percent during the performance period 

meets the benchmark, so Facility A would earn 10 points (the 

maximum) for achievement for this measure. (Because in this 

example Facility A has earned the maximum number of points 

possible for this measure, its improvement score is irrelevant.) 
 

169 

Figure 1. Example of Dialysis Facility Earning Points by 

Achievement or Improvement: Facility A

Measure: Hemoglobin Greater Than 12 g/dL

44%

Achievement

Threshold

2%

Benchmark

Achievement Range

Facility A Earns: 10 points for achievement

Facility A Score: Maximum of achievement or improvement

= 10 points on this measure

Facility A

Baseline Year 

Performance Year

60

2

Score

Score

. . . . . . . . . Achievement Range

1 2 3 4 5 6 7 8 9 10

Improvement Range

123456789

. . . . . . . . .

.

26%

Performance

Standard

Figure 2 shows the scoring for another facility, Facility B. As 

illustrated below, the facility’s performance on the Kt/V Dialysis 

Adequacy measure went from 83 percent in the baseline period to 94 

percent during the performance period. 
 

170 

Figure 2. Example of Dialysis Facility Earning Points by 

Achievement or Improvement: Facility B

Measure: Kt/V Dialysis Adequacy

88%

Achievement

Threshold

98%

Benchmark

Achievement Range

Facility B Earns: 6 points for achievement

7 points for improvement

Facility B Score: Maximum of achievement or improvement

= 7 points on this measure

Facility B

Baseline Year 

Performance Year

83

94

Score

Score

. . . . . . . . . Achievement Range

1 2 3 4 5 6 7 8 9 10

Improvement Range

123456789

. . . . . . . . .

.

94%

Performance

Standard

Applying the achievement scale, Facility B would earn 6 points 

for achievement, calculated as follows: 

9 * [(94 – 88) / (98 – 88)] + .5 = 5.4 + .5 = 5.9, 

which is rounded to 6 points 

 However, because Facility B’s performance during the 

performance period is also greater than its baseline period 
 

171 

performance (but Facility B’s performance period score is less 

than the benchmark), it would be scored based on improvement as 

well. Applying the improvement scale, based on Facility B’s 

period-to-period improvement, from 83% percent to 94% percent, 

Facility B would earn 7 improvement points, calculated as 

follows: 

10 * [(94 – 83) /(98 – 83)] - .5 = 7.3 -.5 = 6.8, 

which would be rounded to 7 points 

Because the higher of the two scores is used for determining the 

measure score, Facility B would receive 7 points for this 

measure. 

In Figure 3 below, Facility C’s performance on the proposed 

SHR measure drops from .75 in the baseline period to 1.4 in the 

performance period, a decline of .65. We note that a lower 

performance score on this proposed measure indicates better 

performance because it indicates that a provider/facility had 

fewer than expected hospital admissions. 
 

172 

Figure 3. Example of Dialysis Facility Earning Points by 

Achievement or Improvement: Facility C

Measure: SHR-Admissions

1.2

Achievement

Threshold

0.5

Benchmark

Achievement Range

Facility C Earns: 0 points for achievement

0 points for improvement

Facility C Score: Maximum of achievement or improvement

= 0 points on this measure

Facility C

Baseline Year 

Performance Year 1.4

.75

Score

Score

1.0

Performance

Standard

 Because Facility C’s performance during the performance 

period falls below the achievement threshold of 1.2, it would 

receive no points for achievement. Facility C would also 

receive zero points for improvement because its performance 

during the performance period was lower than its performance 

during the baseline period. In this example, Facility C would 
 

173 

receive zero points for the SHR Measure. 

vii. Proposed Weighting of the PY 2014 ESRD QIP Measures and 

Calculation of the PY 2014 ESRD QIP Total Performance Score 

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

methodology for assessing provider/facility total performance 

must include a process to weight the performance scores with 

respect to individual measures to reflect priorities for quality 

improvement, such as weighting scores to ensure that providers 

and facilities have strong incentives to meet or exceed anemia 

management and dialysis adequacy performance standards, as 

determined appropriate by the Secretary. 

In determining how to appropriately weight the PY 2014 ESRD 

QIP measures for purposes of calculating total performance 

scores, we considered a number of criteria. Specifically, we 

considered the number of measures we have proposed to include in 

the PY 2014 ESRD QIP as well as CMS and Departmental quality 

improvement priorities. We believe that weighting the five 

proposed clinical measures equally will incentivize 

providers/facilities to improve and achieve high levels of 

performance across all of the measures, resulting in overall 

improvement in the quality of care provided to ESRD patients. 

For these reasons, we propose to assign equal weight to the five 

proposed clinical performance measures: Hemoglobin Greater Than 

12g/dL measure, Kt/V Dialysis Adequacy measure, Vascular Access 
 

174 

Type measure, Vascular Access Infections measure, and SHRAdmissions measure; with those equal weights adding up to 90 

percent of the total performance score. We believe that while 

the proposed reporting measures are valuable, the five proposed 

clinical measures measure actual patient outcomes and therefore, 

justify a proposed combined weight of 90 percent. We propose 

that the remaining 10 percent of the total performance score 

would be comprised of the three proposed reporting measures, 

with each measure weighted equally. We believe it is of utmost 

importance to incentivize providers/facilities to improve 

clinical care, and, therefore, we believe it is necessary to 

heavily weight these measures. We recognize, however, that 

reporting is an important component in quality improvement, and 

that this type of measure should also be included in the ESRD 

QIP, although at a substantially lower weight. 

We also considered whether and how we could award a total 

performance score to providers/facilities that do not report 

data on at least 11 cases with respect to one or more of the 

proposed clinical measures. As we stated above, we are 

proposing that this minimum number of cases must be reported 

with respect to each proposed clinical measure in order for the 

provider/facility to receive a score on that measure. We also 

note that we finalized a policy for the PY 2012 ESRD QIP that 

providers/facilities that reported less than 11 cases meeting 
 

175 

the reporting criteria for each of the measures would not 

receive a total performance score (76 FR 639). Now that we are 

proposing to adopt additional measures, we believe it is 

appropriate to propose to calculate total performance scores for 

all providers/facilities. In the case of a provider/facility 

that has sufficient data from the performance period, but lacks 

sufficient data from the baseline period, we propose to only 

calculate its achievement score, since it would not be possible 

to calculate its improvement score. We believe that this 

approach is necessary to ensure that as many 

providers/facilities receive a score as possible. We are 

proposing that the combined weight of the clinical performance 

measures that are scored would still be equal to 90 percent of 

the total performance score, but only those measures for which 

providers/facilities report a minimum of 11 cases or more would 

be included in determining this score, with each such measure 

being weighting equally. We believe that this approach achieves 

that goal of including as many providers/facilities as possible, 

while ensuring the reliability of the measure scores. 

Similarly, we propose to assign equal weight to the 

proposed NHSN Dialysis Event reporting measure, Patient 

Experience Survey reporting measure, and Mineral Metabolism 

reporting measure, with those equal weights adding up to 10 

percent of the total performance score. Applying the proposed 
 

176 

weighting criteria to a provider/facility that receives a score 

on all eight proposed measures, we propose to calculate the 

provider/facility total performance score using the following 

formula: 

Total Performance Score = [(.1800 * Hemoglobin Greater 

Than 12g/dL Measure) + (.1800 * Kt/V Dialysis Adequacy 

Measure) + (.1800 * Vascular Access Type Measure) + 

(.1800 * Vascular Access Infections Measure) + (.1800 

* SHR-Admissions)] + [(.0333 * NHSN Dialysis Event 

Reporting Measure) + (.0333 * Patient Experience 

Survey Reporting Measure) + (.0333 * Mineral 

Metabolism Reporting Measure)] * 10. 

The Total Performance Score would be rounded to the nearest 

integer (and any individual measure values ending in .5 

would be rounded to the next higher integer)). 

However, if, for example, a provider/facility did not 

receive a score on the proposed Vascular Access Type and 

Vascular Access Infections measures, the provider’s/facility’s 

total performance score would be calculated as follows: 

Total Performance Score = [(.3000 * Hemoglobin Greater 

Than 12g/dL Measure) + (.3000 * Kt/V Dialysis Adequacy 

Measure) + (.3000 * SHR) + (.0333 * NHSN Reporting 

Measure) + (.0333 * Patient Experience Survey 

Reporting Measure) + (.0333 * Mineral Metabolism 
 

177 

Reporting Measure)] * 10, (the Total Performance Score 

will be rounded to the nearest integer (and any values 

ending in .5 would be rounded to the next higher 

integer)). 

viii. Example of Applying the Proposed PY 2014 ESRD QIP 

Performance Scoring Model and Calculating the Total Performance 

Score 

To illustrate the application of the proposed 2014 ESRD QIP 

performance scoring model, we offer the following example: 

For the performance period, Facility D reports and receives 

raw scores on the measures as set forth in columns 5 and 6 of 

Table 8 below. For this example, we calculated sample 

benchmarks and achievement thresholds using 2009 National 

Facility Values data as the baseline period, except for the 

proposed SHR measure, for which we used 2008 National Facility 

Values. Columns 7 and 8 of Table 8 below display the individual 

measure scores (on achievement and improvement), while column 9 

displays the earned points for each measure. Finally, row 9 

displays the total performance score Facility D would receive 

after applying the proposed performance scoring and weighting 

methodology.
 178 

Table 8. Example of Calculation of Provider/Facility Total Performance ScorProposed 2014 ESRD QIP Scoring Methodology

Quality Measure 

Measure 

Description/Definition 

Achievement 

Threshold 

(one 

standard 

deviation 

from the national 

performance 

rate )* 

Benchmark 

(mean of 

the top 

decile)* 

Provider/

Facility Baseline 

Score 

Provider/ 

Facility 

Performance 

Score 

Achievement 

Points 

Impro

Po

Hemoglobin greater than 12 g/dL measure 

% of patients with hemoglobin greater than 12 g/dL 44% 2% 22.0% 14.0% 7 

Dialysis Adequacy Measure (Kt/V) 

% of hemodialysis (HD) patients with Kt/V ≥1.2 85% 100% 80.0% 95.0% 7 

Vascular Access Type Measure 

Average of the two sub-measures 

 (Fistula) 

% of patients receiving treatment with fistulae 40% 73% 25.0% 40.0% 0 

(Catheter) 

% of patients receiving treatment with catheter 38% 11% 29% 30% 3 

Vascular Access Infections Measure 

Overall access-related bacteremia: rate of access-related bacteremia among adult chronic HD patients (Express as: rate per 1000 HD patient days) 3.1 0.0 0.5 1.1 6 

SHRAdmissions Measure 

Standardized Hospitalization Ratio 1.35 0.58 1.32 1.54 0 

NHSN Dialysis Event Reporting Measure 

Enroll and report at least 3 months of dialysis event data N/A N/A N/A 10 N/A 

Patient Experience of Care Survey Usage Reporting 

Providers/facilities must attest that they successfully fielded survey during the performance period N/A N/A N/A 10 N/A 
 

Measure Mineral Metabolism Reporting measure 

Measure serum calcium and serum phosphorus levels of Medicare patients N/A N/A N/A 10 N/A 

Provider/Facility Total Performance 

*Achievement Thresholds and Benchmarks are based on 2009 National Facility Values (except for the SHR-Admissions based on 2008 National Facility Values). 
 180 

 We solicit public comment on the proposed performance 

scoring methodology. 

f. Proposed Payment Reductions for the PY 2014 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 providers and facilities such 

that providers and facilities achieving the lowest total 

performance scores receive the largest payment reductions. 

We have implemented a sliding scale of payment reductions 

for the PY 2012 ESRD QIP, (76 FR 634) and are proposing a 

similar scale for the PY 2013 ESRD QIP. In developing a 

payment reduction scale for the PY 2014 ESRD QIP, we sought 

to create an approach that would retain aspects of the 

tiered sliding scale selected for the PY 2012 ESRD QIP, but 

also reflect the change in provider/facility scores under 

the new scoring methodology. Under this proposed approach, 

a provider/facility would not be required to meet or exceed 

the performance standards with respect to each of the eight 

proposed measures in order to avoid receiving a payment 

reduction under the ESRD QIP. Rather, even if a 

provider/facility failed to meet or exceed the performance 

standards with respect to one or more of these measures, 

the provider/facility could avoid a payment reduction if it 
 181 

achieved a minimum total performance score that is equal or 

greater than the minimum total performance score it would 

receive if it had met the performance standards for each 

proposed measure, or, in the case of the Vascular Access 

Type measure, for the two subcomponent measures. Because we 

are proposing to establish the performance standards, 

achievement thresholds, and benchmarks for each of the 

proposed clinical measures based on provider/facility 

performance during the respective proposed baseline period 

that applies to the measure, we will not know what each of 

those values will be until those baseline periods have 

concluded. However, because we have proposed to assign 10 

points to each provider/facility that meets the achievement 

performance standard on each of the three reporting 

measures, we know how performance on these measures will 

factor into this minimum total performance score. We 

estimate at this time that the minimum total performance 

score that a provider/facility would have to achieve to 

avoid a payment reduction would be 60 points, and we will 

specify the exact number in the final rule. We propose to 

implement at least a 1.0 percent payment reduction for all 

providers/facilities that fail to meet or exceed this 

minimum total performance score. 

 To ensure that the proposed payment reduction 
 182 

methodology complies with the section 1881(h)(3)(A)(ii) 

requirement that providers and facilities achieving the 

lowest total performance scores receiving the largest 

reductions, we propose to increase the payment reduction 

from 1.0 percent to 1.5 percent for all 

providers/facilities that fail to achieve a total 

performance score that is 10 points below the minimum total 

performance score (described above). Additionally, we 

propose to increase the payment reduction to 2.0 percent 

for all providers/facilities that fail to achieve a total 

performance score that is 20 points below the minimum total 

performance score (described above). We believe that such 

a sliding scale will incentivize providers/facilities to 

meet the performance standards and continue to improve 

their performance because even if a provider/facility fails 

to achieve the minimum total performance score, such 

provider/facility will still be incentivized to strive for, 

and attain, better performance in order to reduce the 

amount of its payment reduction. We will review this data 

to ensure that all providers/facilities will be 

sufficiently incentivized to provide high quality care. If 

we determine that the proposed approach for selecting the 

minimum total performance score is not rigorous enough we 

may finalize a higher minimum total performance score or a 
 183 

scalable approach to the scoring methodology. As stated 

above, the specific total performance score that a 

provider/facility would be required to achieve to avoid a 

payment reduction will be specified in the final rule. 

We seek public comments on the proposed payment 

reductions for the PY 2014 ESRD QIP. 

3. Proposed Public Reporting Requirements 

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

Secretary to establish procedures for making information 

regarding performance under the ESRD QIP available to the 

public, including information on the total performance 

score (as well as appropriate comparisons of providers and 

facilities to the national average with respect to such 

scores) and performance scores for individual measures 

achieved by each provider and facility. Section 

1881(h)(6)(B) of the Act further requires that a provider 

or facility has an opportunity to review the information to 

be made public with respect to that provider/facility prior 

to its publication. 

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

the Secretary to provide each provider and facility with a 

certificate containing its total performance score to post 

in patient areas within the facility. Finally, section 

1881(h)(6)(D) of the Act requires the Secretary to post a 
 184 

list of providers/facilities and performance-score data on 

a CMS-maintained Web site. 

For both the PY 2013 and PY 2014 ESRD QIP, we propose 

no change in the implementation of these statutory 

provisions (section 1881(h)(6)(A) through section 

1881(h)(6)(A)(D) of the Act) from the proposals finalized 

in the 2012 ESRD QIP final rule (76 FR 636 through 639), 

wherein we finalized the establishment of procedures for 

providers/facilities to review the information to be made 

public, and the procedures for informing the public through 

facility-posted certificates. 

We seek public comments on the proposed public reporting 

requirements for the PY 2013 and PY 2014 ESRD QIP. 

4. Future QIP Measures 

As part of our effort to continuously improve the ESRD 

QIP, we are working to adopt additional robust measures 

that provide valid assessments of the quality of care 

delivered to ESRD beneficiaries. To that end, we are 

developing measures that apply to all modalities (including 

home and in-center dialysis) and the pediatric population. 

We are considering the adoption of measures on pediatric 

anemia (for example, iron targets), and fluid management 

for future years. 
 185 

We also seek public comment on the inclusion of iron 

management measures, serum calcium management measures, and 

serum phosphorus management measures for future years of 

the QIP. Specifically, we seek public comment on: 

• Measurement of Serum Calcium Concentration. 

• Measurement of Serum Phosphorus Concentration. 

• Assessment of Iron Stores. 

 These measures are currently collected through 

CROWNWeb as part of the Clinical Practice Measures set. 

The full specifications for these measures may be accessed 

at: http://www.arborresearch.org/ESRD_QMS.aspx. 

5. Proposed Process of Updating Measures 

 Section 1881(h)(2)(C) of the Act enables the Secretary 

to establish a process for updating the measures specified 

under subparagraph (A) in consultation with interested 

parties. Occasionally there are changes in science or new 

issues arise related to patient safety concerns that may 

impact the measures that have been adopted through the 

rulemaking process. Therefore, for such cases where new 

information is available that specifically relates to 

patient safety concerns, we are proposing that we would 

post a notice of the updates we intend to make to the 

measure(s) in the Federal Register. We would specify in 

the Notice a time period during which we would accept 
 186 

comments from the public. We would consider these comments 

and post a Notice in the Federal Register finalizing any 

updates that we make to the measure(s). This process will 

enable us to make necessary updates to the ESRD QIP 

measures to ensure that the measures are based on the best 

available scientific data. 

 We request comment on this proposed procedure for 

updating ESRD QIP measures in accordance with section 

1886(h)(2)(C) of the Act. 

III. Ambulance Fee Schedule 

A. Section 106 of the Medicare and Medicaid Extenders Act 

of 2010 (MMEA) 

1. Amendment to section 1834(l)(13) of the Act 

Section 146(a) of the Medicare Improvements for 

Patients and Providers Act of 2008 (Pub. L. 110-275) 

(MIPPA) amended section 1834(l)(13)(A) of the Act to 

specify that, effective for ground ambulance services 

furnished on or after July 1, 2008 and before January 1, 

2010, the ambulance fee schedule amounts for ground 

ambulance services shall be increased as follows: 

For covered ground ambulance transports which 

originate in a rural area or in a rural census tract of a 

metropolitan statistical area, the fee schedule amounts 

shall be increased by 3 percent. 
 187 

For covered ground ambulance transports which do not 

originate in a rural area or in a rural census tract of a 

metropolitan statistical area, the fee schedule amounts 

shall be increased by 2 percent. 

Sections 3105(a) and 10311(a) of the Affordable Care 

Act further amended section 1834(l)(13)(A) of the Act to 

extend the payment add-ons described above for an 

additional year, such that these add-ons also applied to 

covered ground ambulance transports furnished on or after 

January 1, 2010 and before January 1, 2011. In the CY 2011 

physician fee schedule final rule (75 FR 73385 and 73386, 

73625), we revised §414.610(c)(1)(ii) to conform the 

regulations to this statutory requirement. 

Subsequently, section 106(a) of the Medicare and 

Medicaid Extenders Act of 2010 (MMEA) again amended section 

1834(l)(13)(A) of the Act to extend the payment add-ons 

described above for an additional year, such that these 

add-ons also apply to covered ground ambulance transports 

furnished on or after January 1, 2011 and before January 1, 

2012. 

Accordingly, we are proposing to revise 

§414.610(c)(1)(ii) to conform the regulations to this 

statutory requirement. This statutory requirement is selfimplementing. A plain reading of the statute requires only 
 188 

a ministerial application of the mandated rate increase, 

and does not require any substantive exercise of discretion 

on the part of the Secretary. For further information 

regarding the extension of these payment add-ons, please 

see Transmittal 706 (Change Request 6972) dated May 21, 

2010 and the CMS web site, 

http://www.cms.gov/AmbulanceFeeSchedule/02_afspuf.asp. 

2. Amendment to section 146(b)(1) of MIPPA 

Section 146(b)(1) of the MIPPA amended the designation 

of rural areas for payment of air ambulance services. The 

statute originally specified that any area that was 

designated as a rural area for purposes of making payments 

under the ambulance fee schedule for air ambulance services 

furnished on December 31, 2006, shall continue to be 

treated as a rural area for purposes of making payments 

under the ambulance fee schedule for air ambulance services 

furnished during the period July 1, 2008 through December 

31, 2009. 

Sections 3105(b) and 10311(b) of the Affordable Care 

Act amended section 146(b)(1) of MIPPA to extend this 

provision for an additional year, through December 31, 

2010. In the CY 2011 physician fee schedule final rule (75 

FR 73385 through 86, 73625 through 26), we revised 

§414.610(h) to conform the regulations to this statutory 
 189 

requirement. 

 Subsequently, section 106(b) of the MMEA amended 

section 146(b)(1) of MIPPA to extend this provision again 

through December 31, 2011. Thus, we are proposing to revise 

§414.610(h) to conform the regulations to this statutory 

requirement. This statutory requirement is selfimplementing. A plain reading of the statute requires only 

a ministerial application of a rural indicator, and does 

not require any substantive exercise of discretion on the 

part of the Secretary. Accordingly, for areas that were 

designated as rural on December 31, 2006, and were 

subsequently re-designated as urban, we have re-established 

the “rural” indicator on the ZIP Code file for air 

ambulance services through December 31, 2011. 

For further information regarding the extension of 

this MIPPA provision, please see Transmittal 706 (Change 

Request 6972) dated May 21, 2010 and the CMS web site, 

http://www.cms.gov/AmbulanceFeeSchedule/02_afspuf.asp. 

3. Amendment to section 1834(l)(12) of the Act 

Section 414 of the Medicare Prescription Drug, 

Improvement and Modernization Act of 2003 (MMA) added 

paragraph (12) to section 1834(l) of the Act, which 

originally specified that in the case of ground ambulance 

services furnished on or after July 1, 2004, and before 
 190 

January 1, 2010, for which transportation originates in a 

qualified rural area (as described in the statute), the 

Secretary shall provide for a percent increase in the base 

rate of the fee schedule for such transports. The statute 

requires this percent increase to be based on the 

Secretary's estimate of the average cost per trip for such 

services (not taking into account mileage) in the lowest 

quartile of all rural county populations as compared to the 

average cost per trip for such services (not taking into 

account mileage) in the highest quartile of rural county 

populations. Using the methodology specified in the July 

1, 2004 interim final rule (69 FR 40288), we determined 

that this percent increase was equal to 22.6 percent. As 

required by the MMA, this payment increase was applied to 

ground ambulance transports that originated in a “qualified 

rural area”; that is, to transports that originated in a 

rural area included in those areas comprising the lowest 

25th percentile of all rural populations arrayed by 

population density. For this purpose, rural areas included 

Goldsmith areas (a type of rural census tract). 

 Sections 3105(c) and 10311(c) of the Affordable Care 

Act amended section 1834(l)(12)(A) of the Act to extend 

this rural bonus for an additional year through December 

31, 2010. In the CY 2011 PFS final rule (75 FR 73385 
 191 

through 73386 and 73625), we revised §414.610(c)(5)(ii) to 

conform the regulations to this statutory requirement. 

 Subsequently, section 106(c) of the MMEA again amended 

section 1834(l)(12)(A) of the Act to extend the rural bonus 

described above for an additional year, through December 

31, 2011. Therefore, as directed by the MMEA, we are 

continuing to apply the rural bonus described above (in the 

same manner as in previous years), to ground ambulance 

services with dates of service on or after January 1, 2011 

and before January 1, 2012 where transportation originates 

in a qualified rural area. 

 This rural bonus is sometimes referred to as the 

“Super Rural Bonus” and the qualified rural areas (also 

known as “super rural” areas) are identified during the 

claims adjudicative process via the use of a data field 

included on the CMS supplied ZIP Code File. 

Accordingly, we are proposing to revise 

§414.610(c)(5)(ii) to conform the regulations to the 

statutory requirement set forth at section 106(c) of the 

MMEA. This statutory requirement is self-implementing. 

The statute requires a one-year extension of the rural 

bonus (which was previously established by the Secretary), 

and does not require any substantive exercise of discretion 

on the part of the Secretary. For further information 
 192 

regarding the extension of this rural bonus, please see 

Transmittal 706 (Change Request 6972) dated May 21, 2010 

and the CMS web site, 

http://www.cms.gov/AmbulanceFeeSchedule/02_afspuf.asp. 

B. Technical Correction

 In addition, we are making a technical correction to 

§414.610(c)(1). In the CY 2011 physician fee schedule 

final rule (75 FR 73386, 73625), CMS made technical changes 

to reformat §414.610(c)(1). However, in making these 

revisions, language was inadvertently left out of this 

regulation. Specifically, the following sentence was 

inadvertently omitted from revised §414.610(c)(l): “The CF 

is multiplied by the applicable RVUs for each level of 

service to produce a service-level base rate.” Prior to 

the changes made in the CY 2011 physician fee schedule 

final rule, this was the first sentence under 

§414.610(c)(l)(i). We did not intend to delete this 

language in making the CY 2011 formatting changes. Thus, 

we are proposing to revise §414.610(c)(1) to reinstate this 

sentence which was inadvertently deleted in the CY 2011 

physician fee schedule final rule. 

IV. Durable Medical Equipment and Supplies 

A. Background for Durable Medical Equipment and Supplies
 193 

Title XVIII of the Social Security Act (the Act) 

governs the administration of the Medicare Program. The 

statute provides coverage for broad categories of benefits, 

including inpatient and outpatient hospital care, skilled 

nursing facility care, home health care, physician 

services, and durable medical equipment (DME). DME is 

covered by Medicare based, in part, upon section 1832(a) of 

the Act, which describes the scope of benefits under the 

supplementary medical insurance program (Medicare Part B). 

Section 1861(s)(6) of the Act defines "medical and other 

health services" to include DME as a separate benefit for 

which payment is authorized by section 1832 of the Act. 

Section 1861(m)(5) of the Act specifically includes DME in 

the definition of the term “home health services.” 

In accordance with section 1861(n) of the Act, the 

term “durable medical equipment” includes iron lungs, 

oxygen tents, hospital beds, and wheelchairs used in the 

patient’s home whether furnished on a rental basis or 

purchased. The patient’s home includes an institution used 

as his or her home other than an institution that meets the 

requirements of section 1861 (e)(1) or section 1819 (a)(1) 

of the Act. Besides being subject to this provision, the 

coverage of DME must also meet the requirements of section 

1862(a)(1)(A) of the Act, which in general excludes from 
 194 

payment any items or services that are not reasonable and 

necessary for the diagnosis or treatment of illness or 

injury or to improve the functioning of a malformed body 

member, and section 1862(a)(6) of the Act, which (except 

for certain specified exceptions) precludes payment for 

personal comfort items. 

 Section 1834(a) of the Act, as added by section 4062 

of the Omnibus Budget Reconciliation Act of 1987 (OBRA 87), 

Public Law 100-203, sets forth the payment rules for DME 

furnished on or after January 1, 1989. The Medicare 

payment amount for a DME item is generally equal to 80 

percent of the lesser of the actual charge or the fee 

schedule amount for the item, less any unmet Part B 

deductible. The beneficiary coinsurance for such items is 

generally equal to 20 percent of the lesser of the actual 

charge or the fee schedule amount for the item once the 

deductible is met. The fee schedule amounts are generally 

calculated using average allowed charges from a base period 

and then updated by annual update factors. Sections 

1834(a)(2) through (a)(7) of the Act set forth six separate 

classes of DME and separate payment rules for each class. 

The six classes of items are: inexpensive and other 

routinely purchased DME; items requiring frequent and 

substantial servicing; customized items; oxygen and oxygen 
 195 

equipment; other covered items (other than DME); and capped 

rental items. For DME in general, §414.210(f) specifies 

that payment can be made for replacement of DME that is 

lost, stolen, irreparably damaged, or has been in 

continuous use for the equipment’s reasonable useful 

lifetime (RUL). In general, the RUL for DME is established 

as 5 years. Computation of the RUL is based on when the 

equipment is delivered to the beneficiary, not the age of 

the equipment. The 5-year standard is set forth in section 

1834(a)(7)(C)(iii) of the Act for capped rental DME, but 

was applied to all DME through the regulations. The RUL is 

used to determine how often it is reasonable to pay for 

replacement of DME under the program and is not 

specifically set forth as a minimum lifetime standard. 

Therefore, we are using our discretion to propose a rule 

regarding how long equipment must withstand repeated use to 

be considered durable medical equipment. 

 Payment for inexpensive or routinely purchased DME is 

made on a purchase or rental basis, with total payments 

being limited to the purchase fee schedule amount for the 

item. The regulation at 42 CFR §414.220 provides that 

inexpensive DME have an average purchase price of $150 or 

less and routinely purchased DME are items that have 

historically been acquired on a purchase basis 75 percent 
 196 

of the time or more. Accessories used with DME are also 

included in the inexpensive or routinely purchased DME 

class. Payment is generally made on a monthly rental basis 

with no cap on the number of rental payments made for items 

such as ventilators that require frequent and substantial 

servicing. Payment for items meeting the definition of 

customized DME set forth at §414.224 is made on a lump sum 

purchase basis in an amount established based on the 

Medicare claims processing contractor’s individual 

consideration and judgment of a reasonable payment amount 

for each item. Payment for oxygen equipment set forth at 

§414.226 is made on a monthly basis for up to 36 months of 

continuous use. The supplier retains ownership of the 

oxygen equipment following the 36-month cap, but must 

continue to furnish the equipment for the remainder of the 

equipment’s 5-year RUL, at which point the beneficiary can 

elect to obtain new equipment. Payment for capped rental 

items set forth at §414.229(f) is made on a monthly rental 

basis for up to 13 months of continuous use. The supplier 

must transfer title to the equipment to the beneficiary on 

the first day following the 13th month of continuous use. 

In establishing regulations for the purpose of 

implementing the payment rules mandated by OBRA 87, 42 CFR 

§414.202 sets forth the basic definition of DME that was 
 197 

originally established and elaborated upon in program 

instructions discussed below. Section 414.202 defines DME 

as equipment furnished by a supplier or a home health 

agency that-- 

 • Can withstand repeated use; 

 • Is primarily and customarily used to serve a medical 

purpose; 

 • Generally is not useful to an individual in the 

absence of an illness or injury; and 

 • Is appropriate for use in the home. 

The benefit for DME as it was initially defined at 

section 1861(s)(6) of the Act was a benefit for “rental of 

durable medical equipment.” The owner of rented equipment 

is paid for the use of the equipment. When the equipment 

is no longer needed, it is returned to the owner and can 

then be rented by another customer. Items that are 

disposable cannot be rented and items that last for short 

periods of time are not likely to be items that would be 

rented. The Act was amended by section 16 of the MedicareMedicaid Anti-Fraud and Abuse Amendments of 1977 (P.L. 95-

142) to allow for purchase of DME in cases where purchase 

is less costly or more practical than rental. In 1978, 

program instructions were added to the Medicare Part B 

Carriers Manual (HCFA-Pub. 14-3, Rev. 3-669) to further 
 198 

define DME and durability of an item, that is, when an item 

is considered durable. The instructions are now included 

in section 110.1 of chapter 15 of the Medicare Benefit 

Policy Manual (CMS-Pub. 100-02). In specifying which items 

satisfy the durability criteria, these program instructions 

provide that “an item is considered durable if it can 

withstand repeated use, that is, the type of item which 

could normally be rented” and excludes items that are “of 

an expendable nature.” The instructions do not specify 

exactly how long an item must last to be considered a 

durable item that would normally be rented as opposed to a 

disposable item or an item that would not normally be 

rented. 

CMS has provided program instructions for coverage of 

supplies and accessories at Section 110.3 in Chapter 15 of 

the Medicare Benefits Policy Manual. The instructions 

provide that payment may be made for supplies that are 

necessary for the effective use of DME, such as lancets 

used to draw blood for use with a home blood glucose 

monitor. The lancet itself is disposable and would not be 

covered as DME, but it is a covered item that falls under 

the general DME benefit because it is necessary for the 

effective use of DME - the home blood glucose monitor. 

Supplies necessary for the effective use of DME also 
 199 

include oxygen and those drugs and biologicals which must 

be inserted directly into the equipment for the effective 

use of DME. 

The Healthcare Common Procedure Coding System (HCPCS) 

is a standardized coding system used to process claims 

submitted to Medicare, Medicaid, and other health insurance 

programs by providers, physicians, and other suppliers. 

The HCPCS Code Set is divided into two principal 

subsystems, referred to as level I and level II of the 

HCPCS: 

Level I of the HCPCS codes is comprised of Current 

Procedural Terminology (CPT) codes, which are copyrighted 

by the American Medical Association, and are used primarily 

to identify medical services and procedures furnished by 

physicians and other healthcare professionals that are 

billed to public or private health insurance programs. 

Level II of HCPCS is a standardized coding system used 

primarily to identify products and supplies that are not 

included in the CPT codes, such as DME, orthotics, 

prosthetics, and supplies when used outside a physician’s 

office. Assignment of HCPCS code is not a coverage 

determination and does not imply that any payer will cover 

the items in the code category. In October 2003, the 

Secretary delegated authority under the Health Insurance 
 200 

and Portability Act of 1996 to CMS to maintain and 

distribute HCPCS Level II codes. 

B. Current Issues

Section 1861(n) of the Act defines DME to include 

items such as iron lungs, oxygen tents, hospital beds, and 

wheelchairs used in the patient’s home whether furnished on 

a rental basis or purchased. The regulation at §414.202 

defines DME as equipment furnished by a supplier or a home 

health agency that- 

 • Can withstand repeated use; 

 • Is primarily and customarily used to serve a medical 

purpose; 

 • Generally is not useful to an individual in the 

absence of an illness or injury; and 

 • Is appropriate for use in the home. 

CMS program instructions at section 110.1 of chapter 15, 

Medicare Benefits Policy Manual further clarify that an 

item can be considered durable if it can withstand repeated 

use, in other words, the type of item that could normally 

be rented. Section 1834(a)(7)(C) of the Act sets forth 

the provisions for the establishment of RUL for certain 

items of DME, payment for replacement of items and the 

length of RUL. However, the RUL is not specifically set 

forth as a minimum lifetime standard. Computation of the 
 201 

RUL is based on when the equipment is delivered to the 

beneficiary, not the age of the equipment. 

 The regulation and program instructions do not lend 

any guidance regarding the specific period of time that 

equipment must function in order to be considered 

“durable”. In addition, the regulation does not provide 

specific guidance or criteria regarding how to determine if 

new devices consisting of a system of durable and non 

durable components that together serve a medical purpose 

fall within the DME benefit category. Therefore, we 

believe it is necessary to revise the regulation at this 

time to include a definition of DME that uses more specific 

language to define the term "durable" for the purpose of 

determining whether equipment is DME. The issue of linking 

durability to the lifetime of equipment and where to draw 

the line has come to the forefront in light of the recent 

technology and engineering in the field of medical devices 

and equipment. Establishing a minimum lifetime criteria 

would help facilitate the benefit category determination 

process for items that clearly last longer or shorter than 

the minimum lifetime threshold. 

In cases where it is not clear that the equipment can 

function for the specified minimum period of time, 

reviewing additional information and evidence consistent 
 202 

with the present benefit category determination process 

would be necessary to determine the expected life of the 

equipment. CMS and CMS contractors would base the decision 

on various sources of information including but not limited 

to the HCPCS request form, pre-market clearance documents 

from the Food and Drug Administration (FDA), product 

warranty documents, product website, product marketing 

materials, product user guides, product operating manuals, 

consumer product reviews, subject matter expert reviews, 

industry product standards data, and product data created 

as a result of clinical studies or standardized test 

results. A minimum lifetime standard for DME may also help 

facilitate the HCPCS process. The current application form 

used to request new HCPCS codes for items includes the 

question regarding whether equipment is durable and, if so, 

instructs the applicant to provide an explanation of how 

the item can withstand repeated use. We have received 

requests from several entities including DME stakeholders 

for additional clarification regarding the durability 

standard for DME. Comments from some of these entities 

indicate that there is limited direction on what is 

required for an item to be considered “durable” in the 

current regulation. Additional clarification of the term 

“durable” would be helpful to industry stakeholders such as 
 203 

manufacturers in anticipating how their products would be 

treated under coding classification and benefit category 

determinations. 

C. Provisions of the Proposed Regulations

We are proposing changes to the definition of DME at 

42 CFR §414.202 in order to clarify the meaning of the term 

“durable” and reflect our current interpretation of the 

statute. Specifically, we propose to establish a 3-year 

minimum lifetime requirement that equipment must meet in 

order to be considered DME. Section 1861(n) of the Act 

provides examples of items such as wheelchairs, power 

operated vehicles, hospital beds, ventilators, and oxygen 

equipment to illustrate the DME benefit. The citation of 

these examples in the statutory language for many years 

indicates that the DME benefit was intended to be limited 

to medical items designed to be durable. Although the 

ability to pay on a purchase basis for certain items was 

added to the statute, the addition of this flexibility to 

the program did not fundamentally alter the types of items 

included in the DME benefit category or the requirement 

that the equipment must be durable. 

Section 1861(n) of the Act states that items may be 

included under the DME benefit whether furnished on a 

rental basis or purchased. The regulation at §414.202 and 
 204 

program instructions at Section 110.1 of Chapter 15 of the 

Medicare Benefits Policy Manual specify that an item is 

considered durable if it can withstand repeated use, that 

is, the type of item that could normally be rented. This 

excludes items that are of a disposable or single use 

nature. Based upon the statute and current regulations, 

equipment could be eliminated from the DME benefit category 

if it could not withstand repeated use or be reused by 

successive patients or the same patient. Although the 

capacity for reuse is in itself a logical characteristic of 

durability, it is not clear how many months or years an 

item must withstand repeated use in order to be considered 

durable. The Merriam Webster dictionary defines “durable” 

as the ability to exist for a long time without significant 

deterioration. The United States Department of Commerce 

uses a durability standard of 3 years for consumer durable 

goods for National Income and Accounts estimates8. 

Furthermore, economics dictionaries9, various 

encyclopedias10, and economics textbooks11 define durable 

 

8 The NIPA Handbook (Concepts and Methods of the U.S National Income and 

Product Accounts, Chapter 5-Personal Care Expenditures. The handbook 

is available at http://www.bea.gov/national/pdf/NIPAhandbookch5.pdf

9 The McGraw Hill Dictionary of Modern Economics by Douglas Greenwald & 

Associates, Economics dictionary by Donald Moffat, Dictionary of 

Business and Economics by Christine Ammer and Dean Ammer. 

10 Encyclopedia of Business, Britannica Encyclopedia and Gale 

Encyclopedia.

11 A Lexicon of Economics by Kenyon A. Knopf. 
 205 

goods as goods that are expected to last longer than 3 

years. 

In addition, information gathered from various sources 

such as Rehabilitative Engineering and Assistive Technology 

Society of North America (RESNA)12, product catalogs, 

product warranty documents, and consumer product reviews 

indicate that conventional DME items such as wheelchairs, 

hospital beds, and ventilators specified in section 1861(n) 

of the Act typically have a useful life of 3 or more years 

before they need to be replaced or need major repairs. 

Therefore, we propose a 3-year minimum lifetime standard 

for items to meet the durability criterion for DME. 

A minimum lifetime standard would increase the clarity 

of the current definition and give regulatory weight to a 

reasonable benchmark for a minimum period of durability or 

repeated use that would need to be met in order for the 

equipment to be considered DME. In addition, the revised 

regulation would provide clear guidance to CMS and other 

stakeholders for making consistent informal benefit 

category determinations and national coverage 

determinations for DME. It would assist manufacturers in 

designing and developing new medical equipment to have a 

better understanding of how long a period of time an item 

 

12 http://resna.org/
 206 

must be able to withstand repeated use in order to be 

considered DME for Medicare purposes. It is important to 

note that the 3-year minimum period of durability does not 

replace the RUL standard established by section 

1834(a)(7)(C) of the Act for payment purposes. The RUL 

rules are used to determine how often payment can be made 

for replacement items and is not a minimum lifetime 

requirement for DME. Although the proposed 3-year lifetime 

would be a requirement for determining whether an item is 

durable, it is not an indication of the typical or average 

lifespan of DME, which in many cases may last for much 

longer than 3 years. 

1. Application of the 3-year lifetime standard to items 

currently covered as DME and to supplies and accessories of 

covered DME 

The 3-year minimum lifetime requirement would be 

prospective only and would not apply to items classified as 

DME before the proposed rule would be implemented. We 

expect that a vast majority of the categories of items that 

are currently classified as DME function for 3 or more 

years. In addition, the proposed regulation would allow 

for continued coverage of attendant supplies that are 

necessary for the effective use of DME. Such supplies 

include drugs and biologicals which must be inserted 
 207 

directly into the equipment for the effective use of DME. 

Finally, we do not propose to apply the 3-year lifetime 

requirement to accessories used with DME. 

2. Application of the 3-year minimum lifetime criteria to 

multi-component devices 

 In some cases, a device may be a system consisting of 

durable and non-durable components that together serve a 

medical purpose. Currently, a multi-component device 

consisting of durable and non-durable components is 

considered non-durable if the component that performs the 

medically necessary function of the device is non-durable, 

even if other components that are part of the device are 

durable. Therefore, if the proposed regulation to 

establish a minimum 3-year lifetime standard for DME is 

applied to these devices, the component(s) of a multicomponent device that performs the medically necessary 

function of the device would need to meet the 3-year 

minimum lifetime requirement. Although we are not 

proposing to change our policy with regard to these types 

of systems at this point, we are seeking public comments on 

this topic. Specifically, we are soliciting public 

comments on various ways we might consider applying the 3-

year rule to multi-component devices consisting of both 

durable and non-durable components. Various options might 
 208 

include the following: 

1. Apply the 3-year lifetime standard to the component(s) 

that performs the entire medically necessary function 

of the device. 

2. Apply the 3-year lifetime standard to the component(s) 

that performs a vital part of the medically necessary 

function of the device. 

3. Consider a device/system to be durable only if the 

cost of the durable component(s) over a period of time 

(for example, 5 years) makes up greater than 50 

percent of the overall cost of the device/system over 

the same period. 

V. 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 

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: 
 209 

● 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

We are soliciting public comment on each of these 

issues for the following sections of this document that 

contain information collection requirements (ICRs): 

As discussed in section I.C.5 of this proposed rule, 

to receive the low-volume adjustment, an ESRD facility 

would need to provide an attestation to their Fiscal 

Intermediary or Medicare Administrative Contractor (FI/MAC) 

that it has met the criteria to qualify as a low-volume 

facility prior to November 1st of each year. The FI/MAC 

would verify the ESRD facility's attestation of their lowvolume status for the 3-consecutive years immediately 

preceding the payment year, using the ESRD facility's most 

recent final-settled or as-filed 12-month cost reports. 
 210 

The burden associated with the requirement is the time 

and effort necessary for an ESRD facility attesting as a 

low-volume facility to develop an attestation and submit it 

to their FI/MAC. In this proposed rule, for CY 2012, we 

estimate that it would require an administrative staff 

member from each low-volume facility 10 minutes to obtain 

the total number of treatments in the cost reports 

necessary for eligibility determination, develop the 

attestation, and submit it to their FI/MAC. For this 

proposed rule, using 2009 claims our contractor, UM-KECC, 

identified 939 ESRD facilities as providing treatments 

below the low-volume threshold of 4,000 treatments in 2009. 

Of these 939 facilities, we estimated that 358 met the 

additional low-volume criteria as specified in §413.232. 

Further, due to the historical trend of increase in the 

number of small dialysis facilities, we believe that 

several dozen additional ESRD facilities may meet the 

criteria of a low-volume facility prior to the CY 2012 

payment year. To take these facilities into account, we 

have rounded the total number of estimated low-volume 

facilities to 400. Therefore, for CY 2012, we estimate 

that the total initial ESRD facility burden would be 67 

hours. The estimated cost associated with compliance with 

this requirement is $2.61 per ESRD facility and total of 
 211 

$1,044 for all 400 facilities. These costs are estimated 

using the 2010 estimate for the occupational code 43-0000 

Office and Administrative Support Occupation mean hourly 

wage of $15.66 as stated by the U.S. Bureau of Labor 

Statistics. 

C. Additional Information Collection Requirements

This proposed rule imposes collection of information 

requirements as outlined in the regulation text and 

specified above. However, this proposed rule also makes 

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, some of which have already 

received OMB approval. 

1. Proposed Display of Certificates for PY 2013 and PY 

2014 ESRD QIP 

Section II.B of this proposed rule discusses a 

disclosure requirement for both the PY 2013 and the PY 2014 

ESRD QIP. As stated earlier in this proposed rule, section 

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

certificates to dialysis care providers and facilities 

about their total performance scores under the QIP. This 

section also requires each provider and facility that 

receives a QIP certificate to display it prominently in 
 212 

patient areas. 

To comply with this requirement, we are proposing to 

issue a PY 2013 and PY 2014 QIP certificate to providers 

and facilities via a generally accessible electronic file 

format. We propose that each provider and facility would 

be required to prominently display the applicable QIP 

certificate in patient areas. In addition, we propose that 

each provider and facility will take the necessary measures 

to ensure the security of the certificate in the patient 

areas. Finally, we propose that each provider/facility 

would be required to have staff available to answer 

questions about the certificate in an understandable 

manner, taking into account that some patients might have 

limited English proficiency. These proposals represent no 

change from the policy finalized for the 2012 ESRD QIP. 

The burden associated with the aforementioned 

requirements is the time and effort necessary for providers 

and facilities to print the applicable QIP certificate, 

display the certificate prominently in patient areas, 

ensure the safety of the certificate, and respond to 

patient inquiries in reference to the certificates. We 

estimate that approximately 5,227 providers and facilities 

will receive a QIP certificate in PY 2013 and PY 2014 and 

will be required to display it. We also estimate that it 
 213 

will take each provider or facility 10 minutes per year to 

print, prominently display and secure the QIP certificate, 

for a total estimated annual burden of 871 hours at a cost 

of $30,000. We estimate that approximately one-third of 

ESRD patients will ask a question about the QIP 

certificate. We further estimate that it will take each 

provider/facility approximately 5 minutes to answer each 

patient question about the applicable QIP certificate, or 

1.65 hours per provider or facility each year. The total 

estimated annual burden associated with this requirement is 

8,625 hours. The total estimated annual burden for both 

displaying the QIP certificates and answering patient 

questions about the certificates is 9,496 hours (for each 

of PY 2013 and PY 2014). While the total estimated annual 

burden associated with both of these requirements as 

discussed is 9,496 hours, we do not believe that there will 

be a significant cost associated with these requirements 

because we are not proposing to require 

providers/facilities to complete new forms. As discussed 

in section A.1.3 of this proposed rule, we estimate that 

the total cost for all ESRD providers/facilities to comply 

with the collection of information requirements associated 

with the certificate each year would be less than $300,000. 
 214 

2. Proposed NHSN Reporting Requirement for the PY 2014 

ESRD QIP 

As stated above in section II.B.2.b.vi of this 

proposed rule, we propose to include reporting dialysis 

events to the National Healthcare Safety Network (NHSN) as 

a reporting measure for the PY 2014 ESRD QIP. 

Specifically, we would require providers/facilities to: (1) 

enroll in the NHSN and complete required training as 

verified by a digital certificate obtained from CDC; and 

(2) submit at least 3-consecutive months of dialysis event 

data to the NHSN. 

The burden associated with these requirements is the 

time and effort necessary for providers and facilities to 

enroll in the NHSN and conduct the required training and 

submit 3 months of data. We estimate that approximately 

5,227 providers and facilities will enroll in the NHSN and 

submit the necessary data. We also estimate that it will 

take each provider or facility 48 hours per year to enroll 

in the NHSN and complete the required training, for a total 

estimated annual burden of 250,896 hours. Based on the 

Bureau of Labor Statistics we estimate the average 

inflation adjusted salary to be $34.63 per hour. Thus, 
 215 

average cost for each provider/facility would be $1,662.24 

(48 hours times $34.63 per hour). Across all 5,227 

providers/facilities, this would equal $8.7 million. 

However, we further estimate that the number of dialysis 

events in a 3-month period will be 125,680 for the 2014 

ESRD population. We estimate it will require 10 minutes to 

collect and submit data on these events and the estimated 

burden for submitting 3 months of data will be 20,947 

hours. If the dialysis events were distributed evenly 

across all 5,227 providers/facilities, that would result in 

an additional 4 hour burden ($138.78) for each 

provider/facility. The total estimated annual burden for 

enrolling in the NHSN, conducting the required training, 

and submitting 3 consecutive months of data is 271,843 

hours. We estimate that the total cost for all ESRD 

providers/facilities to comply with the proposed collection 

of information requirements associated with NHSN reporting 

requirement each year would be less than $9.5 million, with 

the total average cost per provider/facility approximately 

$1,801.02. 

3. Proposed Patient Experience Survey Usage Requirement 

for the PY 2014 ESRD QIP 

As stated above in section B.A.2. of this proposed 

rule, we propose to include a measure that assesses 
 216 

provider/facility usage of the In-Center Hemodialysis (ICH) 

Consumer Assessment of Healthcare Providers and Systems 

(CAHPS) Survey as a reporting measure for the PY 2014 ESRD 

QIP. The burden associated with this requirement is the 

time and effort necessary for providers and facilities to 

administer the ICH CAHPS survey and submit an attestation 

to CMS that they successfully administered the survey. 

We estimate that approximately 5,227 providers and 

facilities will administer the ICH CAHPS survey and submit 

an attestation to that affect. We estimate that it will 

take each provider or facility 16 hours per year to be 

trained on the survey features. We further estimate that 

it will take each provider/facility approximately 5 minutes 

to submit the attestation each year. The estimated total 

annual burden on providers/facilities is estimated to be 

84,068 hours which is valued at $2.9 million, or $556.97 

per provider/facility. We estimate that administering the 

survey would take 45 minutes per patient (to account for 

variability in education levels) and 200 surveys per year 

which equals 154 hours or $2,707.32 per facility-year to 

administer the ICH CAHPS survey for an estimated annual 

burden of 804,958 hours which is valued at $14.1 million. 

As discussed in section A. of this proposed rule, we 

estimate that the total cost for ESRD providers/facilities 
 217 

to comply with the collection of information requirements 

associated with administering the ICH CAHPS survey each 

year would be approximately $3,264.29, or $17.1 million 

across all ESRD providers/facilities. 

4. Proposed Mineral Metabolism Reporting Requirement for 

the 2014 ESRD QIP 

As stated above in section B.A.2. of this proposed 

rule, we propose to include a Mineral Metabolism reporting 

measure as part of the PY 2014 ESRD QIP. The burden 

associated with this requirement is the time and effort 

necessary for providers and facilities to review their 

records and submit an attestation to CMS that they had 

monitored on a monthly basis, the serum calcium and serum 

phosphorus levels of all patients each month. 

We estimate that approximately 5,227 providers and 

facilities will submit the attestation. We estimate that it 

will take each provider or facility approximately 18 hours 

to review its records and submit the attestation each year. 

The estimated total annual burden on providers/facilities 

is estimated to be 94,086 hours which is valued at $3.3 

million, or $623 per provider/facility. 

To obtain copies of the supporting statement and any 

related forms for the proposed paperwork collections 

referenced above, access CMS’ Web site at 
 218 

http://www.cms.gov/PaperworkReductionActof1995/PRAL/list.as

p#TopOfPage. 

If you comment on these information collection and 

recordkeeping requirements, please do either of the 

following: 

 1. Submit your comments electronically as specified 

in the ADDRESSES section of this proposed rule; or 

 2. Submit your comments to the Office of Information 

and Regulatory Affairs, Office of Management and Budget, 

 Attention: CMS Desk Officer, [CMS-1577-P] 

 Fax: (202) 395-6974; or 

 Email: OIRA_submission@omb.eop.gov 

VI. 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. 

VII. Economic Analyses 

A. Regulatory Impact Analysis

1. Introduction 
 219 

We have examined the impacts of this proposed rule as 

required by Executive Orders 12866 (September 30, 1993, 

Regulatory Planning and Review) and Executive Order 13563 

on Improving Regulation and Regulatory Review (January 18, 

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, of harmonizing 

rules, and of promoting flexibility. This rule has been 

designated an "economically" significant rule, 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 comment on the Regulatory 

Impact Analysis provided. 

2. Statement of Need 

This rule proposes a number of routine updates for 

renal dialysis services in CY 2012, implementing the second 

year of the transition, and making several policy and 
 220 

technical changes to the CY 2011 ESRD PPS final rule as 

well as proposed revisions to the regulations. This 

includes proposed updates to the ESRD PPS and composite 

rate base rates, wage index values, wage index budgetneutrality adjustment factors, outlier payment policy, lowvolume adjustment and transition budget-neutrality 

adjustment. Failure to publish this proposed rule would 

result in ESRD facilities not receiving appropriate 

payments in CY 2012. 

In addition, this rule implements a QIP for Medicare 

ESRD dialysis providers and facilities with payment 

reductions beginning January 1, 2013. Under section 

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

performance standards that apply to each of the measures, 

specifying a performance period, and developing a 

methodology for assessing the total performance of each 

provider and facility based on the specified performance 

standards, the Secretary is required to apply an 

appropriate reduction to ESRD providers and facilities that 

do not meet or exceed the established total performance 

score. Our vision is to continue to implement a robust, 

comprehensive ESRD QIP that builds on the foundation that 

has already been established in providing incentives to 

providers/facilities to improve the quality of care they 
 221 

provide to Medicare beneficiaries. 

 Also, this proposed rule would revise the ambulance 

fee schedule regulations to conform with the requirements 

of section 106 of the Medicare and Medicaid Extenders Act 

of 2010 Pub. L. 111-309 (MMEA). Finally, this proposed 

rule revises the definition of durable medical equipment. 

The revision adds a 3-year minimum lifetime criterion that 

must be met by an item or device in order to be considered 

durable for the purpose of classifying the item under the 

Medicare benefit category for DME. The proposed rule would 

not impact items classified and covered as DME before the 

new rule takes effect or supplies and accessories used with 

covered DME. 

3. Overall Impact 

We estimate that the proposed revisions to the ESRD 

PPS will result in an increase of approximately $200 

million in payments to ESRD facilities in CY 2012. 

Furthermore, as a result of implementing the QIP for 

Medicare outpatient ESRD dialysis providers and facilities, 

we estimate aggregate payment reductions in payment years 

2013 and 2014 would be $47.2 million and $14 million, 

respectively. However, given the lack of data for several 

measures, the actual impact of the proposed 2014 QIP may 

vary significantly from the values provided herein. 
 222 

Lastly, the aggregate costs associated with the QIP 

collection of information requirements described in section 

III.1 of this proposed rule (Display of Certificates for 

the 2013 ESRD QIP) are estimated to be $300,000 for all 

ESRD facilities in 2013. The additional estimated 

aggregate costs associated with the collection of 

information requirements described in sections III.1. 

(Display of Certificates for the 2013 and 2014 ESRD QIP), 

III.2 (NHSN Reporting Requirement for the 2014 ESRD QIP), 

III.3 (CAHPS Survey Requirement for the 2014 ESRD QIP) and 

III.4 (Mineral Metabolism Reporting Requirement for the 

2014 ESRD QIP) in this proposed rule are expected to be 

approximately less than $24 million for all participating 

ESRD facilities.” 

The impact of section 106 of the MMEA, requiring the 

extension of certain add-on payments for ground ambulance 

services, and the extension of certain rural area 

designations for purposes of air ambulance payment, through 

CY 2011, is estimated to be $20 million (for CY 2011). 

Finally, the fiscal impact of the proposed 3-year 

minimum lifetime standard cannot be estimated because it is 

difficult to predict how many different types of devices 

will be introduced in the market in the future that may or 

may not qualify as DME items as a result of the new rule. 
 223 

However, we would expect that this proposed rule would have 

a small, if any, savings impact on the program. 

B. Detailed Economic Analysis

1. CY 2012 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 (that is, payments 

made under the 100 percent ESRD PPS and those under the 

ESRD PPS blended payment during the transition) in CY 2012 

to estimated payments (that is, payments made under the 100 

percent ESRD PPS and those under the ESRD PPS blended 

payment during the transition) in CY 2011. To estimate the 

impact among various classes of ESRD facilities, it is 

imperative that the estimates of payments in CY 2011 and CY 

2012 contain similar inputs. Therefore, we simulated 

payments only for those ESRD facilities that we are able to 

calculate both current payments and new payments. 

We used the June 2010 update of CY 2009 National 

Claims History file as a basis for Medicare dialysis 

treatments and payments under the ESRD PPS. We updated the 

2009 claims to 2011 and 2012 using various updates. The 

updates to the ESRD PPS base rate and the base composite 
 224 

rate portion of the blended rate during the transition are 

described in section I.C.7 of this proposed rule. In 

addition, in order to prepare an impact analysis, since 

some providers opted to be paid the blended payment amount 

during the transition, we made various assumptions about 

price growth for the formerly separately billable drugs and 

laboratory tests with regard to the composite portion of 

the ESRD PPS blended payment during the transition. These 

rates of price growth are briefly outlined below, and are 

described in more detail in the CY 2011 ESRD PPS final rule 

(75 FR 49078 through 49080). 

We used the CY 2009 amounts as the CY 2011 and CY 2012 

amounts for Supplies and Other Services, since this 

category primarily includes the $0.50 administration fee 

for separately billable Part B drugs and this fee is not 

increased; thus we used no price update. Because some ESRD 

facilities will receive blended payments during the 

transition and receive payment for ESRD drugs and 

biologicals based on their average sales price plus 6 

percent (ASP+6), we estimated price growth for these drugs 

and biologicals based on ASP+6 percent where ASP data was 

available. We updated the last available quarter of actual 

ASP data for the top twelve drugs (the second quarter of 

2011) thru 2012 by using the quarterly growth in the 
 225 

Producer Price Index for Drugs (PPI), consistent with the 

method for addressing price growth in the ESRDB market 

basket. This resulted in 1.5 percent, 1.0 percent, 1.7 

percent, 1.2 percent, 1.2 percent and 0.2 percent increase, 

respectively, for the third quarter of 2011 thru the fourth 

quarter of 2012. Since the top twelve drugs account for 

over 99 percent of total former separately billable Part B 

drug payments, we used a weighted average growth of the top 

twelve drugs, for the remainder. Table 9 below shows the 

updates used for the drugs. 

We updated payments for laboratory tests paid through 

the laboratory fee schedule to 2011 and 2012 using the 

statutory required update of the CPI-U increase with any 

legislative adjustments. For this proposed rule, the 

growth from 2009 to 2011 is -3.6 percent and the growth 

from 2009 to 2012 is -5.1 percent. 

Table 9: Price Increases from 2009 to 2011 and 2009 to 

2012 of Separately Billable Part B Drugs.

Drugs and Biologicals Price Update Price Update 

 2009 to 2011 2009 to 2012 

EPO 3.9% 9.1% 

Paricalcitol -16.2% -14.6% 

Sodium_ferric_glut 5.1% 9.6% 

Iron_sucrose -6.0% -1.6% 

Levocarnitine 1.4% 15.5% 

Doxercalciferol 8.0% 15.7% 

Calcitriol -6.4% -2.0% 

Iron_dextran -4.3% 0.5% 

Vancomycin 1.6% 7.2% 

Alteplase 15.9% 21.6% 

Aranesp 3.0% 8.6% 

Daptomycin 16.6% 22.5% 
 226 

Other Injectibles 0.8% 5.5% 

 Table 10 shows the impact of the proposed estimated 

CY 2012 ESRD payments compared to estimated payments to 

ESRD facilities in CY 2011. 

Table 10 Impact of Proposed Changes in Payment to ESRD 

facilities for CY 2012 ESRD proposed rule. [Percent change 

in total payments to ESRD facilities (both program and 

beneficiaries)] 

 

 

 A B C D E 

Facility Type 

Number 

of 

Facilities 

Number 

of 

Treatmen

ts (in 

millions) 

Effect of 

2012 

Changes in 

Outlier 

Policy 

Effect of 

2012 

Changes 

in Wage 

Indexes 

Effect of 

Total 

2012 

changes3

All Facilities 5,304 38.4 0.2% 0.0% 2.1%

Type 

 Freestanding 4,759 34.8 0.3% 0.0% 2.1%

 Hospital based 545 3.6 -0.1% -0.3% 1.7%

Ownership Type 

 Large dialysis organization 3,396 24.8 0.3% 0.0% 2.2%

 Regional chain 848 6.4 0.1% -0.1% 1.8%

 Independent 624 4.3 0.0% 0.0% 2.0%

 Hospital based1 430 2.8 -0.1% -0.4% 1.7%
 227 

 Unknown 6 0.0 0.2% 0.2% 2.1%

Geographic Location 

 Urban 4,117 31.9 0.2% 0.0% 2.0%

 Rural 1,187 6.4 0.3% -0.1% 2.1%

Census Region 

 East North Central 875 5.9 0.2% -0.2% 1.9%

 East South Central 415 2.9 0.4% -0.2% 2.0%

 Middle Atlantic 584 4.7 0.1% 0.0% 2.1%

 Mountain 321 1.7 0.1% 0.1% 2.1%

 New England 163 1.3 0.2% 0.1% 2.1%

 Pacific 620 5.0 0.1% 0.2% 2.2%

 South Atlantic 1,180 8.7 0.3% -0.3% 1.9%

 West North Central 389 2.1 0.2% 0.2% 2.2%

 West South Central 718 5.5 0.3% 0.3% 2.4%

 Puerto Rico and Virgin Islands 39 0.4 0.2% -2.5% 0.0%

Facility Size 

 Less than 4,000 treatments2 939 2.0 0.2% -0.1% 2.1%

 4,000 to 9,999 treatments 2,101 10.9 0.3% -0.1% 2.0%

 10,000 or more treatments 2,214 25.4 0.2% 0.0% 2.1%

 Unknown 50 0.2 0.1% -0.4% 1.8%

Percentage of Pediatric Patients 

 Less than 2% 5,192 37.8 0.2% 0.0% 2.1%

 Between 2% and19% 55 0.5 0.1% -0.3% 1.8%

 Between 20% and 49% 7 0.0 0.0% 0.2% 1.8%

 More than 50% 50 0.0 0.0% -0.3% 1.3%

 

1 Includes hospital based facilities not reported to be part of a large dialysis organization or 

part of regional chain ownership. 

2

 Of the 939 Facilities with less than 4,000 treatments, only 358 qualify for the low-volume adjustment. The 

low-volume adjustment was not applied to pediatric patients. The estimated impact to these Low volume 

Facilities is a 2.4% increase in payments. 

. 

3 Includes the effect of the ESRDB Market Basket minus productivity adjustment, which results in an 

increase of 1.8% to the ESRD PPS base and the Composite Rate portion of the blended payment for 

those facilities that opted to be paid under the transition. Also Includes the effect of the change in the drug 

add-on percentage from14.7% to 14.4% to the composite ration portion of the blended payment for 

those facilities that opted to be paid under the transition. 

Includes the effect of the blended payment changing from 75/25 to 50/50 from CY 2011 to CY 2012 for 

those facilities that choose to be paid under the transition. 

 

Note: Totals do not necessarily equal the sum of rounded parts. 

Column A of impact table indicates the number of ESRD 

facilities for each impact category and column B indicates 
 228 

the number of dialysis treatments (in millions). The 

overall effect of the proposed changes in outlier payment 

policy and the proposed change for the BSA national average 

described in section I.C.10 and section I.C.9, 

respectively, of this proposed rule, are shown in column C. 

For CY 2012, the impact on all facilities of our proposed 

changes in outlier payment policy and the proposed BSA 

national average would be a 0.2 percent increase in 

estimated payments. The estimated impact of our proposed 

changes in outlier payment policy and the BSA national 

average ranges from -0.1 percent decrease to a 0.4 percent 

increase. Most ESRD facilities are anticipated to have a 

positive effect on the estimated CY 2012 payments as a 

result of the proposed outlier and BSA national average 

changes. 

Column D shows the effect of the wage index on ESRD 

facilities and reflects the CY 2012 wage index values for 

the composite rate portion of the blended payment during 

the transition and the ESRD PPS payments. Facilities 

located in the census region of Puerto Rico and the Virgin 

Islands would receive a 2.5 percent decrease in estimated 

payments in CY 2012. Since most of the facilities in this 

category are located in Puerto Rico, the decrease is 

primarily due to the proposed reduction in the wage index 
 229 

floor (which only affects facilities in Puerto Rico in CY 

2012). Renal dialysis facilities outside of Puerto Rico 

would experience changes in estimated payments ranging from 

a 0.4 percent decrease to a 0.3 percent increase due to 

changes in the wage index. 

Column E reflects the overall impact (that is the 

effects of the proposed outlier and BSA national average 

changes, the proposed wage index, the effect of the ESRDB 

market basket increase minus productivity adjustment, and 

the effect of the change in the blended payment percentage 

from 75 percent of payments based on the composite rate 

system and 25 percent based on the ESRD PPS in 2011, to 

50/50, respectively, for 2012, for those facilities that 

opted to be paid under the transition). It is expected 

that overall ESRD facilities will experience a 2.1 percent 

increase in estimated payments in 2012. Puerto Rico is 

expected to receive no increase in their estimated payments 

in CY 2012 primarily due to the negative impact of the wage 

index. The remainder of ESRD facilities are expected to be 

positively impacted ranging from an increase of 1.3 percent 

to 2.4 percent in their 2012 estimated payments. 

b. Effects on Other Providers 

Under the ESRD PPS, ESRD facilities are paid directly 

for the renal dialysis bundle and other provider types such 
 230 

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 by 

Medicare prior to the implementation of the ESRD PPS. 

Therefore, in CY 2012, the second year of the ESRD PPS, 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 2012 will be 

approximately $8.3 billion. This estimate is based on 

various price update factors discussed in section VII of 

this proposed rule. In addition, we estimate that there 

will be an increase in fee-for-service Medicare beneficiary 

enrollment of 4.2 percent in CY 2012. 

d. Effects on Medicare Beneficiaries 

Under the ESRD PPS, beneficiaries are responsible for 

paying 20 percent of the ESRD PPS payment amount or blended 

payment amount for patients treated in facilities that have 
 231 

chosen the ESRD PPS transition. As a result of the 

projected 2.1 percent overall increase in the proposed ESRD 

PPS payment amounts in CY 2012, we estimate that there will 

be an increase in beneficiary co-insurance payments of 2.1 

percent in CY 2012, which translates to approximately $40 

million. 

e. Alternatives Considered 

In developing this proposed rule, we considered 

eliminating all laboratory tests from the outlier policy, 

but instead we are proposing to eliminate only the 

Automated Multi-Channel Chemistry (AMCC) panel tests. We 

believe this proposed approach would continue to recognize 

expensive laboratory tests in the outlier policy while 

reducing the burden associated with the 50 percent rule 

(see section I.C.10 of this proposed rule). 

We also considered alternatives for applying the wage index 

budget-neutrality adjustment factor under the ESRD PPS for 

purposes of the full ESRD PPS payments and ESRD PPS 

portions of the blended payment during the transition, such 

as applying the wage index budget-neutrality adjustment 

factor to the ESRD PPS wage index values, but instead we 

proposed applying the wage index budget-neutrality 

adjustment factor to the ESRD PPS base rate and ESRD PPS 
 232 

portions of the transition blended payment to be consistent 

with how these adjustments are applied in other PPSs (see 

section I.C.c of this proposed rule for additional 

information on how we propose to apply the wage budgetneutrality adjustment factor). 

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

a. Effects of the Proposed 2013 and 2014 ESRD QIP 

This proposed rule is intended to mitigate possible 

reductions in the quality of ESRD dialysis facility 

services provided to beneficiaries as a result of payment 

changes under the ESRD PPS by implementing a QIP that would 

reduce ESRD payments by up to 2 percent to dialysis 

providers/facilities that fail to meet or exceed a total 

performance score with respect to performance standards 

established by the Secretary with respect to certain 

specified measures. 

The methodology that we are proposing to determine a 

provider/facility’s performance score is described in 

section IV.A.3 (Methodology for Calculating the Total 

Performance Score for the 2013 ESRD QIP) and section 

IV.A.2.e (Methodology for Calculating the Total Performance 

Score for the PY 2014 ESRD QIP) of this proposed rule. Any 

reductions in ESRD payment would begin on January 1, 2013 
 233 

for services furnished on or after January 1, 2013 for the 

2013 ESRD QIP and any reductions in ESRD payment would 

begin on January 1, 2014 for services furnished on or after 

January 1, 2014 for the 2014 ESRD QIP. 

As a result, based on the QIP outlined in this 

proposed rule, we estimate that approximately 38.8 percent 

or 2,059 of total ESRD dialysis facilities would likely 

receive a payment reduction for PY 2013. In PY 2014, we 

estimate that approximately 13.8 percent or 737 of total 

ESRD facilities would likely receive some type of payment 

reduction. 

The QIP impact assessment assumes an initial count of 

5,430 dialysis facilities with paid Medicare dialysis 

claims in 2009. The PPS analysis, presented earlier, 

excludes 126 facilities for PPS-specific reasons thereby 

narrowing the final analytic sample to 5,304. Specifically, 

facilities excluded include those they do not have 

information on the PPS phase-in election. Most of these 

facilities closed during 2009 or 2010. In addition, they 

exclude a relatively small number of facilities that were 

either located in certain US territories (Guam, American 

Samoa, Marianna Islands) where a different payment approach 

has been used (they have not been paid under the Composite 

Rate system) or that represented facilities with no 
 234 

payments reported on the very small number of claims they 

submitted. As a result, Table 11 shows the overall 

estimated distribution of payment reductions resulting from 

the PY 2013 ESRD QIP. Table 12 shows the overall estimated 

distribution of payment reductions resulting from the PY 

2014 ESRD QIP. 

Table 11. Estimated Distribution of CY 2013 ESRD QIP 

Payment Reductions. 

Payment Reduction 

Number of 

Facilities 

Percent of 

Facilities 

0.0% 3,245 61.2% 

1.0% 741 14.0% 

1.5% 755 14.2% 

2.0% 563 10.6% 

Table 12. Estimated Distribution of CY 2014 ESRD QIP 

Payment Reductions. 

Payment Reduction 

Number of 

Facilities

Percent of 

Facilities 

0.0% 4,567 86.1%

1.0% 434 8.2%

1.5% 211 4.0%

2.0% 92 1.7%

1

CY 2014 QIP Scores estimated using the measures Hemoglobin > 12 g/dl, 

Urea Reduction Ratio ≥ 65% as a proxy for the Kt/V measure, and 

Standard Hospitalization Ratio. 

To estimate the total payment reductions in 2013 and 

2014 resulting from the proposed rule for each facility, we 

multiplied the number of patients treated at each facility 

receiving a reduction times an average of three treatments 

per week. We then multiplied this product by a base rate 

of $229.63 per dialysis treatment (before an adjustor is 
 235 

applied) to arrive at a total ESRD payment for each 

facility: 

((Number of patients treated at each facility X 3 

treatments per week) X base rate). 

Finally, we applied the estimated payment reduction 

percentage expected under the QIP, yielding a total payment 

reduction amount for each facility: 

(Total ESRD payment X estimated payment reduction 

percentage). 

 For payment consequence year 2013, totaling all of the 

payment reductions for each of the 2,059 facilities 

expected to receive a reduction leads to a total payment 

reduction of approximately $47.2 million. Further, we 

estimate that the total costs associated with the 

collection of information requirements described in section 

III.1, of this proposed rule (Display of Certificates for 

the 2013 ESRD QIP) would be less than $300,000 for all ESRD 

facilities in 2013. 

For payment consequence year 2014, totaling all of the 

payment reductions for each of the 737 facilities expected 

to receive a reduction leads to a total payment reduction 

of approximately $14 million. Further, we estimate that 

the total costs associated with the collection of 

information requirements described in sections III.1. 
 236 

(Display of Certificates for the 2013 and 2014 ESRD QIP), 

III.2 (NHSN Reporting Requirement for the 2014 ESRD QIP), 

III.3 (Patient Experience Survey Usage Reporting 

Requirement for the 2014 ESRD QIP) and III.4 (Mineral 

Metabolism Reporting Requirement for the 2014 ESRD QIP) of 

this proposed rule would be less than $24 million for all 

ESRD facilities. 

As a result, we estimate that ESRD facilities will 

experience an aggregate impact of $47.5 million for 2013 

and $38 million payment reduction for 2014. 

Table 13 below shows the estimated impact of the 

proposed QIP payment reductions to all ESRD facilities for 

payment consequence year 2013. The table details the 

distribution of ESRD providers/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). 

Table 13. Impact of Proposed QIP Payment Reductions to 

ESRD Facilities for CY 2013 

 

Number 

of 

Facilities 

Number of 

Medicare 

Treatments 

2009 (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 5,304 38.4 4,709 2,059 -0.57% 

 

Facility Type: 

Freestanding 4,759 34.8 4,334 1,874 -0.57% 

Hospital-based 545 3.6 375 185 -0.57% 
 237 

 

Number 

of 

Facilities 

Number of 

Medicare 

Treatments 

2009 (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) 

 

Ownership 

Type: 

Large Dialysis 3,396 24.8 3,145 1,326 -0.56% 

Regional Chain 848 6.4 755 348 -0.62% 

Independent 624 4.3 519 250 -0.60% 

Hospital-based 

(non-chain) 430 2.8 288 135 -0.52% 

Unknown 6 0 2 0 0.00% 

 

Facility Size: 

Large Entities 4,302 31.7 3,953 1,700 -0.57% 

Small Entities1 1,054 7.1 807 385 -0.57% 

Unknown 6 0 0 0 - 

 

Urban/Rural 

Status: 

Urban 4,117 31.9 3,630 1,581 -0.56% 

Rural 1,187 6.4 1,079 478 -0.60% 

 

Census 

Region: 

Northeast 746 6.1 671 284 -0.58% 

Midwest 1,258 8 1,075 479 -0.57% 

South 2,311 17.1 2,123 980 -0.61% 

West 939 6.8 806 303 -0.46% 

US Territories2 39 0.4 34 13 -0.52% 

Unknown 11 0 0 0 - 

 

Census 

Division: 

East North 

Central 875 5.9 730 330 -0.56% 

East South 

Central 415 2.9 384 189 -0.69% 

Middle Atlantic 584 4.7 526 232 -0.61% 

Mountain 321 1.7 276 87 -0.40% 

New England 163 1.3 145 52 -0.50% 

Pacific 620 5 530 216 -0.49% 

South Atlantic 1,180 8.7 1,088 514 -0.62% 

West North 

Central 389 2.1 345 149 -0.61% 

West South 

Central 718 5.5 651 277 -0.56% 

US Territories2 39 0.4 34 13 -0.52% 

 

Facility Size (# 

of total 

treatments): 

Less than 4,000 

treatments 939 2 514 171 -0.29% 

4,000-9,999 

treatments 2,101 10.9 2,006 846 -0.60% 
 238 

 

Number 

of 

Facilities 

Number of 

Medicare 

Treatments 

2009 (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) 

Over 10,000 

treatments 2,214 25.4 2,177 1,038 -0.66% 

Unknown 50 0.2 12 4 -0.19% 1

Small Entities include hospital-based and satellite facilities, and non-chain facilities based on DFC selfreported status. 

2

Includes Puerto Rico and Virgin Islands. 

 We note that for the 2014 ESRD QIP we lacked 

performance data on the Vascular Access Type Measure 

(Fistula), Dialysis Adequacy Measure (Kt/V), the Vascular 

Access Type Measure (Catheter), and the Vascular Access 

Infections Measure to conduct an analysis at this time and 

we have omitted those measures from these estimates. 

Rather, we conducted a simulation using the latest 

available performance data on the Hemoglobin Greater Than 

12g/dL measure, the Dialysis Adequacy (URR) measure (as a 

proxy for the Dialysis Adequacy Measure (Kt/V)), and the 

SHR measure to estimate the impact of this proposed rule as 

accurately as possible. These simulated analyses were 

performed using 2009 claims data as the performance year 

and 2008 claims data as the baseline year for the 

Hemoglobin Greater Than 12g/dL measure and the Dialysis 

Adequacy Measure (URR); SHR performance data was extracted 

from the 2010 DFR data set using 2008 as the performance 

year and 2007 as the baseline year. 
 239 

 Using these conditions, we calculated estimated 

national achievement threshold and benchmark values for the 

Hemoglobin Greater than 12g/dL, Dialysis Adequacy (URR), 

and SHR measures using all facilities present in the data 

set. Equal weighting was applied in calculating total 

performance scores. Given the lack of data for several 

measures, the actual impact of the proposed 2014 QIP may 

vary significantly from the values provided here. 

 Using the above assumptions, Table 14 below shows the 

estimated impact of the proposed QIP payment reductions to 

all ESRD facilities for payment consequence year 2014. The 

table details the distribution of ESRD providers/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). 

Table 14. Impact of Proposed QIP Payment Reductions to 

ESRD Facilities for CY 2014 

 

Number 

of 

Facilities 

Number of 

Medicare 

Treatments 

2009 (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 5,304 38.4 4,238 737 -0.17% 

 

Facility Type: Freestanding 4,759 34.8 4,077 712 -0.18% 

Hospital-based 545 3.6 161 25 -0.06% 

 

Ownership 

Type: Large Dialysis 3,396 24.8 2,981 497 -0.18% 

Regional Chain 848 6.4 671 108 -0.16% 
 240 

 

Number 

of 

Facilities 

Number of 

Medicare 

Treatments 

2009 (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) 

Independent 624 4.3 477 115 -0.24% 

Hospital-based 

(non-chain) 430 2.8 109 17 -0.05% 

Unknown 6 0 0 0 0.00% 

 

Facility Size: Large Entities 4,302 31.7 3,696 616 -0.18% 

Small Entities1 1,054 7.1 586 132 -0.16% 

Unknown 6 0 0 0 - 

 

Urban/Rural 

Status: Urban 4,117 31.9 3,289 587 -0.18% 

Rural 1,187 6.4 949 150 -0.16% 

 

Census 

Region: Northeast 746 6.1 579 116 -0.19% 

Midwest 1,262 8 937 189 -0.19% 

South 2,312 17.1 1,994 329 -0.18% 

West 939 6.8 703 94 -0.12% 

US Territories2 39 0.4 25 9 -0.28% 

Unknown 6 0 0 0 - 

 

Census 

Division: East North 

Central 875 5.9 643 128 -0.18% 

East South 

Central 415 2.9 364 64 -0.19% 

Middle Atlantic 584 4.7 447 98 -0.21% 

Mountain 321 1.7 230 26 -0.10% 

New England 163 1.3 132 18 -0.12% 

Pacific 620 5 473 68 -0.14% 

South Atlantic 1,180 8.7 1,014 175 -0.18% 

West North 

Central 389 2.1 294 61 -0.20% 

West South 

Central 718 5.5 616 90 -0.16% 

US Territories2 39 0.4 25 9 -0.28% 

 

Facility Size (# 

of total 

treatments): Less than 4,000 

treatments 939 2 384 63 -0.09% 

4,000-9,999 

treatments 2,101 10.9 1,822 332 -0.20% 

Over 10,000 

treatments 2,214 25.4 2,023 338 -0.18% 

Unknown 50 0.2 9 4 -0.22% 1

Small Entities include hospital-based and satellite facilities, and non-chain facilities based on DFC selfreported status. 

2

Includes Puerto Rico and Virgin Islands. 
 241 

 

Number 

of 

Facilities 

Number of 

Medicare 

Treatments 

2009 (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) 3

CY 2014 QIP Scores estimated using the measures Hemoglobin > 12 g/dl, Urea Reduction Ratio ≥ 65%, 

and Standard Hospitalization Ratio. 

b. Alternatives Considered for 2013 and 2014 ESRD QIP 

 In developing the proposed PY 2013 ESRD QIP, we 

carefully considered the size of the incentive to providers 

and facilities to provide high-quality care. We also 

selected the measures adopted for the PY 2013 ESRD QIP 

because these measures are important indicators of patient 

outcomes and quality of care. For example, inadequate 

dialysis can lead to avoidable hospitalizations, decreased 

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

selected will allow CMS to continue focusing on improving 

the quality of care that Medicare beneficiaries receive 

from ESRD dialysis providers and facilities. 

 Additionally, for 2013 we considered whether to leave 

the Hemoglobin Measure Less Than 10g/dL in the program. 

Ultimately we decided that the clinical evidence shows that 

this measure is not conducive to improving the patient 

quality of care that the QIP strives for. The ESA labeling 

approved by the FDA on June 24, 2011 states that no trial 

has identified a hemoglobin target level that does not 

increase risks, and that “in controlled trials, patients 
 242 

experienced greater risks for death, serious adverse 

cardiovascular reactions, and stroke when administered ESAs 

to target a hemoglobin level of greater than 11g/dL. We 

have decided to retire the Hemoglobin Less Than 10g/dL 

measure from the program, and are requesting the public’s 

comments on this proposal. 

As stated previously for the PY 2014 ESRD QIP, we 

propose to implement a QIP for Medicare ESRD dialysis 

providers and facilities with payment reductions beginning 

January 1, 2014. Under section 1881(h) of the Act, after 

selecting measures, establishing performance standards that 

apply to each of the measures, specifying a performance 

period, and developing a methodology for assessing the 

total performance of each provider and facility based on 

the specified performance standards, the Secretary is 

required to apply an appropriate reduction to ESRD 

providers and facilities that do not meet or exceed the 

established total performance score. In developing the 

proposed QIP, we carefully considered the size of the 

incentive to providers and facilities to provide highquality care. We also selected the measures adopted for 

the 2014 ESRD QIP because these measures are important 

indicators of patient outcomes and quality of care. Poor 

management of anemia and inadequate dialysis, for example, 
 243 

can lead to avoidable hospitalizations, decreased quality 

of life, and death. Infections are also a leading cause of 

death and hospitalization among hemodialysis patients, but 

there are proven infection control methods that have been 

shown effective in reducing morbidity and mortality. Thus, 

we believe the measures selected will allow CMS to continue 

focusing on improving the quality of care that Medicare 

beneficiaries receive from ESRD dialysis providers and 

facilities. 

 In proposing the scoring methodology for the 2014 ESRD 

QIP, we considered a number of alternatives, including 

continuing to use the existing scoring model. In proposing 

to move to a new scoring approach for the 2014 ESRD QIP, we 

aim to design a scoring methodology that is straightforward 

and transparent to providers/facilities, patients, and 

other stakeholders. We believe that all scoring 

methodologies for Medicare Value-Based Purchasing programs 

should be aligned as appropriate given their specific 

statutory requirements. 

3. Ambulance Fee Schedule

 Section 106 of the Medicare and Medicaid Extenders Act 

of 2010 (MMEA) 

 As discussed in section V. of this proposed rule, 

section 106 of the MMEA requires the extension of certain 
 244 

add-on payments for ground ambulance services, and the 

extension of certain rural area designations for purposes 

of air ambulance payment, through CY 2011. As further 

discussed in section V, we are proposing to amend the 

Medicare program regulations to conform the regulations to 

this section of the MMEA. This MMEA section is essentially 

prescriptive and does not allow for discretionary 

alternatives on the part of the Secretary. 

 As discussed in the July 1, 2004 interim final rule 

(69 FR 40288), in determining the super-rural bonus amount 

under section 1834(l)(12) of the Act, we followed the 

statutory guidance of using the data from the Comptroller 

General (GAO) of the U.S. We obtained the same data as the 

data that were used in the GAO's September 2003 Report 

titled “Ambulance Services: Medicare Payments Can Be Better 

Targeted to Trips in Less Densely Populated Rural Areas” 

(GAO report number GAO-03-986) and used the same general 

methodology in a regression analysis as was used in that 

report. The result was that the average cost per trip in 

the lowest quartile of rural county populations was 22.6 

percent higher than the average cost per trip in the 

highest quartile. As required by section 1834(l)(12) of 

the Act, this percent increase is applied to the base rate 

for ground ambulance transports that originate in qualified 
 245 

rural areas, which were identified using the methodology 

set forth in the statute. Payments for ambulance services 

under Medicare are determined by the point of pick-up (by 

zip code area) where the beneficiary is loaded on board the 

ambulance. 

 We determined that ground ambulance transports 

originating in 7,842 zip code areas (which were determined 

to be in “qualified rural areas”) out of 42,879 zip code 

areas, according to the July 2010 zip code file, will 

realize increased base rate payments under section 106(c) 

of the MMEA for CY 2011; however, the number and level of 

services that might occur in these areas for CY 2011 is 

unknown at this time. Similarly, for purposes of assessing 

the impact of MMEA section 106(a) and (b), the number and 

level of services that might occur during CY 2011 in rural 

and urban areas generally is unknown at this time. While 

many elements may factor into the final impact of section 

106 of the MMEA, our Office of the Actuary (OACT) estimates 

the impact of this section to be $20 million for CY 2011. 

4. Durable Medical Equipment (DME) and Supplies 

 The fiscal impact of the proposed 3-year minimum 

lifetime standard for DME is likely to be minimal because 

we believe that this standard is consistent with our 

current interpretation of durability for DME. It is 
 246 

difficult to predict how many different types of new 

devices will be introduced in the market in the future that 

may or may not meet the 3-year minimum lifetime standard. 

However, even absent the rule, it is likely that new 

products which do not meet the 3-year lifetime standard 

would not qualify as DME based upon our current 

interpretation of durability for DME. It is possible that 

with the clarification of the 3-year minimum lifetime 

standard, we would be limiting what can be covered as DME 

compared to what we would have covered as DME absent this 

regulatory clarification. To the extent the regulatory 

change is binding to some new products, there may be 

reduced program cost. Also, the revised regulation does 

not apply to items that were classified as DME before the 

effective date of the amended regulation, which tends to 

lessen the overall impact to the program. In general, we 

would expect that this proposed rule would have a small, if 

any, savings impact on the program. 

C. Accounting Statement 

As required by OMB Circular A-4 (available at 

http://www.whitehouse.gov/omb/circulars_a004_a-4), in Table 

15 below, we have prepared an accounting statement showing 

the classification of the transfers and costs associated 

with the various provisions of this proposed rule. 
 247 

 

TABLE 15: Accounting Statement: Classification of 

Estimated Transfers and Costs ESRD PPS for CY 2012 

Category Transfers 

Annualized Monetized Transfers $160 million 

From Whom to Whom Federal Government to ESRD providers 

Category Costs

Increased Beneficiary Co-insurance Payments $40 million 

ESRD QIP for PYs 2013 and 2014 

Category Transfers

Annualized Monetized Transfers at the 7% Discount 

Rate 

-$31.2 million 

Annualized Monetized Transfers at the 3% Discount 

Rate 

-$30.9 million 

From Whom to Whom Federal Government to ESRD providers 

Category Costs

Annualized Monetized ESRD Provider Costs at the 7% 

Discount Rate 

$11.7 million 

Annualized Monetized ESRD Provider Costs at the 7% 

Discount Rate 

$11.9 million 

Ambulance Fee Schedule for CY 2011 

Category Transfers

Annualized Monetized Transfers $20 million 

From Whom to Whom Federal Government to Medicare Ambulance 

Providers 

Durable Medical Equipment (DME) and Supplies 

Category Transfers

Annualized Monetized Transfers Impact of the 3 year RUL not estimated 

From Whom to Whom Federal Government to DME suppliers 

VIII. 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 
 248 

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 20 percent of 

ESRD dialysis facilities are considered small entities 

according to the Small Business Administration’s size 

standards, which classifies small businesses as those 

dialysis facilities having total revenues of less than 

$34.5 million in any 1 year. Individuals and States are 

not included in the definitions of a small entity and 

seventeen percent of dialysis facilities are nonprofit 

organizations. For more information on SBA’s size 

standards, see the Small Business Administration’s Web site 

at http://sba.gov/idc/groups/public/documents/ 

sba_homepage/serv_sstd_tablepdf.pdf (Kidney Dialysis 

Centers are listed as 621492 with a size standard of $34.5 

million). 

The claims data utilized to estimate payments to ESRD 

facilities in this RFA and RIA do not identify which 

dialysis facilities are part of an large dialysis 

organizations (LDO), regional chain, or other type of 

ownership. Each individual dialysis facility has its own 

provider number and bills Medicare using this number. 

Therefore, in previous RFAs and RIAs presented in proposed 
 249 

and final rules that updated the basic case-mix adjusted 

composite payment system, we considered each ESRD to be a 

small entity for purposes of the RFA. However, we 

conducted a special analysis for this proposed rule that 

enabled us to identify the ESRD facilities that are part of 

an LDO or regional chain and therefore, were able to 

identify individual ESRD facilities, regardless of 

ownership, that would be considered small entities. 

We do not believe ESRD facilities are operated by 

small government entities such as counties or towns with 

populations 50,000 or less and therefore, they are not 

enumerated or included in this estimated RFA. Individuals 

and States are not included in the definition of a small 

entity. 

For purposes of the RFA, we estimate that 

approximately 20 percent of ESRD facilities are small 

entities as that term is used in the RFA (which includes 

small businesses, nonprofit organizations, and small 

governmental jurisdictions). This amount is based on the 

number of ESRD facilities shown in the ownership category 

in the impact Table 15. Using the definitions in this 

ownership category, we consider the 624 facilities that are 

independent and the 430 facilities that are shown as 

hospital-based to be small entities. The ESRD facilities 
 250 

that are owned and operated by LDOs and regional chains 

would have total revenues more than $34.5 million in any 

year when the total revenues for all locations are combined 

for each business (individual LDO or regional chain) are 

not 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 1.7 percent increase in payments 

for CY 2012. An independent facility (as defined by 

ownership type) is estimated to receive a 2.0 percent 

increase in payments for 2012. 

Based on the proposed QIP payment reduction impacts to 

ESRD facilities for PY 2013, we estimate that of the 2,059 

ESRD facilities expected to receive a payment reduction, 

385 ESRD small entity facilities would experience a payment 

reduction (ranging from 0.5 percent up to 2.0 of total 

payments), as presented in Table 15 above. We anticipate 

the payment reductions to average approximately $22,934 per 

facility, with an average of $23,807 per small entity. 

Using our projections of provider/facility performance, we 

then estimated the impact of anticipated payment reductions 

on ESRD small entities, by comparing the total payment 

reductions for the 385 small entities expected to receive a 

payment reduction, with the aggregate ESRD payments to all 
 251 

small entities. For the entire group of 1,054 ESRD small 

entity facilities, a decrease of 0.57 percent in aggregate 

ESRD payments is observed. 

 Furthermore, based on the proposed QIP payment 

reduction impacts to ESRD facilities for PY 2014, we 

estimate that of the 737 ESRD entity facilities expected to 

receive a payment reduction, 132 small entities are 

expected to experience a payment reduction (ranging from 

1.0 percent up to 2.0 of total payments), as presented in 

Table 15 above. We anticipate the payment reductions to 

average approximately $18,820 per facility, with an average 

of $20,436 per small entity facility. Using our 

projections of provider/facility performance, we then 

estimated the impact of anticipated payment reductions on 

small entities, by comparing the total payment reductions 

for the 132 small entities expected to receive a payment 

reduction, with the aggregate ESRD payments to all small 

entities. For the entire group of 1,054 small entity 

facilities, a decrease of 0.16 percent in aggregate ESRD 

payments is observed. 

Therefore, the Secretary has determined that this 

proposed rule will not have a significant economic impact 

on a substantial number of small entities. We solicit 

comment on the RFA analysis provided. 
 252 

In addition, section 1102(b) of the Act requires us to 

prepare a regulatory impact analysis if a rule may have a 

significant impact on the operations of a substantial 

number of small rural hospitals. Any such regulatory 

impact analysis must conform to the provisions of section 

603 of the RFA. For purposes of section 1102(b) of the 

Act, we define a small rural hospital as a hospital that is 

located outside of a metropolitan statistical area and has 

fewer than 100 beds. We do not believe this proposed rule 

would have a significant impact on operations of a 

substantial number of small rural hospitals because most 

dialysis facilities are freestanding. While there are 174 

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 174 rural hospital-based 

dialysis facilities will experience an estimated 1.8 

percent increase in payments. As a result, this proposed 

rule is estimated to not 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. 

IX. Unfunded Mandates Reform Act Analysis 

Section 202 of the Unfunded Mandates Reform Act of 
 253 

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 2011, that threshold is approximately $136 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 

$136 million. 

X. 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 would not have substantial direct effects on the rights, 

roles, and responsibilities of States, local or tribal 

governments. 

XI. Files Available to the Public via the Internet 

This section lists the Addenda referred to in the 

preamble of this proposed rule. Beginning in CY 2012, the 
 254 

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. We will continue to post the Addenda through the 

Internet. 

 Readers who experience any problems accessing the 

Addenda that are posted on the CMS website at 

http://www.cms.gov/ESRDPayment/PAY/list.asp, should contact 

Lisa Hubbard at (410) 786-4533. 
 255 

List of Subjects 

42 CFR Part 413 

Health facilities, Kidney diseases, Medicare, Reporting and 

recordkeeping requirements. 

42 CFR Part 414 

Proposed Rule to revise the definition of durable medical 

equipment (DME) to incorporate a minimum lifetime standard 

of 3 years and further refine the meaning of the term 

durable. 
 256 

For the reasons set forth in the preamble, the Center 

for Medicare & Medicaid Services proposes to amend 42 CFR 

Chapter IV as set forth below: 

PART 413—PRINCIPLES OF REASONABLE COST REIMBURSEMENT; 

PAYMENT FOR END-STAGE RENAL DISEASE SERVICES; OPTIONAL 

PROSPECTIVELY DETERMINED PAYMENT RATES FOR SKILLED NURSING 

FACILITIES 

 1. The authority citation for part 413 continues to 

read as follows: 

Authority: Secs. 1102, 1812(d), 1814(b), 1815, 

1833(a), (i),and (n), 1861(v), 1871, 1881, 1883, and 1886 

of the Social Security Act (42 U.S.C. 1302, 1395d(d), 

1395f(b), 1395(g), 1395I(a), (i), and (n), 1395x(v), 

1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of Public 

Law 106-113 (133 stat. 1501A-332) 

 2. Section 413.232 is amended by revising paragraphs 

(b)(1), (b)(2), and (f) to read as follows: 

§413.232 Low-Volume adjustment. 

 (a) * * * 

 (b) * * * 

 (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 
 257 

 (2) Has not opened, closed, or had 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. 

* * * * * 

(f) To receive the low-volume adjustment an ESRD 

facility must provide an attestation statement, prior to 

November 1st of each year, to its Medicare administrative 

contractor that the facility has met all the criteria 

established in paragraphs (a), (b), (c), and (d) of this 

section. 

* * * * * 

4. Section 413.237 is amended by adding paragraph 

(a)(1)(v) to read as follows:

§413.237 Outliers 

 (a) * * * 

 (1) * * * 

 (v) As of January 1, 2012, the laboratory tests that 

comprise the Automated Multi-Channel Chemistry panel are 

excluded from the definition of outlier services. 

* * * * * 

PART 414-PAYMENT FOR PART B MEDICAL AND OTHER HEALTH 

SERVICES 

5. The authority citation for part 414 continues to 
 258 

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)). 

Subpart D-Payment for Durable Medical Equipment and 

Prosthetic and Orthotic Devices 

6. Section 414.202 is amended by revising the 

definition of durable medical equipment to read as follows:

§414.202 Definitions 

* * * * * 

Durable medical equipment means equipment, furnished by a 

supplier or a home health agency that meets the following 

conditions: 

(1) Can withstand repeated use. 

(2) Has an expected life of at least 3 years (This 

expected life requirement applies to items 

classified as DME after [EFFECTIVE DATE OF FINAL 

RULE]). 

(3) Is primarily and customarily used to serve a medical 

purpose. 

(4) Generally is not useful to an individual in the 

absence of an illness or injury. 

(5) Is appropriate for use in the home. 

* * * * * 
 259 

Subpart H – Fee Schedule for Ambulance Services 

 7. Section 414.610 is amended by revising 

paragraphs(c)(1) introductory text,(c )(1)(ii), (c)(5)(ii) 

and (h) to read as follows: 

§414.610 Basis of payments. 

* * * * * 

 (c) * * *

 (1) Ground ambulance service levels. The CF is 

multiplied by the applicable RVUs for each level of service 

to produce a service-level base rate. 

* * * * * 

(ii) For services furnished during the period July 1, 2008 

through December 31, 2011, ambulance services originating 

in-- 

* * * * * 

(5) * * * 

(ii) For services furnished during the period July 1, 

2004 through December 31, 2011, the payment amount for the 

ground ambulance base rate is increased by 22.6 percent 

where the point of pickup is in a rural area determined to 

be in the lowest 25 percent of rural population arrayed by 

population density. The amount of this increase is based 

on CMS's estimate of the ratio of the average cost per trip 
 260 

for the rural areas in the lowest quartile of population 

compared to the average cost per trip for the rural areas 

in the highest quartile of population. In making this 

estimate, CMS may use data provided by the GAO. 

* * * * * 

 (h) Treatment of certain areas for payment for air 

ambulance services. Any area that was designated as a 

rural area for purposes of making payments under the 

ambulance fee schedule for air ambulance services furnished 

on December 31, 2006, must be treated as a rural area for 

purposes of making payments under the ambulance fee 

schedule for air ambulance services furnished during the 

period July 1, 2008 through December 31, 2011. 
CMS-1577-P 

(Catalog of Federal Domestic Assistance Program No. 93.773, 

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

Medicare--Supplementary Medical Insurance Program)

Dated: June 16, 2011

 _________________________

 Donald M. Berwick, 

 Administrator, 

 Centers for Medicare & 

 Medicaid Services. 

Approved: June 20, 2011

 _____________________________ 

 Kathleen Sebelius, 

 Secretary, 

Department of Health and 

Human Services. 

BILLING CODE 4120-01-P 
CMS-1577-P SKP 6/06/2011 Segment 1 262