40498 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Proposed Rules 

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, EndStage 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 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 August 30, 2011. 

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: 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.) 

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: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

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

appointment to view public comments, 

phone 1–800–743–3951. 

Electronic Access 

This Federal Register document is 

also available from the Federal Register 

online database through Federal Digital 

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

Government Printing Office. This 

database can be accessed via the 

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

Addenda Are Only Available Through 

the Internet on the CMS Web Site 

In the past, a majority of the Addenda 

referred to throughout the preamble of 

our proposed and final rules 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) 


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Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Proposed Rules 40499 

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 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 Labor-Related 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 

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 MultiChannel Chemistry (AMCC) Laboratory 

Tests From the Outlier Calculation 

c. Impact of Proposed Changes to the 

Outlier Policy 

D. Technical Corrections 

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 

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 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 

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 

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 


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40500 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Proposed Rules 

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 

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 

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 

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, ‘‘EndStage Renal Disease Prospective 

Payment System’’, hereinafter referred 

to as the CY 2011 ESRD PPS final rule. 

In the CY 2011 ESRD PPS 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 casemix 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 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 budgetneutrality 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. 

• 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 casemix adjusted payment rate for facilities 

that qualifies as low-volume ESRD 

facilities. 

• An outlier payment policy that 

provides an additional payment to 

ESRD facilities treating high cost, 

resource-intensive 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 BudgetNeutrality 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 


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Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Proposed Rules 40501 

budget-neutrality 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 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 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 budget-neutrality 

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 casemix 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 

proposed productivity adjustment can 

be found in section I.C.2.c of this 

proposed rule. 

We are also proposing to update the 

transition budget-neutrality 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 drugspecific 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 a patient 

to treat an infection of the catheter site 

or peritonitis associated with peritoneal 

dialysis as non-composite rate ESRDrelated drugs, and reiterating that under 

the current regulation, all noncomposite 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 lowvolume 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 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. 


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40502 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Proposed Rules 

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 casemix 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 through 

2013). For a historical perspective of the 

basic case-mix 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 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 budgetneutrality 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 × 

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 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 × 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 

budget-neutrality adjustment factor of 

1.001126 to the CY 2012 ESRD PPS base 

rate (that is, $233.76), yielding a 

proposed CY 2012 ESRD PPS wageindex budget-neutrality adjusted base 

rate of $234.02 ($233.76 × 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. 

b. Proposed Market Basket Update 

Increase Factor and Labor-Related 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) 


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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. 

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 capital-related expenses for 

the labor-related shares for 

rehabilitation facilities (70 FR 30233), 

psychiatric facilities, long-term care 

facilities, and skilled nursing facilities 

(66 FR 39585). 

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, Laborrelated ............................. 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 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 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. 


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TABLE 2—MULTIFACTOR PRODUCTIVITY COMPONENT SERIES EMPLOYED BY THE BUREAU OF LABOR STATISTICS AND IHS 

GLOBAL INSIGHT—Continued 

BLS series IGI series 

Aggregate capital inputs; 2005 = 100.00 ................................. Real effective capital stock used for full employment GDP, Billions of chained 

2005 dollars. 

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, non-farm, 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 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 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 

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 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. 


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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). 

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 be 

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 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 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 BudgetNeutrality 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 phasein’’ 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 onetime 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-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. 

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 budgetneutrality 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. 


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40506 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Proposed Rules 

For the second part, as described in 

the CY 2011 ESRD PPS proposed rule 

(74 FR 49946), to calculate the transition 

budget-neutrality 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 budgetneutrality adjustment of 0 percent. 

Given that the transition budgetneutrality adjustment required under 

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

applies in each year 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 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 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 low-volume 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 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 lowvolume 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 lowvolume 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 lowvolume 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 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 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 low-volume 

payment adjustment). 

In this proposed rule, we also are 

proposing to establish the process, for 

CY 2012 and each year thereafter that an 


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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-volume 

adjustment must submit an attestation 

to their respective FI/MAC no later than 

November 1, 2011 (with regard to its 

low-volume 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 lowvolume 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 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 lowvolume 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 

low-volume 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 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 lowvolume 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), 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 low-volume 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 asfiled (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 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 asfiled 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 lowvolume criteria for its cost reporting 

periods ending in 2009 and 2010 and 

that it expects to meet the low-volume 


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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 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 lowvolume 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 onetime 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 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 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 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 

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 


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result of public comments, we revised 

our update 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 addon 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 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 addon 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. 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 addon 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 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 prefloor hospital data that are unadjusted 

for occupational case mix. The CBSAbased 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 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 budget-neutrality adjustment 

factor to be applied in CY 2012 and in 

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 


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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 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 BudgetNeutrality Adjustment 

As noted above, we have broad 

discretion under section 

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

develop a geographic wage 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 budgetneutrality 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 budgetneutrality 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 budgetneutrality adjustment factor in CY 2006 

(70 FR 70171). During the transition, we 

are not proposing to change the 

application of the wage index budgetneutrality 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 budgetneutrality 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 budgetneutrality 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 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 budgetneutrality 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 of the 

ESRD PPS payment rate. 

To compute the proposed CY 2012 

wage index budget-neutrality 

adjustment factors, we used the fiscal 

year (FY) 2012 pre-floor, prereclassified, non-occupational mixadjusted hospital data to compute the 

wage index values, 2010 outpatient 

claims (paid and processed as of 

December 31, 2010), and geographic 


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location information for each facility 

which may be found through Dialysis 

Facility Compare Web page on the CMS 

Web site 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 Web site 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 

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 budget-neutrality 

adjustment factor of 1.001126 to the 

ESRD PPS base rate. 

Because we are proposing to apply the 

wage index budget-neutrality 

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 budget-neutrality 

adjustment factor to the wage index 

floor of 0.550 which results in an 

adjusted wage index floor of 0.551 

(0.550 × 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 Web site 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 budget-neutrality 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 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 antiinfective 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 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). 

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 


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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). 

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 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 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 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 


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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 (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 

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 

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-todate. 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 billable under Part B or 

formerly covered under Part D prior to 

January 1, 2011, is an ESRD outlier 

service, excluding ESRD-related oralonly 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 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 


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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 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 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 ESRDrelated 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 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 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 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 application. Unlike specific drugs 

which are classified as either composite 


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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 ESRDrelated 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 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 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 treatment 1 ................. $50.85 $85.62 $45.14 $84.71 $44.67 $84.40 $46.27 $87.83 

Adjustments Standardization for 

outlier services 2 ........................... 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 amount 3 ............................... $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 threshold 4 .. $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). 

* 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. 

1Excludes 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. 2Applied to the average outlier MAP per treatment. Standardization for outlier services is based on existing Case Mix Adjusters for adult and 

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

each patient. 4The fixed dollar loss amounts were calculated using 2009 data to yield total outlier payments that represent 1% of total projected payments 

for the ESRD PPS. 


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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 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 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 casemix 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 

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 test 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 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 comorbidity 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 

co-morbidity 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 comorbidity 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 categories of comorbidities and the diagnoses within 

the co-morbidity 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 comorbidity 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 


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of any co-morbidity diagnoses 

recognized for the co-morbidity 

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 comorbidity payment adjustment as 

compared to previous trends (75 FR 

49099). We are monitoring the comorbidities eligible for payment 

adjustment to determine if the comorbidity 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 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 allinclusive 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) 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 workup 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 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 ESRDrelated 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 

PYs 2013 and PY 2014 

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’’). 


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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 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) 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: 

http://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 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 

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 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 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
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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). 

Adequacy measure, in the PY 2013 

ESRD QIP measure 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 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/DrugSafety/ 

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 

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 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 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 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/ 


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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 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 Web site 

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 

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 Web site, the 2009 national 

performance rates for the Hemoglobin 

Greater Than 12g/dL measure 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 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 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 


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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 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 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 

26–29 .................................... 1.0 

21–25 .................................... 1.5 

0–20 ...................................... 2.0 

TABLE 6—FINALIZED PY 2012 

PAYMENT REDUCTION SCALE

Total performance score 

2012 Percent 

of payment 

reduction 

30–26 Points ......................... 0.0 

21–25 .................................... 0.5 

16–20 .................................... 1.0 

11–15 .................................... 1.5 

0–10 ...................................... 2.0 

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 In-Center 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 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 decisionmaking, 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 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 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
40522 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Proposed Rules 

2http://www.kidney.org/professionals/kdoqi/

guideline_uphd_pd_va/va_guide2.htm. 

3http://www.fistulafirst.org/AboutAVFistulaFirst/

History.aspx. 

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 

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: http:// 

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 (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, 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 

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 

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 


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Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Proposed Rules 40523 

4See http://www.fistulafirst.org/ for further 

information regarding this initiative. 

5http://www.cdc.gov/media/releases/2011/

p0301_vitalsigns.html. 

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 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 

NQF-endorsed 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 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: 

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 lifethreatening 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 < 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 accessrelated 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 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 


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40524 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Proposed Rules 

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 SHRAdmissions measure has been regularly 

reported to Dialysis Facility Reports 

(DFR) since 1995 (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 consensusendorsed 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 

voluntary consensus standards bodies 

and/or endorsed by NQF for ESRD 

patients. Therefore, we are proposing to 

adopt this SHR-Admissions 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 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. 

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 

healthcare-associated 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, providers/facilities would 

be able to 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 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 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Proposed Rules 40525 

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.) 

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.) 

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 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 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 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 11:59 p.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: 

https://www.cahps.ahrq.gov/content/

products/ICH/PROD_ICH_

Intro.asp?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 calciumphosphorus dysregulation, which is 

why we believe that routine blood 

testing of calcium and phosphorus is 

necessary to detect abnormalities.6

The Kidney Disease: Improving 

Global Outcomes (KDIGO) 2009 

guideline 7 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 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
40526 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Proposed Rules 

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 http://www.qualityforum.org/

Projects/e-g/End_Stage_Renal_Disease

_2010/End_Stage_Renal_Disease

_2010.aspx 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 

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 NQF-endorsed 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. 

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 11:59 p.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 

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 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 


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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 

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 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 SHRAdmissions 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 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. 

TABLE 7—EXAMPLE ACHIEVEMENT AND

IMPROVEMENT PERFORMANCE

STANDARDS FOR THE PY 2014 

ESRD QIP 

Proposed measure 

Example 

achievement/ 

improvement 

performance 

standard 

(percent) 

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 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 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 


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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, 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 ValueBased 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. 

• 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 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 

Value-Based 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 

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 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 


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propose to establish the benchmark and 

achievement threshold 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 SHRAdmissions), 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 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 

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, SHRAdmissions) 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 

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 that this method of 

calculating this measure stresses the 

importance of both vascular access submeasures 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 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. 


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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 

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.) 

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. 


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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 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. 


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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 

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 

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 


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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 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 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 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. 

TABLE 8—EXAMPLE OF CALCULATION OF PROVIDER/FACILITY TOTAL PERFORMANCE SCORE BASED ON PROPOSED 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 

Improvement 

points 

Earned points 

(higher of 

achievement 

and 

improvement) 

Hemoglobin greater 

than 12 g/dL 

measure.

% of patients with 

hemoglobin greater than 12 g/dL.

44% 2% 22.0% 14.0% 7 4 7 

Dialysis Adequacy 

Measure (Kt/V).

% of hemodialysis 

(HD) patients with 

Kt/V ≥ 1.2.

85% 100% 80.0% 95.0% 7 8 8 

Vascular Access 

Type Measure.

Average of the two 

sub-measures.

........................ ........................ ........................ ........................ ........................ ........................ 3 

(Fistula) ................... % of patients receiving treatment with 

fistulae.

40% 73% 25.0% 40.0% 0 3 3 

(Catheter) ................ % of patients receiving treatment with 

catheter.

38% 11% 29% 30% 3 0 3 


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TABLE 8—EXAMPLE OF CALCULATION OF PROVIDER/FACILITY TOTAL PERFORMANCE SCORE BASED ON PROPOSED 2014 

ESRD QIP SCORING METHODOLOGY—Continued 

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 

Improvement 

points 

Earned points 

(higher of 

achievement 

and 

improvement) 

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 0 6 

SHR-Admissions 

Measure.

Standardized Hospitalization Ratio.1.35 0.58 1.32 1.54 0 0 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 N/A 10 

Patient Experience of 

Care Survey 

Usage Reporting 

Measure.

Providers/facilities 

must attest that 

they successfully 

fielded survey during the performance period.

N/A N/A N/A 10 N/A N/A 10 

Mineral Metabolism 

Reporting Measure.

Measure serum calcium and serum 

phosphorus levels 

of Medicare patients.

N/A N/A N/A 10 N/A N/A 10 

Provider/Facility Total Performance Score: 53.19 

* Achievement Thresholds and Benchmarks are based on 2009 National Facility Values (except for the SHR-Admissions Measure, which is based on 2008 National 

Facility Values). 

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 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 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 


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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 

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 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. 

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 

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. 

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 self-implementing. A plain reading of 

the statute requires only 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 


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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 

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 self-implementing. 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 redesignated as urban, we have reestablished 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 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 

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 selfimplementing. 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 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)(1): ‘‘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)(1)(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 

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 


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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 

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 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 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 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 Medicare-Medicaid 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 

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 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. 


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8The 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. 

9The 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. 

10Encyclopedia of Business, Britannica 

Encyclopedia and Gale Encyclopedia. 

11A Lexicon of Economics by Kenyon A. Knopf. 

12http://resna.org/. 

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 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 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 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 Web site, 

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 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 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 estimates.8

Furthermore, economics dictionaries,9

various encyclopedias,10 and economics 

textbooks 11 define durable 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 


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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 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 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 nondurable components that together serve 

a medical purpose. Currently, a multicomponent 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 nondurable, 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 

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: 

• 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 lowvolume 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 low-volume 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. 

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 lowvolume 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 

$1,044 for all 400 facilities. These costs 

are estimated using the 2010 estimate 

for the occupational code 43–0000 

Office and Administrative Support 


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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 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 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 onethird 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. 

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, 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 

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 to comply with the 

collection of information requirements 

associated with administering the ICH 

CAHPS survey each year would be 


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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 http://www.cms.gov/ 

PaperworkReductionActof1995/PRAL/ 

list.asp#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 

E-mail: 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 

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 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 budget-neutrality 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 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 Public 

Law 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. 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 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
40542 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Proposed Rules 

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. 

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 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 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 

2009 to 2011 

(percent) 

Price update 

2009 to 2012 

(percent) 

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 

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. 


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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))] 

Facility type Number of 

facilities 

Number of treatments 

(in millions) 

Effect of 2012 

changes in 

outlier policy 

percent 

Effect of 2012 

changes in wage 

indexes 

percent 

Effect of total 

2012 changes 3

percent 

A B C D E 

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 based 1 ........................................ 430 2.8 ¥0.1 ¥0.4 1.7 

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 treatments 2 .................... 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. 2Of 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 from 14.7% 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 

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 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/ 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
40544 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Proposed Rules 

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 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 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 coinsurance 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 budgetneutrality 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 budgetneutrality adjustment factor to the ESRD 

PPS base rate and ESRD PPS 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 budget-neutrality 

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 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 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 

percent 

Number of 

facilities 

Percent of 

facilities 

percent 

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 

percent 

Number of 

facilities 

Percent of 

facilities 

percent 

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 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Proposed Rules 40545 

treatments per week. We then 

multiplied this product by a base rate of 

$229.63 per dialysis treatment (before 

an adjustor is applied) to arrive at a total 

ESRD payment for each facility: 

((Number of patients treated at each 

facility × 3 treatments per week) × 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 × 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. (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 

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 Entities 1 .......................................... 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 Territories 2 ......................................... 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 Territories 2 ......................................... 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 

Over 10,000 treatments ............................ 2,214 25.4 2,177 1,038 ¥0.66 

Unknown ................................................... 50 0.2 12 4 ¥0.19 

1Small Entities include hospital-based and satellite facilities, and non-chain facilities based on DFC self-reported status. 

2 Includes Puerto Rico and Virgin Islands. 


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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. 

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 

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 Territories 2 ......................................... 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 Territories 2 ......................................... 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 

1Small Entities include hospital-based and satellite facilities, and non-chain facilities based on DFC self-reported status. 

2 Includes Puerto Rico and Virgin Islands. 

3 CY 2014 QIP Scores estimated using the measures Hemoglobin > 12 g/dl, Urea Reduction Ratio ≥ 65%, and Standard Hospitalization Ratio. 


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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 

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 high-quality 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, 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 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 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 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. 


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40548 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Proposed Rules 

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. 

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 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 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 


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Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Proposed Rules 40549 

the 430 facilities that are shown as 

hospital-based to be small entities. The 

ESRD facilities that are owned and 

operated by LDOs and regional chains 

would have total revenues 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 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. 

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 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 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 Web site at http:// 

www.cms.gov/ESRDPayment/PAY/ 

list.asp, should contact Lisa Hubbard at 

(410) 786–4533. 

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. 

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 Pub. L. 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 


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40550 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Proposed Rules 

final settled 12-consecutive month cost 

reports, whichever is most recent) 

preceding the payment year; and 

(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 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. 

* * * * * 

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 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. 

(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. 

[FR Doc. 2011–16874 Filed 7–1–11; 4:15 pm] 

BILLING CODE 4120–01–P 


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