This document is scheduled to be published in the

Federal Register on 07/11/2012 and available online at

http://federalregister.gov/a/2012-16566, and on FDsys.gov

CMS-1352-P 

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

42 CFR Parts 413 and 417 

[CMS-1352-P] 

RIN 0938-AR13 

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

Incentive Program, and Bad Debt Reductions for all Medicare Providers 

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

ACTION: Proposed rule. 

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

(ESRD) prospective payment system (PPS) for calendar year (CY) 2013. This rule also proposes 

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

year (PY) 2015 and beyond. This proposed rule will implement changes to bad debt 

reimbursement for all Medicare providers, suppliers, and other entities eligible to receive bad 

debt. (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. E.S.T on [OFR--insert date 60 days after date of display in

the Federal Register]. 

ADDRESSES: In commenting, please refer to file code CMS-1352-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-1352-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-1352-P, 

 Mail Stop C4-26-05, 

 7500 Security Boulevard, 

Baltimore, MD 21244-1850. 

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

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

a. For delivery in Washington, DC-- 
 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

Room 445-G, Hubert H. Humphrey Building, 

 200 Independence Avenue, SW., 

 Washington, DC 20201 

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

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

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

an extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD-- 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

7500 Security Boulevard, 

Baltimore, MD 21244-1850. 

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

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

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

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

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

"SUPPLEMENTARY INFORMATION" section. 

FOR FURTHER INFORMATION CONTACT: 

Michelle Cruse or Terri Deutsch, (410)786-4533, for issues related to ESRD. 
Heidi Oumarou, (410)786-7942, for issues related to the ESRD market basket. 

Teresa Casey, (410)786-7215, for issues related to the QIP. 

Kellie Shannon, (410) 786-0416 for information regarding Medicare bad debt. 

SUPPLEMENTARY INFORMATION: 

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

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

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

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

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

public comments. 

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

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

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

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

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

Electronic Access 

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

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

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

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

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

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

annual proposed and final rules will no longer be available in the Federal Register. Instead, 
these Addenda to the annual proposed and final rules will be available only through the Internet 

on the CMS Web site. The Addenda to the End-Stage Renal Disease (ESRD) Prospective 

Payment System (PPS) rules are available at: http://www.cms.gov/ESRDPayment/PAY/list.asp. 

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

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

Michelle Cruse at 410-786-7540. 

Table of Contents 

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

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

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

I. Executive Summary 

A. Purpose 

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

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

3. Reductions to Bad Debt Payments for all Medicare Providers 

B. Summary of the Major provisions 

1. ESRD PPS 

2. ESRD QIP 

3. Reductions to Bad Debt Payments for all Medicare Providers 

C. Summary of Cost and Benefits 

1. Impacts of the Proposed ESRD PPS 

2. Impacts for ESRD QIP 

3. Impacts of Bad Debt Provisions 
II. Calendar Year (CY) 2013 End-Stage Renal Disease (ESRD) Prospective Payment System 

(PPS) 

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

B. Routine Updates and Proposed Policy Changes to the CY 2013 ESRD PPS 

1. Composite Rate Portion of the ESRD PPS Blended Payment 

a. Proposed Update to the Drug Add-on to the Composite Rate Portion of the ESRD Blended 

Payment Rate 

i. Estimating Growth in Expenditures for Drugs and Biologicals in CY 2013 

ii. Estimating Per Patient Growth 

iii. Applying the Proposed Growth Update to the Drug Add-On Adjustment 

iv. Proposed Update to the Drug Add-On Adjustment for CY 2013 

2. ESRD PPS Base Rate 

3. ESRD Bundled Market Basket 

a. Overview and Background 

b. Proposed Market Basket Update Increase Factor and Labor-Related Share for ESRD Facilities 

for CY 2013 

c. Proposed Productivity Adjustment 

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

CY 2013 

4. Transition Budget-Neutrality Adjustment for CY 2013 

5. Proposed Updates to the Wage Index Values and Wage Index Floor for the Composite Rate 

Portion of the Blended Payment and the ESRD PPS Payment 

a. Reduction to the ESRD Wage Index Floor 
b. Policies For Areas With No Wage Data – Segment 1 

c. Proposed Wage Index Budget-Neutrality Adjustment 

d. ESRD PPS Wage Index Tables 

6. Proposed Drug Policy Changes 

a. Daptomycin 

b. Alteplase and Other Thrombolytics 

c. Part B Drug Pricing 

7. Proposed Revisions to the Outlier Policy 

a. Impact of Proposed Changes to the Outlier Policy 

b. Outlier Policy Percentage 

C. Clarifications Regarding the ESRD PPS 

1. Reporting Composite Rate Items and Services 

2. ESRD Facility Responsibilities for ESRD-Related Drugs and Biologicals 

3. Use of AY Modifier 

III. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP) for Payment Year (PY) 

2015

A. Background 

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

2015 and Subsequent PYs 

1. Value-Based Purchasing (VBP) Overview 

2. Brief Overview of Proposed PY 2015 Measures 

3. PY 2014 Mineral Metabolism Measure 

4. Measures Application Partnership Review 
C. Proposed Measures for the PY 2015 ESRD QIP and Subsequent PYs of the ESRD QIP 

1. PY 2014 Measures Continuing for PY 2015 and Subsequent Payment Years 

2. Expansion of Two PY 2014 Measures for PY 2015 and Subsequent Payment Years 

a. Proposed Expanded NHSN Dialysis Event Reporting Measure 

b. Proposed Expanded Mineral Metabolism Reporting Measure 

3. New Measures Proposed for PY 2015 and Subsequent Payment Years of the ESRD QIP 

a. Proposed Kt/V Dialysis Adequacy Measure Topic 

b. Hypercalcemia 

c. Proposed Anemia Management Reporting Measure 

4. Measures under Consideration for Future Payment Years of the ESRD QIP 

a. Standardized Hospitalization Ratio (SHR) 

b. Standardized Mortality Ratio (SMR) 

c. Public Reporting of SHR and SMR Measures 

5. Other Potential Future Measures Under Development 

a. Thirty-Day Hospital Readmissions 

b. Efficiency 

c. Population/Community Health 

6. Proposed Scoring for the PY 2015 ESRD QIP 

7. Proposed Performance Period for the PY 2015 ESRD QIP 

8. Proposed Performance Standards for the PY 2015 ESRD QIP 

a. Proposed Clinical Measure Performance Standards 

b. Estimated Performance Standards 

c. Proposed Performance Standards for PY 2015 Reporting Measures 
9. Proposed Scoring for the PY 2015 ESRD QIP Proposed Measures 

a. Proposals for Scoring Facility Performance on Clinical Measures Based on Achievement 

b. Proposals for Scoring Facility Performance on Clinical Measures Based on Improvement 

c. Proposals for Calculating the Reporting Measure Scores 

10. Proposals for Weighting the PY 2015 ESRD QIP Measures and Calculation of the PY 2015 

ESRD QIP Total Performance Score 

a. Proposals for Weighting Individual Measures to Compute Measure Topic Scores for the Kt/V 

Dialysis Adequacy Measure Topic and the Vascular Access Type Measure Topic 

b. Proposals for Weighting the Total Performance Score 

c. Examples of the Proposed PY 2015 ESRD QIP Scoring Methodology 

11. Proposed Minimum Data for Scoring Measures for the PY 2015 ESRD QIP 

a. Proposed Minimum Data for Scoring Measures for the PY 2015 ESRD QIP 

i. Proposed Case Minimum for Clinical Measures 

ii. Proposed Adjustment Methodology 

b. Proposed Minimum Data Requirements for Reporting Measures from New Facilities 

12. Proposed Payment Reductions for the PY 2015 ESRD QIP 

13. Data Validation 

14. Proposals for Scoring Facilities Whose Ownership has Changed 

15. Proposals for Public Reporting Requirements 

IV. Limitation on Payments to All Providers, Suppliers and Other Entities Entitled to Bad Debt 
A. Background 

B. Section 3201 of The Middle Class Tax Extension and Job Creation Act of 2012 (Pub. L. No. 

112-96) 

C. Summary of Provisions of the Proposed Rule 

1. Section 3201 of The Middle Class Tax Extension and Job Creation Act of 2012 (Pub. L. No. 

112-96) 

2. Remove and Reserve §413.178 

3. Technical corrections 

D. Proposed Changes to Medicare Bad Debt Policy 

1. Proposed Changes to 42 CFR §413.89(h) 

2. Rationale for Removing 42 CFR §413.178 

3. Technical Corrections to 42 CFR §417.536(f)(1) 

V. Collection of Information Requirements 

A. Legislative Requirement for Solicitation of Comments 

B. Requirements in the Regulation Text 

C. Additional Information Collection Requirements 

1. ESRD PPS 

2. QIP 

VI. Response to Comments 

VII. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

2. Statement of Need 
3. Overall Impact 

B. Detailed Economic Analysis 

1. CY 2013 End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) 

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. QIP 

C. Accounting Statement 

VIII. Regulatory Flexibility Act Analysis 

IX. Unfunded Mandates Reform Act Analysis 

X. Federalism Analysis – 

XI. Files Available to the Public via the Internet 

Regulations Text 

Acronyms 

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 

CCN CMS Certification Number 

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 

CY Calendar Year 

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 Edition, Clinical Modifications 

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

Systems 

IGI IHS Global Insight 

IPPS Inpatient Prospective 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 

PSR Performance Score Report 

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 Protection and Affordable Care Act 

URR Urea reduction ratio 

VBP Value Based Purchasing 

I. Executive Summary 

A. Purpose 

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

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

(ESRD) prospective payment system (PPS) for calendar year (CY) 2013. 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) (Pub. L. 

110-275), Centers for Medicare & Medicaid Services (CMS) implemented a case-mix 
adjusted bundled PPS for Medicare outpatient ESRD dialysis services beginning January 

1, 2011. The ESRD PPS replaced the basic case-mix adjusted composite payment 

system and the methodologies for the reimbursement of separately billable outpatient 

ESRD services. 

Also, section 1881(b)(14)(F) of the Act, as added by section 153(b) of MIPPA and 

amended by section 3401(h) of the Affordable Care Act (Public Law 111-148), established that 

beginning CY 2012, and each subsequent year, the 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 addition, the application of the productivity adjustment may result in the increase factor being 

less than 0.0 percent for a year. 

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

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

(QIP), including payment year (PY) 2015. The program is authorized under section 153(c) of 

MIPPA, which added section 1881(h) to the Social Security Act (the Act). The ESRD QIP is the 

most recent step in fostering improved patient outcomes by establishing incentives for dialysis 

facilities to meet performance standards established by CMS. 

3. Reductions to Bad Debt Payments for all Medicare Providers 

This proposed rule would also implement the changes to the limitations on 

payments for bad debt reimbursement set forth in section 3201 of The Middle Class Tax 

Extension and Job Creation Act of 2012 (Pub. L. 112-96) by revising 42 CFR 413.89, 

Bad debts, charity, and courtesy allowances. 
B. Summary of the Major Provisions 

1. ESRD PPS 

• Update to the composite and ESRD PPS base rate for CY 2013: For CY 2013, we 

propose an ESRD PPS base rate of $240.88. This amount reflects the application of the 

ESRD bundled (ESRDB) market basket reduced by the productivity adjustment, or 2.5 

percent, and the wage index budget-neutrality adjustment factor of 1.000826 to the CY 2012 

ESRD PPS base rate of $234.81. The proposed base rate is applicable to both the ESRD 

PPS portion of the blended payment under the transition and payments under the full PPS. 

For CY 2013, we propose a composite rate portion of the ESRD PPS blended payment of 

$145.49. This amount reflects the CY 2012 composite rate of $141.94, increased by the 

ESRDB market basket reduced by the productivity adjustment. 

• Update to the composite rate drug add-on for CY 2013: We are not proposing any 

changes to the methodology used to compute the drug add-on for CY 2013; we are only updating 

the data used to calculate the drug add-on for CY 2013. Using 6 years of ASP drug expenditure 

data, and other data, we estimate a 3.0 percent decrease in aggregate drug expenditures and a 4.6 

percent increase in enrollment. Using these estimates, we project a 7.3 percent decrease in per 

patient growth of drug expenditures for CY 2013. Thus, we are projecting that the combined 

growth in per patient utilization and pricing for CY 2013 would result in a decrease to the drug 

add-on equal to 1.0 percentage points. We are, however, proposing to apply a zero update to 

the drug add-on adjustment and maintain the $20.33 per treatment drug add-on amount for CY 

2013. Because the market basket minus productivity that is applied to the composite rate 

increases the composite rate, the add-on adjustment of 14.3 percent is reduced to 14.0 percent to 

maintain the drug add-on at $20.33. 
• Market basket and productivity adjustment: Under section 1881(b)(14)(F) of the Act, 

beginning in CY 2012, ESRD PPS payment amounts and the composite rate portion of the 

transition blended payment amounts shall be annually increased by an ESRD market basket 

percentage increase factor reduced by a multi-factor productivity (MFP) adjustment. The 

proposed CY 2013 ESRDB market basket increase factor is 3.2 percent. The current forecast of 

the proposed CY 2013 MFP adjustment is 0.7 percent. The resulting proposed CY 2013 MFPadjusted ESRDB market basket update is equal to 2.5 percent. 

• The transition budget-neutrality adjustment factor: For CY 2013, we are proposing to 

apply the transition budget neutrality adjustment methodology established in CY 2011. This 

results in a 0 percent adjustment. Therefore, for CY 2013 we propose a 0 percent reduction to be 

applied to both the blended payments made under the transition and payments made under the 

100 percent ESRD PPS for renal dialysis services furnished January 1, 2013 through December 

31, 2013.

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

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

which ESRD facilities are located. In CY 2013, we are not proposing any changes to the 

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

budget-neutrality adjustment to the pre-floor, pre-reclassified wage index values for the 

composite rate portion of the blended payment and to the base rate for the ESRD PPS. Over the 

past several years, we have been gradually decreasing the wage index floor by 0.05 in an effort 

to gradually phase out the floor and in CY 2013 will continue to do so. Therefore, in CY 2013, 

we are reducing the wage index floor from 0.55 to 0.50. We also applied the wage index 

budget-neutrality adjustment factor to the wage index floor of 0.500 which results in an adjusted 
wage index floor of 0.501 (0.500 x 1.001538) for CY 2013. 

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

amounts and Medicare Allowable Payments (MAPs) for CY 2013 using 2011 data. Based on the 

use of more current data, the fixed-dollar loss amount for pediatric patients would decrease from 

$71.64 to $50.15 and the MAP amount would decrease from $45.44 to $43.63 as compared to 

CY 2012 values. For adult patients, the fixed-dollar loss amount drops from $141.21 to $113.35 

and the MAP amount drops from $78.00 to $61.06. Because of the decline in utilization 

associated with the implementation of the expanded bundle, the 1 percent target for outlier 

payments was not achieved in CY 2011. Use of 2011 data to recalibrate the thresholds, 

reflecting lower utilization of EPO and other outlier services, is expected to result in aggregate 

outlier payments close to the 1 percent target in CY 2013. We believe this update to the outlier 

MAP and fixed dollar loss amounts for CY 2013 will increase payments for ESRD beneficiaries 

requiring higher resource utilization in accordance with a 1 percent outlier policy. 

• Policy reiteration (composite rate drugs and AY modifier): Under the composite and 

basic case-mix adjusted composite rate payment systems, certain drugs were included in the 

composite rate and were not eligible for separate payment. Our analyses of claims show that 

ESRD facilities are continuing to report composite rate drugs. In this proposed rule, we are 

reiterating that any item or service included in the composite rate should not be identified on 

ESRD claims.

• An AY modifier can be appended to claims for drugs and laboratory tests that are 

not ESRD-related to allow for separate payment. Our analyses of claims show that there are 

ESRD facilities and laboratories that are appending the AY modifier to drugs and laboratory 

tests that we believe are ESRD-related, resulting in separate payment. In this proposed rule, 
we are reiterating the purpose of the AY modifier and emphasizing that we are continuing 

our monitoring efforts. We are also indicating that we may consider eliminating the AY 

modifier in future rulemaking. 

2. ESRD QIP 

This proposed rule proposes to implement new requirements for the ESRD QIP. It 

proposes to continue some of the previous ESRD QIP measures, add new measures, and expand 

the scope of some of the existing measures to cover the measure topics as follows: 

• To evaluate anemia management: 

o Hemoglobin Greater Than 12 g/dL, a clinical measure. 

o Anemia Management, a reporting measure.* 

• To evaluate dialysis adequacy: 

o A clinical Kt/V measure for adult hemodialysis patients.* 

o A clinical Kt/V measure for adult peritoneal dialysis patients. * 

o A clinical Kt/V measure for pediatric hemodialysis patients. * 

• To determine whether patients are treated using the most beneficial type of 

vascular access: 

o Vascular Access Type, a clinical measure topic comprised of an 

arteriovenous fistula and catheter measure. 

• To address effective bone mineral metabolism management: 

o Hypercalcemia, a clinical measure. * 

o Mineral Metabolism, a reporting measure. 

• To address safety: 

o NHSN Dialysis Event reporting measure. 
• To assess patient and caregiver experience: 

o ICH CAHPS survey reporting measure. 

* Denotes that this measure is new to the ESRD QIP. 

It also proposes to establish CY 2013 as the performance period for the PY 2015 ESRD 

QIP, establish performance standards for each measure, and adopt scoring and payment 

reduction methodologies that are similar to those finalized for the PY 2014 ESRD QIP. 

3. Reductions to Bad Debt Payments for all Medicare Providers 

This rule would also implement the statutory changes to the limitations on payments for 

bad debt reimbursement by revising 42 CFR 413.89, Bad debts, charity, and courtesy 

allowances. We are also proposing to move 42 CFR 413.178(a) to 42 CFR 413.89(h)(3), and to 

move 42 CFR 413.178(d)(2) to 42 CFR 413.89(i)(2) and to remove 42 CFR 413.178 (b), (c) and 

(d)(1), as they are duplicated and discussed at 42 CFR 413.89. Additionally, we are making a 

technical correction to the cross reference in 42 CFR 417.536(f)(1) to Medicare bad debt 

reimbursement policy. 

C. Summary of Costs and Benefits 

 In section VII of this proposed rule, we set forth a detailed analysis of the impacts that 

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

the following: 

1. Impacts of the Proposed ESRD PPS 

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

in payments to ESRD facilities in CY 2013 as compared to estimated payments in CY 2012. The 

overall impact of the CY 2013 changes is projected to be a 3.1 percent increase in payments. 

Hospital-based ESRD facilities have an estimated 3.7 percent increase in payments compared 
with freestanding facilities with an estimated 3.0 percent increase. Urban facilities are expected 

to receive an estimated payment increase of 3.1 percent compared to an estimated 3.0 percent 

increase for rural facilities. We expect a 2.4 percent decrease in estimated payments as a result 

of wage index adjustments for Puerto Rico and the Virgin Islands. However, this is offset by the 

impact of the outlier policy, resulting in an estimated 0.4 percent increase in payment. The 

estimated 3.1 percent overall payment increase would result in a $250 million cost to Medicare 

and a $70 million cost to beneficiaries. In 2013, a 2.5 percent market basket increase would 

result in a $200 million cost to Medicare and a $50 million cost to beneficiaries. The outlier 

fixed dollar loss and MAP adjustments in CY 2013 would result in a $30 million cost to 

Medicare and a $10 million cost to beneficiaries. 

2. Impacts for ESRD QIP 

The overall economic impact of the proposed ESRD QIP is an estimated $20.9 million for 

PY 2015. We expect the total payment reductions to be approximately $8.5 million, and the 

costs associated with the collection of information requirements for certain measures to be 

approximately $12.4 million. 

The estimated payment reduction will continue to incentivize facilities to provide higher 

quality care to beneficiaries. The reporting measures that result in costs associated with the 

collection of information are critical to better understanding the quality of care beneficiaries 

receive, particularly a patient’s experience of care, and will be used to incentivize improvements 

in the quality of care provided.

3. Impacts of Bad Debt Provisions 

We are codifying the provisions of section 3201 of The Middle Class Tax Extension and 

Job Creation Act of 2012 that requires reductions in bad debt reimbursement to all providers 
eligible to receive bad debt reimbursement; these provisions are specifically prescribed by statute 

and thus, are self-implementing. There will be a $10.9 billion savings to the program over 10 

years resulting from these self-implementing reductions in bad debt reimbursement. 

II. Calendar Year (CY) 2013 End-Stage Renal Disease (ESRD) Prospective Payment 

System (PPS) 

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

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

through 49214) titled, “End-Stage 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 services 

beginning January 1, 2011, in accordance with section 1881(b)(14) of the Act, as added by 

section 153(b) of MIPPA. 

On November 10, 2011, we published in the Federal Register, a final rule (76 FR 70228 

through 70316) titled, “Medicare Program; End-Stage Renal Disease Prospective Payment 

System and Quality Incentive Program; Ambulance Fee Schedule; Durable Medical Equipment; 

and Competitive Acquisition of Certain Durable Medical Equipment, Prosthetics, Orthotics and 

Supplies (hereinafter referred to as the CY 2012 ESRD PPS final rule). In that final rule, for the 

ESRD PPS, we made a number of routine updates for CY 2012, implemented the second year of 

the transition to the ESRD PPS, made several policy changes and clarifications, and made 

technical changes with regard to the CY 2011 ESRD PPS final rule. In that rule, we finalized the 

following: 

• A composite rate of $141.94 per treatment for renal dialysis services that is used in the 

composite rate portion of the ESRD PPS payment for ESRD facilities receiving blended 
payments during the transition. The $141.94 reflected the addition of the CY 2011 Part 

D per treatment amount ($.49) for oral ESRD drugs with an injectable equivalent to the 

CY 2011 composite rate of $138.53, and the application of the ESRD Bundled (ESRDB) 

market basket update of 3.0 percent minus a multifactor productivity adjustment of 0.9 

percent, that is, a 2.1 percent increase. 

• A zero update to the drug add-on adjustment and maintaining the $20.33 per treatment 

drug add-on amount for the composite rate portion of the ESRD PPS blended payment. 

This results in a 14.3 percent drug add-on adjustment to the composite rate portion of the 

ESRD PPS blended payment. 

• An ESRD PPS base rate of $234.81 per treatment for renal dialysis services. The ESRD 

PPS base rate applies to the ESRD PPS portion of the blended payments during the 

transition and to the ESRD PPS payments. This amount reflected the CY 2012 ESRDB 

market basket update of 3.0 percent minus a multifactor productivity adjustment of 0.9 

percent, that is, a 2.1 percent increase. This amount also reflected the application of the 

wage index budget-neutrality adjustment of 1.001520. 

• A zero percent transition budget-neutrality adjustment factor for claims for renal dialysis 

services furnished from April 1, 2011 through December 31, 2011 and for CY 2012. 

• The labor-related share of 41.737 percent for the CY 2012 ESRD PPS payment and the 

labor-related share of 53.711 percent for the CYs 2012 and 2013 ESRD composite rate 

portion of the blended payment for those ESRD facilities receiving a blended payment 

during the transition. 

• The methodology for CY 2012 and subsequent years for computing the wage index 

budget-neutrality adjustment factors. For CY 2012, the wage index budget-neutrality 
adjustment factor for the composite portion of the ESRD PPS blended payment is 

1.002830, and is applied to the wage index values. The wage index budget-neutrality 

adjustment factor for the ESRD PPS portion of the blended payment and for the ESRD 

PPS is 1.001520, and is applied to the ESRD PPS base rate. 

• A 0.05 reduction to the wage index floor for CYs 2012 and 2013 which resulted in a 

wage index floor of 0.550 and 0.500, respectively. For CY 2012, the wage index floor 

under the composite rate portion of the blended payment is 0.552 after the wage index 

budget-neutrality adjustment factor is applied to 0.550. The wage index floor under the 

ESRD PPS is 0.550. 

• The methodologies used for CY 2012 and subsequent years of computing a wage index 

value for areas without hospital data for urban and rural geographic areas and for Puerto 

Rico. 

• Using the ESRDB market basket forecasts for the ESRD PPS transition payment updates. 

• The methodology for calculating and applying the multifactor productivity adjustment to 

the ESRDB market basket. 

• An annual deadline of November 1st for ESRD facilities to submit an attestation if they 

believe that they are eligible for the low-volume payment adjustment. 

• Changes to 42 CFR §413.232(b)(1) and (b)(2) to indicate that in the absence of an ESRD 

facility’s final settled 12-consecutive month cost report, a fiscal intermediary (FI) or A/B 

Medicare Administrative Contractor (MAC) can review the ESRD facility’s as-filed 12-

consecutive month cost report when determining if an ESRD facility meets the lowvolume criteria. 
• Eliminating the restriction on vancomycin to allow ESRD facilities to receive separate 

payment by appending the AY modifier on the claim for vancomycin when the diagnosis 

reported on the claim indicates the drug was used to treat a non-ESRD related condition. 

• Incorporating the Part B drug overfill policy into our outlier policy and for purposes of 

the composite rate portion of the blended payment during the transition, that is, ESRD 

facilities may only report units and charges for drugs and biologicals actually purchased. 

• Using a body surface area (BSA) national average of 1.87, which is the latest national 

average 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 

will also review the BSA national average on the CY 2012 claims and every 5 years 

thereafter. 

• Changes to the outlier provision which included; 1) eliminating the issuance of a specific 

list of eligible outlier service drugs, 2) including antibiotics furnished in the home to treat 

catheter site infections or peritonitis associated with peritoneal dialysis as an eligible 

outlier service, 3) excluding thrombolytic drugs and biologicals from the outlier policy, 

4) including testosterone and anabolic steroids that are used for anemia management as 

an eligible outlier service, and 5) excluding the laboratory tests that comprise the 

Automated Multi-Channel Chemistry panel from the definition of outlier services and 

revising §413.237 to indicate this change. 

Finally, in the CY 2012 ESRD PPS final rule (76 FR 70228), we clarified the following: 

• For the low-volume payment adjustment, 1) “payment year” was defined as the period of 

time that we use for determining payment to ESRD facilities, which is a calendar year; 2) 

“eligibility” years was defined as the 3 years preceding the payment year and are based 
on cost reporting years; 3) for the cost reporting years, ESRD facilities must report costs 

for 12-consectutive months; 4) in the absence of a final-settled cost report, an FI or A/B 

MAC can review the ESRD facility’s as-filed cost report when verifying eligibility; and 

5) if the FI or A/B MAC finds that the ESRD facility did not meet low-volume eligibility 

based on the final settled cost report, they should discontinue application of the lowvolume adjustment and recoup the inappropriate payments. 

• The ICD-9-CM diagnosis codes that are eligible for the co-morbidity payment 

adjustments 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. 

• Laboratory tests that are performed for Medicare ESRD beneficiaries in an emergency 

room or emergency department as part of the general work-up of the patient necessary for 

diagnosis are not considered to be renal dialysis services. 

B. Routine Updates and Proposed Policy Changes to the CY 2013 ESRD PPS 

1. Composite Rate Portion of the ESRD PPS Blended Payment 

Section 1881(b)(14)(E)(i) of the Act requires a 4-year transition under the ESRD PPS. 

This proposed rule would implement the third year of the transition period for those ESRD 

facilities going through the transition rather than electing to receive payment based on 100 

percent of the payment amount under the ESRD PPS. For CY 2013, under 42 CFR 

§413.239(a)(3), facilities that go through the transition will receive a blended rate equal to the 

sum of 75 percent of the full ESRD PPS amount and 25 percent of the basic case-mix adjusted 

composite payment amount. Accordingly, as a result of the transition period under the ESRD 

PPS, we continue to update the composite rate portion of the blended payment during the 4-year 

transition, (that is, CY 2011 through 2013), 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 includes 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 II.B.1.a of this proposed rule and the wage index is 

discussed in section II.B.5 of this proposed rule. For CY 2013, we are also proposing to update 

the second part of the transition budget-neutrality adjustment to reflect updated data. The 

transition budget-neutrality adjustment 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 II.B.4 of this proposed rule. 

As discussed in section II.B.3 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 and, for CY 2012 and each 

subsequent year, the ESRDB market basket shall be reduced by the productivity adjustment 

described in section 1886(b)(3)(B)(xi)(II) of the Act. In sections II.B.3.b and II.B.3.c of this 

proposed rule, we describe the basis for the proposed CY 2013 ESRDB market basket increase 

of 3.2 percent, and the productivity offset of 0.7 percent, yielding a proposed forecasted rate of 

increase in the base rate of 2.5 percent. 

For CY 2013, the composite rate portion of the ESRD PPS blended payment would be 

$145.49. The $145.49 reflects the CY 2012 composite rate of $141.94 increased by the ESRDB 

market basket reduced by the productivity adjustment (3.2 percent minus 0.7 percent) of 2.5 

percent. 

a. 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 4-year transition under the ESRD PPS. 

Under §413.239, ESRD facilities were permitted to make a one-time election by November 1, 

2010, to be excluded from the transition and receive full payment under the ESRD PPS. Section 

413.239(a)(3) provides for ESRD facilities that elected to receive payment under the transition to 

be paid a blended amount that will consist of 25 percent of the basic case-mix adjusted 

composite payment system and 75 percent of the ESRD PPS payment in CY 2013. Thus, during 

the ESRD PPS transition, we must continue to update the composite rate portion of the blended 

payment amount which includes an update to the drug add-on. 

 As required under section 1881(b)(12) of the Act, the basic case-mix adjusted composite 

payment system includes services in the composite rate and an add-on to the composite rate to 

account for the difference between pre-MMA payments for separately billed drugs and the 

revised drug pricing specified in the statute. In this proposed rule, we are not proposing any 

changes to the drug add-on methodology in CY 2013, but are merely updating the data used in 

computing the drug add-on as described below. 

i. Estimating Growth in Expenditures for Drugs and Biologicals in CY 2013 

 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 6 years 

of drug expenditure data based on ASP pricing, for CY 2013, 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 2013, we looked at the 

average annual growth in total drug expenditures between 2006 and 2011. First, we estimated 

the total drug expenditures for all ESRD facilities in CY 2011. We used the final CY 2006 

through CY 2010 ESRD claims data and the latest available CY 2011 ESRD facility claims, 

updated through December 31, 2011 (that is, claims with dates of service from January 1 through 

December 31, 2011, that were received, processed, paid, and passed to the National Claims 

History File as of December 31, 2011). For the CY 2013 PPS final rule, we intend to use 

additional updated CY 2011 claims with dates of service for the same timeframe. This updated 

CY 2011 data file will include claims received, processed, paid, and passed to the National 

Claims History File as of June 30, 2012. While the CY 2011 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 2013, based on analysis of the 2010 claims, we inflated the CY 2011 drug 

expenditures to estimate the June 30, 2012 update of the 2011 claims file. We used the 

relationship between the December 2010 and the June 2011 versions of 2010 claims to estimate 

the more complete 2011 claims that will be available in June 2012 and applied that ratio to the 

2011 claims data from the December 2011 claims file. The net adjustment to the CY 2011 

claims data is an increase of 9.7 percent to the 2011 expenditure data. This adjustment allows us 
to more accurately compare the 2010 and 2011 drug expenditure data to estimate per patient 

growth. 

 Using the completed full-year 2011 drug expenditure figure, we calculated the average 

annual change in drug expenditures from 2006 through 2011. This average annual change 

showed a decrease of 3.0 percent in drug expenditures from 2006 through 2011. We used this 

3.0 percent decrease to project drug expenditures for both 2012 and 2013. 

ii. Estimating Per Patient Growth 

 Once we had the projected growth in drug expenditures from 2012 to 2013, we calculated 

per patient growth between CYs 2012 and 2013 by removing the estimated growth in enrollment 

data between CYs 2012 and 2013. We estimate a 4.6 percent growth in fee for service Medicare 

dialysis beneficiary enrollment between CYs 2012 and 2013. To obtain the per-patient estimated 

growth in expenditures, we divided the total drug expenditure change of a 3 percent decrease 

between 2012 and 2013 (0.97) by enrollment growth of 4.6 percent (1.046) for the same 

timeframe. The result is a per-patient growth factor equal to 0.927 (0.97/1.046 = 0.927). Thus, 

we are projecting a 7.3 percent decrease (-7.3% =-.073=0.927-1) in per patient growth in drug 

expenditures between 2012 and 2013. 

iii. Applying the Proposed Growth Update to the Drug Add-On Adjustment 

 In the CY 2012 ESRD PPS proposed and final rules, we provided an incorrect citation to 

the CY 2006 PFS final rule with comment in the discussion of the application of the projected 

growth update percentages. The correct citationto this discussion in the CY 2006 PFS final rule 

with comment is 70 FR 70166 and 70167. In that rule, we applied the projected growth 

percentage to the total amount of drug add-on dollars established for CY 2005 to establish a 

dollar amount for the CY 2006 growth. 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 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 a 14.7 percent adjustment to the 

composite rate for CY 2006. 

Subsequent to the publication of the CY 2006 PFS final rule with comment, the Deficit 

Reduction Act (DRA) of 2005 (Pub.L. 109-171) was enacted on February 8, 2006. Section 5106 

of the DRA amended section 1881(b)(12) of the Act to require the Secretary to increase the 

amount of the composite rate component of the basic case-mix adjusted system for dialysis 

services furnished on or after January 1, 2006 by 1.6 percent above the amount of the composite 

rate for such services furnished on December 31, 2005. We issued Change Request (CR) 4291, 

Transmittal 849, entitled, “Update to the ESRD Composite Payment Rates” on February 10, 

2006 to instruct contractors to implement this change. We stated in CR 4291 that because the 

drug add-on adjustment is determined as a percentage of the composite rate, it was necessary to 

adjust the drug add-on percentage to account for the 1.6 percent increase in the composite 

payment rate. Therefore, the total drug add-on adjustment to the composite payment rate for 

2006 was 14.5 percent instead of 14.7 percent.

In the CY 2007 PFS final rule with comment period (71 FR 69683 and 69684), 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 add-on amount of 

$19.64 per treatment (71 FR 69684). For CY 2008, the per treatment drug add-on amount was 

updated to $20.33. In the CYs 2009, 2010, and 2011 PFS final rule with comment period (73 FR 
69755 through 69757, 74 FR 61923, 75 FR 73485, respectively) and the CY 2012 ESRD PPS 

final rule (76 FR 70239), 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 

2013, we are again proposing no update to the per treatment drug add-on amount of $20.33 

established in CY 2008. 

iv. Proposed Update to the Drug Add-On Adjustment for CY 2013 

 As discussed above, we estimate a 3.0 percent decrease in drug expenditures between 

CYs 2012 and CY 2013. Combining this decrease with a 4.6 percent increase in enrollment, as 

described above, we are projecting a 7.3 percent decrease in per patient growth of drug 

expenditures between CYs 2012 and CY 2013. Therefore, we are projecting that the combined 

growth in per patient utilization and pricing for CY 2013 would result in a decrease to the drug 

add-on equal to 1.0 percentage points (out of the 14.3 percent add-on for 2012). This figure is 

derived by applying the 7.3 percent decrease to the CY 2012 drug add-on of $20.33. This would 

result in a revised drug add-on of $18.85, which is 13.0 percent of the proposed CY 2013 base 

composite rate of $145.49. If we were to apply no decrease to the drug add-on of $20.33, this 

would result in a 14.0 percent drug add-on. However, similar to last year and as indicated above, 

we are proposing a zero update to the drug add-on adjustment. We believe this approach is 

consistent with the language under section 1881(b)(12)(F) of the Act which states in part that 

“the Secretary shall annually increase” the drug add-on amount based on the growth in 

expenditures for separately billed ESRD drugs. Therefore, we propose to apply a zero update 

and maintain the $20.33 per treatment drug add-on amount for CY 2013. 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 14.3 percent drug add-on 
adjustment to the composite rate in effect for CY 2012. As discussed in section II.B.3.a. 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 

(proposed forecast of 2.5 percent in 2013 effective January 1, 2013), resulting in a proposed 

decrease to the CY 2013 drug add-on adjustment from 14.3 to 14.0 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 2013 composite rate is higher than the CY 2012 

composite rate, and since the drug add-on remains at $20.33, the percentage decreases. 

Therefore, we are proposing a drug add-on adjustment to the composite rate for CY 2013 of 14.0 

percent. 

2. ESRD PPS Base Rate 

 In the CY 2012 ESRD PPS final rule (76 FR 70231), we discussed the development of 

the ESRD PPS per treatment base rate that is codified in the Medicare regulations at §413.220 

and §413.230. We explained that the CY 2011 ESRD PPS final rule (75 FR 49071 through 

49082) provides a detailed discussion of the methodology used to calculate the ESRD PPS base 

rate and the computation of factors used to adjust the ESRD PPS base rate for projected outlier 

payments and budget-neutrality in accordance with sections 1881(b)(14)(D)(ii) and 

1881(b)(14)(A)(ii) of the Act, respectively. Specifically, the ESRD PPS base rate was developed 

from CY 2007 claims (that is, the lowest per patient utilization year), updated to CY 2011, and 

represented the average per treatment Medicare Allowable Payment (MAP) for composite rate 

and separately billable services. We further explained that in accordance with §413.230, the 

ESRD PPS base rate is adjusted for the patient-specific case-mix adjustments, applicable facility 

adjustments, geographic differences in area wage levels using an area wage index, as well as any 
outlier payment or training payments (if applicable). For CY 2012, the ESRD PPS base rate was 

$234.81 (76 FR 70231). 

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, for 

this proposed rule, we applied the 2.5 percent increase to the CY 2012 ESRD PPS base rate of 

$234.81, which results in a CY 2013 ESRD PPS base rate of $240.68 ($234.81 x 1.025 = 

$240.68). The proposed CY 2013 ESRD PPS base rate is applicable to both the ESRD PPS 

portion of the blended payment under the transition and payments under the full ESRD PPS. 

 In addition, as discussed in section II.B.5.c. of this proposed rule, for CY 2013 we are 

applying the wage index budget-neutrality adjustment factor of 1.000826 to the CY 2013 ESRD 

PPS base rate (that is, $240.68), yielding a proposed CY 2013 ESRD PPS wage-index budgetneutrality adjusted base rate of $240.88 ($240.68 X 1.000826 = $240.88). 

3. ESRD Bundled Market Basket 

a. Overview and Background 

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

MIPPA and amended by section 3401(h) of the Affordable Care Act, beginning in 2012, the 

ESRD 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 application of the productivity adjustment described may 

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

year being less than the payment rates for the preceding year. The statute 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 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 CYs 2011 through 2013; though beginning in CY 2012, such market basket increase 

factor will be reduced by the productivity adjustment. Therefore, 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 2013 

 As required under section 1881(b)(14)(F) of the Act, CMS developed an all-inclusive 

ESRDB input price index (75 FR 49151 through 49162). Although “market basket” technically 

describes the mix of goods and services used to produce ESRD care, this term is also commonly 

used to denote the input price index (that is, cost categories, their respective weights, and price 

proxies combined) derived from that market basket. Accordingly, the term “ESRDB market 

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

 For this proposed rule, we are proposing to use the same methodology described in the 

CY 2011 ESRD PPS final rule (75 FR 49151 through 49162) to compute the CY 2013 ESRDB 

market basket increase factor and labor-related share based on the best available data (76 FR 

40503). Consistent with historical practice, we estimate the ESRDB market basket update based 

on IHS Global Insight (IGI), Inc.’s forecast using the most recently available data. IGI is a 

nationally recognized economic and financial forecasting firm that contracts with CMS to 
forecast the components of the market baskets. 

 Using this methodology and the IGI forecast for the first quarter of 2012 of the CY 2008-

based ESRDB market basket (with historical data through the fourth quarter of 2011), and 

consistent with our historical practice of estimating market basket increases based on the best 

available data, the proposed CY 2013 ESRDB market basket increase factor is 3.2 percent. 

 For the CY 2013 ESRD payment update, we will continue to use a labor-related share of 

41.737 percent for the ESRD PPS payment and the ESRD PPS portion of the blended payment, 

which was finalized in the CY 2011 ESRD final rule (75 FR 49161). We will also continue to 

use a labor-related share of 53.711 percent for the ESRD composite rate portion of the blended 

payment for all years of the transition. This labor-related share was developed from the laborrelated components of the 1997 ESRD composite rate market basket that was finalized in the CY 

2006 Physician Fee Schedule (PFS) final rule (70 FR 70168), and is consistent with the mix of 

labor-related services paid under the composite rate, as well as the method finalized in the CY 

2011 ESRD PPS final rule (75 FR 49116). 

c. Proposed Productivity Adjustment 

 The ESRDB market basket must be annually adjusted by changes in economy-wide 

productivity. Specifically, under section 1881(b)(14)(F)(i) of the Act, as amended by section 

3401(h) of the Affordable Care Act, for CY 2012 and each subsequent year, the ESRD market 

basket percentage increase factor shall be reduced by the productivity adjustment described in 

section 1886(b)(3)(B)(xi)(II) of the Act. The statute defines the productivity adjustment 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 and final methodology for calculating and applying the 

MFP adjustment to the ESRD payment update is similar to the methodology used in other 

payment systems, as required by section 3401 of the Affordable Care Act. 

 The projection of MFP is currently produced by IGI. The details regarding the 

methodology for forecasting MFP and how it is applied to the market basket was finalized in the 

CY 2012 ESRD PPS final rule (76 FR 70232 through 70234). Using this method and the IGI 

forecast for the first quarter of 2012 of the 10-year moving average of MFP, the proposed CY 

2013 MFP factor is 0.7 percent. 

d. Calculation of the ESRDB Market Basket Update, adjusted for Multifactor Productivity for 

CY 2013 

 Under section 1881(b)(14)(F) of the Act, beginning in CY 2012, ESRD PPS payment 

amounts and the composite rate portion of the transition blended payment amounts shall be 

annually increased by an ESRD market basket percentage increase factor reduced by a 

productivity adjustment. We are proposing to follow the same methodology for calculating the 

ESRDB market basket updates adjusted for MFP that was finalized in the CY 2012 ESRD PPS 

final rule (76 FR 70234). 

 Thus, in accordance with section 1881(b)(14)(F)(i) of the Act, the proposed market 

basket increase factor for CY 2013 for the ESRDB market basket is based on the 1st quarter 2012 

forecast of the CY 2008-based ESRDB market basket update, which is estimated to be 3.2 

percent. This market basket percentage is then reduced by the MFP adjustment (the 10-year 
moving average of MFP for the period ending CY 2013) of 0.7 percent, which is based on IGI’s 

1st quarter 2012 forecast. The resulting proposed MFP-adjusted ESRDB market basket update 

for CY 2013 is equal to 2.5 percent, or 3.2 percent less 0.7 percentage point. If more recent data 

is subsequently available (for example, a more recent estimate of the market basket and MFP 

adjustment), we will use such data, if appropriate, to determine the CY 2013 market basket 

update and MFP adjustment in the CY 2013 ESRD PPS final rule. 

4. Transition Budget-Neutrality Adjustment for CY 2013 

Section 1881(b)(14)(E)(i) of the Act requires the Secretary to provide a 4 year phase-in of 

the payments under the ESRD PPS for renal dialysis services furnished on or after January 1, 

2011, with payments under the ESRD PPS fully implemented for renal dialysis services 

furnished on or after January 1, 2014. We use the term “transition” rather than “phase-in” to be 

consistent with other Medicare payment systems. 

Section 1881(b)(14)(E)(ii) of the Act permitted ESRD facilities to make a one-time 

election to be excluded from the transition. An ESRD facility that elected to be excluded from 

the transition receives payment for renal dialysis services furnished 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 under the basic case-mix adjusted composite payment system and 

in part on the payment under the ESRD PPS. Section 1881(b)(14)(E)(iii) of the Act also requires 

that we make an adjustment to payments 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. 
In the CY 2012 ESRD PPS final rule (76 FR 70235), we discussed the methodology used 

to develop the transition budget-neutrality adjustment factor. We explained that there were two 

parts that comprised the adjustment. For the first part, we created a one time payment 

adjustment to the composite rate portion of the blended payment during the transition to account 

for the per treatment costs of ESRD drugs with an injectable equivalent that were paid under 

Part D. We finalized the one time addition of the CY 2011 Part D per treatment amount of $0.49 

to the composite rate (76 FR 70231). 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 to the estimated total amount of payments that would otherwise occur without 

such a transition. We finalized in the CY 2011 ESRD PPS final rule a transition budgetneutrality adjustment of 3.1 percent based on estimates of ESRD facilities that would elect to be 

excluded from the transition. On April 6, 2011, we published an interim final rule (76 FR 

18930) in which we revised the transition budget-neutrality adjustment from 3.1 to 0.0 percent 

for treatments furnished from April 1, 2011 through December 31, 2011. For CY 2012, we did 

not make any changes to our methodology for computing the second part of the transition 

budget-neutrality adjustment. In the CY 2012 ESRD PPS final rule (76 FR 70236), we finalized 

a zero percent reduction to all payments made to ESRD facilities for CY 2012 (that is, the zero 

percent adjustment was applied to both the blended payments under the transition and payments 

made under the 100 percent ESRD PPS). 

Given that the transition budget-neutrality adjustment required under section 

1881(b)(14)(E)(iii) of the Act applies in each year of the transition, we must update the transition 

budget-neutrality adjustment for CY 2013, the third year of the transition. As discussed in detail 

below, and in accordance with section 1881(b)(14)(E)(iii) of the Act, an adjustment is made to 
payments so that estimated total payments under the transition equal estimated total payment 

amounts without such a transition. In this proposed rule, we are not proposing for CY 2013 to 

change the methodology used to calculate either part of the transition budget-neutrality 

adjustment factor. We are, however, proposing to use updated data. The first part, which was 

addressed and finalized in the CY 2012 ESRD PPS final rule, is the Part D payment amount 

added to the composite rate. Therefore, this amount is updated annually by the ESRDB market 

basket reduced by the productivity adjustment. The second part is updated as described below. 

For CY 2013, we started with 2011 utilization data from claims, as 2011 is the latest 

complete year of claims data available. For this proposed rule, we used the December claims 

file. We updated the CY 2011 utilization data to CYs 2012 and 2013 payments by using the 

price growth factors for CYs 2012 and 2013, as discussed in the impact analysis in section 

VII.B.1.a. of this proposed rule. We then took the estimated payments under the full CY 2013 

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 2013 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 reduction factor for CY 2013. Therefore, for CY 2013, 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, 2013 through 

December 31, 2013. We solicit comments on the proposed second part of CY 2013 transition 

budget-neutrality adjustment. 
5. Proposed Updates to the Wage Index Values and Wage Index Floor for the Composite Rate 

Portion of the Blended Payment and 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 the index referred to in section 1881(b)(12)(D) 

of the Act. In the CY 2011 ESRD PPS final rule (75 FR 49117), we finalized the use of the 

OMB’s CBSA-based geographic area designations to define urban/rural areas and corresponding 

wage index values. In the CY 2012 ESRD PPS final rule (76 FR 70241), we finalized the wage 

index policy that is used under the ESRD PPS. Under the ESRD PPS, we have adopted the same 

method and source of wage index values used previously to compute the wage index values for 

the basic case-mix adjusted composite payment system. Specifically, we finalized our policies 

to continue to utilize the methodology established under the composite payment system for 

updating the wage index values using the OMB’s CBSA-based geographic area designations to 

define urban and rural areas and corresponding wage index value values; the gradual reduction of 

the wage index floor during the transition; and the policies for areas with no hospital data. For 

CY 2013, we are not proposing any changes to the methodology finalized in the CY 2012 final 

rule and will update the wage index values using the FY 2013 IPPS pre-floor, pre-reclassified 

hospital wage data. 

In the CY 2012 ESRD PPS final rule (76 FR 70242), we explained that we would 

continue to use the labor-related share of 53.711 finalized in the 2005 PFS final rule (70 FR 

70168) for the composite rate portion of the blended payment during the transition and continue 

to use a labor-related share of 41.737 for the ESRD PPS payment for CY 2012. We also 

discussed that 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 urban and rural 

definitions and corresponding wage index values. Additional discussion on the labor-share can 

be found in section II.B.3.b. of this proposed rule. For CY 2013, we are not proposing to change 

the labor-related shares as finalized in the CY 2012 rule and as discussed in section II.B.3.b of 

this proposed rule.

In the CY 2012 ESRD PPS final rule (76 FR 70240), we discussed that 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, for CY 2013 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. 

a. Reduction to the ESRD Wage Index Floor 

In the CY 2012 ESRD PPS final rule (76 FR 70239 through 70241), we finalized that we 

will continue to reduce the wage index floor by 0.05 for each of the remaining years of the 

transition. That is, we finalized the 0.05 reduction to the wage index floor for CYs 2012 and 

2013, resulting in a wage index floor of 0.550 and 0.500, respectively. The wage index floor 

value is used in lieu of wage index values below the floor. In CY 2013, the wage index floor 

only applies to areas located in Puerto Rico because those are the only areas that have wage 

index values below the wage index floor value of 0.500 in CY 2013. The wage index floor is 

applied to both the composite rate portion of the blend and to the ESRD PPS. In this proposed 

rule, we are not proposing any changes to the wage index floor methodology or reduction. 

Consequently for CY 2013, we will continue to reduce the wage index floor by 0.05 
which will reduce the wage index value from 0.550 to 0.500. The ESRD wage index floor value 

of 0.500 would be applied to areas that are below the wage index floor. 

In the CY 2012 ESRD PPS final rule (76 FR 70241), we explained that continuing to 

artificially adjust the wage index values after the transition by substituting a wage index floor is 

not an appropriate method to address low wages in certain geographic locations. Therefore, we 

would no longer apply a wage index floor beginning January 1, 2014 because the wage index 

floor would be lower than areas with low wage index values. 

b. Policies for Areas with No Wage Data 

 In the CY 2012 ESRD PPS final rule (76 FR 70241), we explained that we adopted the 

CBSA designations for the basic case-mix adjusted composite rate payment system and for the 

ESRD PPS. We also discussed and finalized the methodologies we use to calculate wage index 

values for ESRD facilities that are located in urban and rural areas where there are no hospital 

data. That is, for urban areas with no hospital data we compute the average wage index value of 

all urban areas within the State and use that value as the wage index. For rural areas with no 

hospital data, we compute the wage index using the average wage index values from all 

contiguous CBSAs to represent a reasonable proxy for that rural area. For rural Puerto Rico, we 

use the wage index floor as the wage index value, since all rural Puerto Rico areas are subject to 

the floor. 

 We further explained that for rural Massachusetts, we determined that the borders of 

Dukes and Nantucket Counties are contiguous with Barnstable and Bristol counties. Under the 

methodology, the values for these counties are averaged to establish the wage index value for 

rural Massachusetts. In the CY 2012 ESRD PPS final rule (76 FR 70241), we finalized that for 

CY 2012 and subsequent years, we will continue to follow these methodologies for computing a 
wage index value for areas without hospital data for urban and rural geographic areas and for 

Puerto Rico. 

 Subsequent to the issuance of the CY 2012 ESRD PPS final rule, we determined that for 

CY 2012 there was a rural hospital with wage data to base an area wage index on for rural 

Massachusetts. We note that the wage index value for rural Massachusetts was correctly 

identified on the wage index table for CY 2012 based on the wage data for that rural hospital. 

Consequently, in this proposed rule we are correcting the statement in the CY 2012 final rule that 

“For rural Massachusetts, we determined that the borders of Dukes and Nantucket Counties are 

contiguous with Barnstable and Bristol counties. Under the methodology, the values for these 

counties are averaged to establish the wage index value for rural Massachusetts” (76 FR 70241). 

Therefore, for CY 2012 and subsequent years, the area wage index value for rural Massachusetts 

is based on wage index data of the rural hospital. 

 For CY 2013, we will continue to use the statewide urban average based on the average 

of all urban areas within the state for urban areas without hospital data. We note that Yuba City, 

California now has hospital data to calculate a wage index. Therefore, the methodology for 

computing a wage index for urban areas without hospital data no longer applies to that area. The 

only urban area without wage index data is Hineville-Fort Stewart, GA. 

c. Proposed Wage Index Budget-Neutrality Adjustment 

In the CY 2012 ESRD PPS final rule (76 FR 70241 and 70242), we explained that we 

have broad discretion under section 1881(b)(14)(D)(iv)(II) of the Act to develop a geographic 

wage index. We explained that in addition to being given broad discretion, the section cites the 

wage index under the basic case-mix adjusted composite payment system as an example. We 

have previously interpreted the statutory requirement in section 1881(b)(12)(D) of the Act for the 
geographic adjustment for the basic case-mix adjusted composite payment system as requiring 

that the geographic adjustment be made in a budget-neutral manner. 

 In the CY 2012 ESRD PPS final rule (76 FR 70241 and 70242), we finalized the policy 

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

budget-neutrality adjustment factor. We further explained that in the first year of the ESRD PPS, 

CY 2011, we did not apply a wage index budget-neutrality adjustment factor under the ESRD 

PPS because budget-neutrality was achieved through the overall 98 percent budget-neutrality 

requirement in section 1881(b)(14)(A)(ii) of the Act. In the CY 2012 ESRD PPS final rule (76 

FR 70242), we finalized that for CY 2012 and CY 2013 we will apply the wage index budgetneutrality adjustment to the wage index values for the composite rate portion of the blended 

payment and that for CY 2012 and subsequent years we will apply the wage index budgetneutrality adjustment to the ESRD PPS base rate for purposes of the ESRD PPS portion of the 

blended payment during the transition and the ESRD PPS payment. We are not proposing any 

changes to the wage index budget-neutrality adjustment methodology for CY 2013. 

 In the CY 2012 ESRD PPS final rule (76 FR 70242), we also finalized the methodology 

for computing the wage index budget-neutrality adjustment factor for CY 2012 and subsequent 

years. For CY 2013, we are not proposing any changes to the methodology. Consequently, for 

CY 2013 wage index budget-neutrality adjustment factors, we use the fiscal year (FY) 2013 prefloor, pre-reclassified, non-occupational mix-adjusted hospital data to compute the wage index 

values, 2011 outpatient claims (paid and processed as of December 31, 2011), and geographic 

location information for each facility which may be found through Dialysis Facility Compare. 

Dialysis Facility Compare can be found at the Dialysis Facility Compare Web page on the CMS 

Website at http://www.cms.hhs.gov/DialysisFacilityCompare/. The FY 2013 hospital wage 
index data for each urban and rural locale by CBSA may also be accessed on the CMS Website 

at http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp. The wage index data are located 

in the section entitled, “FY 2013 Proposed Rule Occupational Mix Adjusted and Unadjusted 

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

To compute the CY 2013 wage index budget-neutrality adjustment factor for this 

proposed rule, using treatment counts from the 2011 claims and facility-specific CY 2012 

payment rates, we computed the estimated total dollar amount that each ESRD facility would 

have received in CY 2012. The total of these payments became the target amount of 

expenditures for all ESRD facilities for CY 2013. Next, we computed the estimated dollar 

amount that would have been paid for the same ESRD facilities using the final ESRD wage 

index for CY 2013. The total of these payments becomes the new CY 2013 amount of wageadjusted expenditures for all ESRD facilities. 

After comparing these two dollar amounts (target amount divided by the new CY 2013 

amount), we calculated two wage index budget-neutrality adjustment factors that, when 

multiplied by the applicable CY 2013 estimated payments, would result in aggregate payments to 

ESRD facilities that would remain budget-neutral when compared to the target amount of 

expenditures. The first factor was applied to the ESRD PPS base rate. The second factor would 

be applied to the wage index values for the composite rate portion of the blended payment. 

Therefore, we are proposing for CY 2013, a wage index budget-neutrality adjustment factor for 

the composite portion of the ESRD PPS blended payment of 1.001538, 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 a wage index budget-neutrality adjustment factor of 1.000826 would be applied to the 
ESRD PPS base rate. 

Because we apply the wage index budget-neutrality adjustment factor to the wage index 

values to ensure budget-neutrality under the composite rate portion of the blended payment, we

also apply the wage index budget-neutrality adjustment factor to the wage index floor. 

Therefore, for the composite rate portion of the blended payment, for CY 2013, we would apply 

the wage index budget-neutrality adjustment factor to the wage index floor of 0.500 which 

results in an adjusted wage index floor of 0.501 (1.001538 x 0.500). Under the ESRD PPS, the 

wage index floor for CY 2013 is 0.500 because the wage index budget-neutrality adjustment 

factor is applied to the base rate. 

d. ESRD PPS Wage Index Tables 

The CY 2013 ESRD proposed wage index tables, referred to as Addendum A (ESRD 

facilities located in urban areas), and Addendum B (ESRD facilities located in rural areas) are 

posted on the CMS Website at http://www.cms.gov/ESRDPayment/PAY/list.asp. The wage 

index tables list two separate columns of wage index values. One column represents the wage 

index values for the composite rate 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 budgetneutrality adjustment factor, because we have finalized for CY 2012 and subsequent years, that 

we will apply the wage index budget-neutrality adjustment factor to the ESRD PPS base rate. 

6. Proposed Drug Policy Changes 

a. Daptomycin 

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. This policy also applies to any drug or 

biological that may be developed in the future. 

Subsequent to the publication of the CY 2011 ESRD PPS final rule, we received 

numerous comments indicating that vancomycin is indicated in the treatment of both ESRD and 

non-ESRD conditions, such as skin infections. In the CY 2012 ESRD PPS final rule (75 FR 

70243), we eliminated 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 nonESRD related conditions. We also stipulated that in accordance with ICD-9 guidelines as 

described in the CY 2011 ESRD PPS final rule (75 FR 49107), an ESRD facility must report the 

diagnosis code for which vancomycin is indicated. We also reiterated that treatment of any skin 

infection that is related to renal dialysis access management would be considered a renal dialysis 

service paid under the ESRD PPS, and that no separate payment would be made. Finally, in 

response to comments, we stated that we would consider removing the system edit for 

daptomycin in future rulemaking. 

After consultation with our medical experts, we are proposing to eliminate the restriction 

on daptomycin to allow ESRD facilities to receive separate payment by placing the AY modifier 

on the claim for daptomycin when furnished to treat non-ESRD related conditions for CY 2013 

and subsequent years. In accordance with ICD-9-CM coding guidelines, the ESRD facility 

would also be required to report the diagnosis code for which the daptomycin is indicated. We 

solicit public comments on our proposal to eliminate the restriction on daptomycin to allow 
ESRD facilities to receive separate payment for these drugs when furnished to treat non-ESRD 

related conditions. We will continue to monitor the use of anti-infectives furnished by ESRD 

facilities including those that are identified as non-ESRD related. 

b. Alteplase and Other Thrombolytics 

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 discussion on the outlier policy is in section II.B.7. of this proposed 

rule. 

In the CY 2012 ESRD PPS final rule (76 FR 70246), we explained that 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. We explained that under the Medicare 

Benefit Policy Manual, Pub. 100–02, chapter 11, section 30.4.1, drugs used as a substitute for 

any of the listed items, or used to accomplish the same effect were covered under the composite 

rate. We further explained that because heparin is a composite rate drug and could be used for 

access management, any drug or biological used for the same purpose may not be separately 

paid. Section 413.237(a)(1) provides the definition of ESRD outlier services. Specifically, 

§413.237(a)(1)(i) includes “ESRD related drugs and biologicals that were or would have been, 

prior to January 1, 2011, separately billable under Medicare Part B.” 

Because 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, in the CY 2012 

ESRD PPS final rule (76 FR 70249), we excluded thrombolytic drugs from the outlier policy and 

we recomputed the outlier MAP amounts to reflect this change. However, for CY 2012 we did 

not propose to exclude separate payment of thrombolytic drugs under the composite rate portion 

of the blended payment. 

 For CY 2013, we are proposing that thrombolytic drugs would not be considered eligible 

for separate payment under the composite rate portion of the blended payment for those ESRD 

facilities that are receiving a blended payment under the transition. We believe that this proposal 

is consistent with the changes we made to our outlier policy regarding excluding thrombolytic 

drugs from outlier eligibility as discussed above. We solicit comment on our proposal to exclude 

thrombolytic drugs from separate payment under the composite rate portion of the blended 

payment during the transition. 

c. Part B Drug Pricing 

 In the CY 2011 ESRD PPS proposed rule (74 FR 49991), with respect to estimating the 

imputed MAP amounts of ESRD outlier services that are separately billable under Part B, we 

proposed to use Average Sales Price (ASP) data for Part B ESRD-related drugs (which is 

updated quarterly). We did not make any changes to this proposed methodology in the CY 2011 

final rule. In the CY 2012 ESRD PPS final rule (76 FR 70243), we explained that ESRD 

facilities receiving blended payments under the transition would receive payments based on ASP 

for separately billable ESRD drugs and biologicals for the composite rate portion of the blend. 

In the CY 2012 ESRD PPS final rule (76 FR 70244), we stated that under the outlier policy, we 

use the ASP methodology. 
 We are proposing for CY 2013 and subsequent years to continue to use the ASP 

methodology, including any modifications finalized in the Physician Fee Schedule (PFS) final 

rules, to compute our outlier MAP amounts, the drug add-on, and any other policy that requires 

the use of payment amounts for drugs and biologicals that would be separately paid absent the 

ESRD PPS and for the composite rate portion of the blended payment during the transition. We 

also would use this methodology for payment analyses that CMS may perform. We are seeking 

comment on our proposal to apply the ASP methodology or any modifications to the ASP for 

these purposes, as updated from time to time in the PFS rule or in updating the ASP pricing. 

7. Proposed Revisions to the Outlier Policy 

Section 1881(b)(14)(D)(ii) of the Act requires that the ESRD PPS include a payment 

adjustment for high cost outliers due to unusual variations in the type or amount of medically 

necessary care, including variability in the amount of erythropoiesis stimulating agents (ESAs) 

necessary for anemia management. Our regulations at 42 CFR §413.237(a)(1) provides that 

ESRD outlier services include: (i) ESRD-related drugs and biologicals that were or would have 

been, prior to January 1, 2011, separately billable under Medicare Part B; (ii) ESRD-related 

laboratory tests that were or would have been, prior to January 1, 2011, separately billable under 

Medicare Part B; (iii) medical/surgical supplies, including syringes used to administer ESRDrelated drugs, that were or would have been, prior to January 1, 2011, separately billable under 

Medicare Part B; and (iv) renal dialysis service drugs that were or would have been, prior to 

January 1, 2011, covered under Medicare Part D, excluding ESRD-related oral-only drugs. 

In the CY 2011 ESRD PPS final rule, 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). 

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

services were specified in Attachment 3 of Change Request 7064, Transmittal 2033 issued 

August 20, 2010 rescinded and replaced by Transmittal 2094, dated November 17, 2010. With 

respect to the outlier policy, Transmittal 2094 identified additional drugs and laboratory tests that 

may be eligible for ESRD outlier payment. Transmittal 2094 was rescinded and replaced by 

Transmittal 2134, dated January 14, 2011 which was issued to correct the subject on the 

Transmittal page and made no other changes. 

In the CY 2012 ESRD PPS final rule (76 FR 70246), we finalized 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. We stated in that 

rule, however, that we planned to use separate guidance to continue to identify renal dialysis 

service drugs which were or would have been covered under Part D for outlier eligibility 

purposes in order to provide unit prices for calculating imputed outlier services. We also plan to 

identify, through our monitoring efforts, items and services that are incorrectly being identified 

as eligible outlier services. Any updates to the list of renal dialysis items and services that 

qualify as outlier services will be made through administrative issuances, if necessary. 

Our regulations at 42 CFR §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) plus the fixed dollar 

loss amount. In accordance with §413.237(c) of the regulations, facilities are paid 80 percent of 

the per treatment amount by which the imputed MAP amount for outlier services (that is, the 

actual incurred amount) exceeds this threshold. ESRD facilities are eligible to receive outlier 

payments for treating both adult and pediatric dialysis patients. 

 In the CY 2011 ESRD PPS final rule, using 2007 data, we established the outlier 

percentage at 1.0 percent of total payments (75 FR 49142 through 49143). We also established 

the fixed dollar loss amounts that are added to the predicted outlier services MAP amounts. The 

outlier services MAP amounts and fixed dollar loss amounts are different for adult and pediatric 

patients due to differences in the utilization of separately billable services among adult and 

pediatric patients (75 FR 49140). 

 As we explained in the CY 2011 ESRD PPS final rule (75 FR 49138 and 49139), the 

predicted outlier services MAP amounts for a patient would be determined by multiplying the 

adjusted average outlier services MAP amount by the product of the patient-specific case-mix 

adjusters applicable using the outlier services payment multipliers developed from the regression 

analysis to compute the payment adjustments. The average outlier services MAP amount per 

treatment for CY 2011 was based on payment amounts reported on 2007 claims and adjusted to 

reflect projected prices for 2011. For CY 2012, the outlier services MAP amounts and fixed 

dollar loss amounts were based on 2010 data (76 FR 70250). That is, for CYs 2011 and 2012, 

the MAP and fixed dollar loss amounts were computed based on pre-ESRD PPS claims data and 

utilization. 

a. Impact of Proposed Changes to the Outlier Policy 

 For CY 2013, we are not proposing any changes to the methodology used to compute 
the MAP or fixed dollar loss amounts. Rather, in this proposed rule, we are updating the outlier 

services MAP amounts and fixed dollar loss amounts to reflect the utilization of outlier services 

reported on the 2011 claims using the December 2011 claims file. That is, for CY 2013, the 

MAP and fixed dollar loss amounts are based on ESRD PPS claims and utilization. The impact 

of this update is shown in Table 1 which compares the outlier services MAP amounts and fixed 

dollar loss amounts used for the outlier policy in CY 2012 with the updated estimates for this 

proposed rule. The estimates for the proposed outlier CY 2013 outlier policy, which are 

included in Column III of Table 1, were inflation adjusted to reflect projected 2013 prices for 

outlier services. 

Table 1. 

Outlier policy: Impact of using updated data to define the outlier policy 

Column I

Outlier policy for 

CY2012 (based on 

2010 data price 

inflated to 

2012)* 

Column II

Updated outlier 

estimates based on 

2011 data price 

inflated to 2012* 

Column III

Proposed outlier 

policy for CY2013 

(based on 2011 data 

price inflated to 

2013)* 

Age 

< 18 

Age 

>= 18 

Age 

< 18 

Age 

>= 18 

Age 

< 18 

Age 

>= 18 

Average outlier services MAP 

amount per treatment1 $46.26 $81.73 $40.20 $60.58 $41.49 $62.95 

Adjustments 

Standardization for 

outlier services2 1.0024 0.9738 1.0731 0.9898 1.0731 0.9898 

 MIPPA reduction 0.98 0.98 0.98 0.98 0.98 0.98 

Adjusted average 

outlier services 

MAP amount3 

$45.44 $78.00 $42.27 $58.76 $43.63 $61.06 

Fixed dollar loss amount that 

is added to the predicted 

MAP to determine the outlier 

threshold4 

$71.64 $141.21 $46.70 $105.96 $50.15 $113.35 

Patient months qualifying for 

outlier payment 

5.7% 5.4% 7.6% 5.2% 7.4% 5.1% 

* The outlier services MAP amounts and fixed dollar loss amounts were inflation adjusted to reflect updated 

prices for outlier services (that is, 2012 prices in Columns I and II and projected 2013 prices in Column III). 1

Excludes patients for whom not all data were available to calculate projected payments under an expanded 

bundle. The outlier services MAP amounts are based on 2011 data. The medically unbelievable edits of 

400,000 units for EPO and 1,200 mcg for Aranesp that are in place under the ESA claims monitoring policy were 

applied. 

2

Applied to the average outlier MAP per treatment. Standardization for outlier services is based on existing Case 

Mix Adjusters for adult and pediatric patient groups. 
3

This is the amount to which the separately billable (SB) payment multipliers are applied to calculate the 

predicted outlier services MAP for each patient. 

4

The fixed dollar loss amounts were calculated using 2011 data to yield total outlier payments that 

represent 1% of total projected payments for the ESRD PPS. 

 As seen in Table 1, the estimated fixed dollar loss amounts that determine the 2013 

outlier threshold amounts (Column III) are lower than those used for the 2012 outlier policy 

(Column I). The main reason for these reductions is the lower utilization of epoetin and other 

outlier services in the first year of the PPS. This can be seen by comparing the outlier service 

MAP amounts in Column I (which are based on 2010 data) vs. Column II (which is based on 

2011 data). 

The fixed dollar loss amounts which are added to the predicted MAP amounts per 

treatment to determine the outlier thresholds are being updated from $141.21 to $113.35 for adult 

patients and from $71.64 to $50.15 for pediatric patients compared with CY 2012 values. We 

estimate that the percentage of patient months qualifying for outlier payments under the current 

policy will be 5.1 percent and 7.4 percent for adult and pediatric patients, respectively, based on 

our use of 2011 data. The pediatric outlier MAP and fixed dollar loss amounts continue to be 

lower for pediatric patients than adults due to the continued lower use of outlier services 

(primarily reflecting lower use of epoetin and other injectable drugs). 

b. Outlier Policy Percentage 

 Section 413.220(b)(4) stipulates that the per treatment base rate is reduced by 1 percent to 

account for the proportion of the estimated total payments under the ESRD PPS that are outlier 

payments. Because of the decline in utilization associated with the implementation of the 

expanded bundle, the 1 percent target for outlier payments was not achieved in CY 2011. Based 

on the 2011 claims, outlier payments represented approximately 0.52 percent of total payments. 

That is, the historical data previously used to set the outlier thresholds for CY 2011 
overestimated the use of outlier services under the expanded ESRD PPS, leading to lower outlier 

payments than expected. Use of 2011 data to recalibrate the thresholds, reflecting lower 

utilization of EPO and other outlier services, is expected to result in aggregate outlier payments 

close to the 1 percent target in CY 2013. We believe this update to the outlier MAP and fixed 

dollar loss amounts for CY 2013 will increase payments for ESRD beneficiaries requiring higher 

resource utilization in accordance with a 1 percent outlier policy. 

We note that recalibration of the fixed dollar loss amounts in this proposed rule for CY 

2013 outlier payments results in no change in payments to ESRD facilities for beneficiaries with 

renal dialysis items and services that are not eligible for outlier payments, but raises payments to 

providers for beneficiaries with renal dialysis items and services that are eligible for outlier 

payments. Therefore, beneficiary co-insurance obligations would increase for renal dialysis 

services eligible for outlier services and would remain unchanged for those not eligible. 

C. Clarifications Regarding the ESRD PPS

1. Reporting Composite Rate Items and Services 

In the CY 2011 ESRD PPS final rule (75 FR 49036), we explained that section 

1881(b)(14)(B)(i) of the Act requires that the ESRD PPS payment bundle include composite rate 

services. The basic case-mix adjusted composite payment system represented a limited PPS for 

a bundle of routine outpatient maintenance renal dialysis services. We defined composite rate 

services at §413.171 as “items and services used in the provision of outpatient maintenance 

dialysis for the treatment of ESRD and included in the composite payment system established 

under section 1881(b)(7) [of the Act] and the basic case-mix adjusted composite payment system 

established under section 1881(b)(12) of the Act.” In §413.171 we also defined renal dialysis 

services as including, “items and services included in the composite rate for renal dialysis 
services as of December 31, 2010.” 

The composite rate included a number of items and services beyond the dialysis 

treatment itself. In the CY 2011 ESRD PPS final rule (75 FR 49173), we explained that 

currently services that are billed on the ESRD claim do not provide any detail of the composite 

rate items and services that are furnished to the patient. As we discussed in the Medicare Claims 

Processing Manual, Pub. 100-04, chapter 8, sections 50.1 and 50.2., laboratory tests and drugs 

covered under the facility’s composite rate may not be billed separately. As mentioned above, 

the composite rate represented the routine items and services provided to Medicare beneficiaries 

for outpatient maintenance dialysis, therefore was full payment for those items and services. It 

would not have been appropriate for ESRD facilities to bill for items and services in the 

composite rate because this would result in duplicate payments made by Medicare. 

 In the CY 2011 ESRD PPS final rule (75 FR 49048), we also explained that in our 

analysis of the ESRD claims we identified drugs and biologicals that were included in the 

composite payment rate but for which ESRD facilities received separate payment in addition to 

the composite rate payment. Because these composite rate drugs and biologicals were listed 

separately on the ESRD claims, separate payment was inadvertently made. We further explained 

that we excluded those payments from the final ESRD PPS base rate calculation. We also noted 

that the Medicare Benefit Policy Manual, Pub. 100-02, chapter 11, section 30.4.1 lists the drugs 

and fluids that were included under the composite payment system as heparin, antiarrythmics, 

protamine, local anesthetics, apresoline, dopamine, insulin, lidocaine, mannitol, saline, pressors, 

heparin antidotes, benadryl, hydralazine, lanoxin, solu-cortef, glucose, antihypertensives, 

antihistamines, dextrose, inderal, levophed, and verapamil. The Medicare Benefit Policy 

Manual, Pub. 100-02, chapter 11, section 30.4.1 also explicitly states, “... drugs used in the 
dialysis procedure are covered under the facility's composite rate and may not be billed 

separately. Drugs that are used as a substitute for any of these items, or are used to accomplish 

the same effect, are also covered under the composite rate.” The manual further provides that 

“administration of these items (both the staff time and supplies) is covered under the composite 

rate and may not be billed separately” (75 FR 49048). In the CY 2012 final rule (76 FR 70243), 

with regards to antibiotics, we provided for separate payment for vancomycin when furnished to 

treat non-ESRD related conditions. Also, in section II.B.6.a of this proposed rule, we proposed 

to provide for separate payment for daptomycin if furnished for non-ESRD-related conditions. 

We also eliminated the payment distinction for antibiotics furnished in an ESRD facility or in the 

home used to treat access infections or peritonitis. We finalized that antibiotics furnished in the 

home to treat access site infections and peritonitis would be eligible for outlier payment (76 FR 

70246). 

 As described at §413.239, there are ESRD facilities receiving reimbursement under the 

transition, that is, receiving a blended payment of the basic case-mix adjusted composite rate 

payment system and the ESRD PPS. If an ESRD facility receives payment under the transition 

and reports a drug, biological, or laboratory test that was included in the composite rate on the 

ESRD claim, it could receive separate payment for that item or service within the portion of the 

blended payment that is based on the basic case-mix adjusted composite payment system. 

As mentioned above and defined at §413.237, ESRD-related drugs, biologicals, and 

laboratory tests that were or would have been separately payable under the basic case-mix 

adjusted composite payment system qualify as eligible outlier services. In the CY 2012 ESRD 

PPS final rule (76 FR 70246), we finalized the elimination of 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. Therefore, if an ESRD facility reports a drug or biological that 

was included in the basic case-mix adjusted composite payment system on the ESRD claim, it 

would inappropriately be applied toward an outlier calculation. This is because all drugs and 

biologicals with a rate available on the ASP pricing file when the modifier AY is not present are 

eligible for outlier consideration. 

As a result of our monitoring efforts, we continue to see composite rate drugs reported on 

ESRD claims. Therefore, in this proposed rule we are reiterating that composite rate items and 

services are not to be reported on the ESRD facility claim. We are instituting measures to ensure 

that composite rate drugs will be prevented from being applied to the outlier payment. These 

measures will be discussed through administrative issuances. We are continuing to monitor the 

reporting of composite rate items and services on ESRD claims and plan to take actions to 

recoup inappropriate and duplicative payments. If the inclusion of composite rate items and 

services such as laboratory tests, drugs and supplies on claims will be required, we will discuss 

this requirement in future rulemaking. 

2. ESRD Facility Responsibilities for ESRD-Related Drugs and Biologicals 

 It has come to our attention that some ESRD facilities are requiring ESRD beneficiaries 

to purchase renal dialysis drugs and are informing beneficiaries not to use their Part D plan for 

their purchases. 

Section 1866(a)(1)(A) of the Act as codified in regulations at 42 CFR §489.21 prohibits 

providers from billing beneficiaries for services for which the beneficiary would have been 

entitled to have payment made under Medicare if the provider appropriately filed claims. 

Furthermore, section 1881(b)(2)(A) of the Act states that payments shall be made to a renal 
dialysis facility only if it agrees to accept such payments as payment in full for covered services 

except for the beneficiary co-insurance and deductible amounts. 

In the CY 2011 ESRD PPS final rule (75 FR 49045), we explained that the ESRD PPS 

bundled base rate reflects Medicare payment for the average ESRD patient. We stated that we 

had incorporated payments under the basic case-mix adjusted composite rate payment system as 

well as payments for separately billable items and services into the ESRD PPS base rate. As a 

result, we believe the ESRD PPS payments are sufficient and reflect the average cost of 

providing care to the average patient with ESRD and therefore, we expect that, on average, high 

cost patients would be offset by low cost patients. In the CY 2011 ESRD PPS final rule (75 FR 

49045), we also explained that we had provided for higher acuity patients with patient case-mix 

adjusters and outlier payments for high-cost patients. We further cited 42 CFR §494.90 of the 

ESRD Conditions for Coverage which requires the development of an individualized patient plan 

of care to address patient needs and concluded that we believe ESRD facilities should make 

medical decisions based on patient needs and not solely on a financial basis. 

In the CY 2011 ESRD PPS final rule (75 FR 49050), we stipulated that any drug or 

biological (that is injectable, oral or other forms of administration) furnished for the purpose of 

access management, anemia management, vascular access or peritonitis, cellular management 

and bone and mineral metabolism would be considered renal dialysis services under the ESRD 

PPS. Any drug or biological used as a substitute for a drug or biological that was included in the 

ESRD PPS bundled base rate would also be a renal dialysis service and would not be eligible for 

separate payment. Antiemetics, anti-infectives, antipruritics, anxiolytic, excess fluid 

management, fluid and electrolyte management and pain management could be used for dialysis 

purposes and therefore, considered ESRD related. We indicated that we presumed these drugs 
and biologicals in whatever form they are furnished to be renal dialysis services unless indicated 

that they are used for non-ESRD related conditions. Drugs and biologicals paid under Part D 

that are furnished by an ESRD facility for ESRD-related purposes, would be considered renal 

dialysis services (75 FR 49050 and 49051). 

 We are reiterating in this proposed rule that ESRD facilities are responsible for furnishing 

renal dialysis items and services that are required to meet patient needs. This would include oral 

or other forms of administration of injectable drugs and biologicals that are furnished for ESRDrelated conditions. We would also expect that ESRD facilities would not restrict access to 

necessary drugs for financial purposes, requiring patients to purchase medically necessary drugs 

and biologicals. We expect that ESRD facilities would furnish drugs and biologicals that had 

been considered medically necessary prior to the implementation of the ESRD PPS and not 

exclude them because the ESRD facility is now financially responsible for these drugs and 

biologicals. Because of the reasons cited above, ESRD facilities may not require, induce or 

coerce beneficiaries to purchase any renal dialysis item or service. 

3. Use of AY Modifiers 

In response to comments received, in the CY 2011 ESRD PPS final rule, we stated that 

we had developed a mechanism to be used by ESRD facilities to identify and be paid separately 

for non-ESRD-related drugs and biologicals (75 FR 49052 and 75 FR 49168). We provided this 

mechanism in order to support a Medicare beneficiary’s need for the furnishing of non-ESRDrelated items and services (that is, predominantly drugs and laboratory tests) during a dialysis 

treatment to mitigate the need for the beneficiary to receive additional injections or health care 

visits. We further stated that in the event that supplies or equipment are not ESRD-related, 

ESRD facilities would be required to place a modifier for those supplies and equipment 
signifying that they were used for services that are not ESRD-related and eligible for separate 

payment (75 FR 49168). Change Request 7064, Transmittal 2033, entitled “End Stage Renal 

Disease (ESRD) Prospective Payment System (PPS) and Consolidated Billing for Limited Part B 

Services, issued on August 20, 2010, re-issued November 17, 2010 under Transmittal 2094, and 

re-issued January 14, 2011 under Transmittal 2134, provided instructions in the use of the 

modifier. In that Change Request, we indicated that the claim lines for laboratory tests and drugs 

provided to a beneficiary for reasons other than the treatment of ESRD, must be submitted with 

the AY modifier to allow for separate payment outside of the ESRD PPS. In the CY 2012 final 

rule, we provided for the use of the AY modifier with vancomycin, if used for non-ESRD-related 

conditions with the requirement that the ESRD facilities include the diagnosis code of the 

condition (76 FR 70243). In this proposed rule, in section II.B.6.a, we are also proposing the use 

of the AY modifier with daptomycin for non-ESRD related conditions. ESRD facilities will also 

be required to indicate the ICD-9-CM code on the claim that reflects the condition requiring the 

use of daptomycin. 

Our monitoring activities have identified that there are ESRD facilities and clinical 

laboratories that are appending the AY modifier for items that we believe are ESRD-related. 

Additionally, some ESRD facilities and clinical laboratories appear to be appending the AY 

modifier on many items and services reported on the claims. We are reiterating in this proposed 

rule that the purpose of the AY modifier is to allow beneficiaries the convenience to receive nonESRD-related items (that is, drugs and laboratory tests) during their dialysis treatment and to 

allow the ESRD facility to receive payment for furnishing those items. The AY modifier is also 

intended to allow separate payment to laboratories in the event an ESRD-related laboratory test 

was required for non-ESRD conditions. The AY modifier is not intended to be used to receive 
separate payment for items that are ESRD-related and therefore are included in the ESRD PPS 

base rate. We are continuing to monitor the use of the AY modifier and intend to take steps to 

recoup inappropriate payments. In the event that we believe that the AY modifier is not being 

used for the purpose intended, we may be forced to discontinue the AY modifier and cease to 

provide separate payment for any non-ESRD-related drug or laboratory test furnished. 

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

(PY) 2015 

A. Background

For over 30 years, monitoring the quality of care provided to end-stage renal disease 

(ESRD) patients by dialysis providers or facilities (hereinafter referred to collectively as 

“facility” or “facilities”) has been an important component of the Medicare ESRD payment 

system. The ESRD quality incentive program (QIP) is the most recent step in fostering 

improved patient outcomes by establishing incentives for dialysis facilities to meet or exceed 

performance standards established by CMS. The ESRD QIP is authorized by section 153(c) of 

MIPPA, which added section 1881(h) to the Act. CMS established the ESRD QIP for PY 2012, 

the initial year of the program in which payment reductions are being made, in two rules 

published in the Federal Register on August 12, 2010 and January 5, 2011 (75 FR 49030 and 76 

FR 628, respectively). On November 10, 2011, CMS published a rule in the Federal Register

outlining the PY 2013 and PY 2014 ESRD QIP (76 FR 70228). 

Section 1881(h) of the Act requires the Secretary to establish an ESRD QIP by (i) 

selecting measures; (ii) establishing the performance standards that apply to the individual 

measures; (iii) specifying a performance period with respect to a year; (iv) developing a 

methodology for assessing the total performance of each facility based on the performance 
standards with respect to the measures for a performance period; and (v) applying an appropriate 

payment reduction to facilities that do not meet or exceed the established Total Performance 

Score. This proposed rule discusses each of these elements and our proposals for their 

application to PY 2015 and future years of the ESRD QIP. 

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

2015 and Subsequent PYs

1. Value-Based Purchasing (VBP) Overview 

 Throughout the past decade, Medicare has been transitioning from a program that pays 

for healthcare based solely on the number of services furnished to a beneficiary to a program that 

ties portions of payments to providers and suppliers to the quality of services they deliver. By 

paying for the quality of care, rather than merely the quantity of care, we believe we are 

strengthening the healthcare system while also advancing the National Quality Strategy and the 

three part aim which promote (i) better care for the individual thereby (ii) advancing the health of 

the entire population while also (iii) reducing costs. CMS specifies the domains and specific 

measures of quality for our value-based purchasing (VBP) programs and we are working to link 

the aims of the National Quality Strategy with our payment policies on a national scale. 

There are currently six domains of measurement for our VBP programs, based on the six 

priorities of the National Quality Strategy: (i) care coordination; (ii) population/community 

health; (iii) efficiency and cost reduction; (iv) safety; (v) patient- and caregiver-centered 

experience and outcomes; and (vi) clinical care. Together these domains not only encourage 

better care at the facility level, but also encourage different care settings to interface to 

comprehensively improve healthcare. Although currently none of the VBP programs measure 

quality across all of the six domains, we are working to ensure that each program considers 
measures supporting the six national priorities where feasible. Furthermore, we are working in 

partnership with facilities, beneficiaries, the National Quality Forum (NQF), the Measures 

Application Partnership, sister agencies in the Department of Health and Human Services (HHS), 

and other stakeholders to develop new measures where gaps exist, refine measures requiring 

adjustment, and remove measures when appropriate. We are also working with stakeholders to 

ensure that the ESRD QIP serves the needs of our beneficiaries and also advances the goals of 

the National Quality Strategy. 

We believe that the development of an ESRD QIP that is successful in promoting the 

delivery of high quality healthcare services in dialysis facilities is paramount. We seek to adopt 

measures for the ESRD QIP that promote better, safer, and more efficient care. Our measure 

development and selection activities for the ESRD QIP take into account national priorities, such 

as those established by the National Priorities Partnership 

(http://www.nationalprioritiespartnership.org/), HHS Strategic Plan 

(http://www.hhs.gov/secretary/about/priorities/priorities.html), the National Strategy for Quality 

Improvement in Healthcare (http://www.healthcare.gov/center/reports/quality03212011a.html), 

and the HHS National Action Plan to Prevent Healthcare Associated Infections (HAIs) 

(http://www.hhs.gov/ash/initiatives/hai/esrd.html). To the extent practicable, we have sought to 

adopt measures that have been endorsed by a national consensus organization, recommended by 

multi-stakeholder organizations, and developed with the input of facilities, purchasers/payers, 

beneficiaries, and other stakeholders. 

2. Brief Overview of Proposed PY 2015 Measures 

Thus far, we have adopted measures for the ESRD QIP that fall under three of the six 

National Quality Strategy measure priority domains: 
• Safety: National Healthcare Safety Network (NHSN) Dialysis Event reporting; 

• Patient- and caregiver-centered experience: In-Center Hemodialysis Consumer 

Assessment of Healthcare Providers and Systems (ICH CAHPS) survey reporting; 

and 

• Clinical quality of care: (i) Hemoglobin Greater Than 12 g/dL; (ii) Hemodialysis 

Adequacy (Urea Reduction Ratio (URR)); (iii) Vascular Access Type; (iv) and 

Mineral Metabolism reporting (76 FR 70228). 

For PY 2015, we are proposing to add new measures in the clinical quality of care 

domain and to expand the scope of the NHSN Dialysis Event reporting measure (safety domain) 

and the Mineral Metabolism reporting measure (clinical quality of care domain). We believe 

that the PY 2015 ESRD QIP not only further promotes the health of ESRD patients, but also 

strengthens the goals of the National Quality Strategy. To that end, and as proposed and further 

discussed below, we are proposing to include 11 measures in the PY 2015 ESRD QIP. We also 

propose to include these measures and measure topics in subsequent payment years. The 

following measures seek to evaluate facilities on the clinical quality of care which they deliver. 

• For purposes of evaluating anemia management: 

o Hemoglobin Greater Than 12 g/dL, a clinical measure. 

o Anemia Management, a reporting measure.* 

• To evaluate dialysis adequacy: 

o A clinical Kt/V measure for adult hemodialysis patients.* 

o A clinical Kt/V measure for adult peritoneal dialysis patients.* 

o A clinical Kt/V measure for pediatric hemodialysis patients.* 

• To determine whether patients are treated using the most beneficial type of 
vascular access: 

o An arteriovenous fistula measure. 

o A catheter measure. 

• To address effective bone mineral metabolism management: 

o Hypercalcemia, a clinical measure.* 

o Mineral Metabolism, a reporting measure (expansion proposed). 

Additionally, we are proposing to expand a previously adopted reporting measure addressing 

safety: 

• NHSN Dialysis Event reporting measure. 

We are also proposing to continue using a previously adopted reporting measure assessing 

patient- and caregiver-centered experience: 

• ICH CAHPS survey reporting measure. 

*Indicates that the measure is new to the ESRD QIP. 

Although, at this time, we are not proposing to adopt measures that address care 

coordination, population/community health, or efficiency and cost of care, we are soliciting 

comments in this proposed rule on potential measures that would fall into each of these areas. 

We also discuss below the following measures that are under consideration for future adoption: 

a 30-Day Hospital Readmission measure to address care coordination; an access to care measure 

to address population/community health; and an efficiency measure. We also discuss below the 

Standardized Hospitalization Ratio Admissions (SHR) measure and the Standardized Mortality 

Ratio (SMR) measure that we are considering for program adoption in future years. We 

welcome further comments on these and the other potential measures for future program years. 

3. PY 2014 Mineral Metabolism Measure 

As noted above, in the CY 2012 ESRD PPS final rule, we adopted the Mineral 
Metabolism reporting measure which requires each facility to attest that it monitored serum 

calcium and serum phosphorus at least once a month for each Medicare ESRD patient (76 FR 

70271). We have since realized, however, that it may be difficult for some facilities to make this 

attestation if, for example, a patient is seen at the beginning of the month, his or her blood is not 

drawn, and then he or she is hospitalized or transient for the remainder of the month. While it is 

our intention to encourage facilities to put systems and processes into place to ensure at least 

monthly serum calcium and phosphorus monitoring, we believe it is reasonable to give 

consideration to situations where the monthly blood draw does not happen within the dialysis 

facility given these scenarios. Therefore, for PY 2014, we propose to change the Mineral 

Metabolism reporting requirement. 

We considered proposing to require facilities to report the required information for less 

than 100 percent of their patients. Specifically, we considered lowering the threshold to require 

that a facility attest that it monitored on a monthly basis the serum calcium and serum 

phosphorus levels for 98 percent of its patients. We ultimately decided that a facility should be 

required to take and report these values for every patient at least once per month so that each 

beneficiary receives the highest standard of care. We realize, however, that there are 

circumstances beyond a facility’s control wherein it may not be able to draw a sample for this 

patient. Therefore, for purposes of scoring the measure, we propose to now require that, in order 

for a facility to receive 10 points on the PY 2014 Mineral Metabolism measure, it must attest that 

it monitored on a monthly basis the serum calcium and serum phosphorus levels for every 

Medicare ESRD patient provided that: (i) the patient is alive for the entirety of the applicable 

month; (ii) if the patient is treated in-center, that patient was treated at that facility at least twice 

during the claim month; and (iii) if the patient receives dialysis at home, a facility must report 
this information regardless of the number of treatments, provided that a claim is submitted for 

that patient. Additionally, we propose that if a patient is hospitalized or transient during a claim 

month, the facility may monitor the serum calcium and serum phosphorus readings for that 

patient for the month if a patient has labs drawn by another provider/facility, those labs are 

evaluated by an accredited laboratory (a laboratory that is accredited by, for example, Joint 

Commission, College of American Pathologists, AAB (American Association of Bioanalysts), or 

State or Federal agency), and the dialysis facility reviews the serum calcium and serum 

phosphorus readings. We believe that these proposals will provide more flexibility for facilities 

and will also prevent facilities from drawing blood, even when not necessary, each time a patient 

visits for fear that he or she will fail to come to the facility again during that month. We request 

comment on this proposal. We also request comment on our consideration to lower the 

attestation to monthly monitoring of 98 percent of Medicare ESRD patients. We chose 98 

percent in order to encourage improvement, and to ensure that we do not undermine the current 

level of high-reporting (based on the CrownWeb pilot data). We recognize that 100 percent 

might not be appropriate due to some individual cases that may not fit specified criteria. 

Additionally, for purposes of clarification, we note that the PY 2014 attestations for both 

the Mineral Metabolism and ICH CAHPS measures will become available in CROWNWeb in 

December. As noted in the CY 2011 ESRD PPS final rule, these attestations must be made 

before January 31, 2013 (76 FR 70269, 70271). 

4. Measures Application Partnership Review 

 In addition to the considerations discussed above, in selecting measures for the PY 2015 

ESRD QIP, we considered input from the multi-stakeholder group, the Measures Application 

Partnership (http://www.qualityforum.org.map/). Section 1890A(a)(1) of the Act, as added by 
section 3014(b) of the Affordable Care Act, requires the entity with a contract under section 

1890(a) of the Act, currently NQF, to convene multi-stakeholder groups to provide input to the 

Secretary on the selection of quality and efficiency measures for use in certain programs. 

Section 1890A(a)(2) of the Act requires the Secretary, not later than December 1 of each year, to 

make available to the public a list of quality and efficiency measures that are under consideration 

for use in certain programs. Section 1890A(a)(3) of the Act requires the entity with a contract 

under section 1890(a) of the Act to transmit the input of the multi-stakeholder groups to the 

Secretary not later than February 1 of each year, beginning in 2012. Section 1890A(a)(4) of the 

Act requires the Secretary to take into consideration the input of the multi-stakeholder groups in 

selecting quality and efficiency measures. The Measures Application Partnership is the publicprivate partnership comprised of multi-stakeholder groups convened by NQF for the primary 

purpose of providing input on measures as required by sections 1890A(a)(1) and (3) of the Act. 

The Measures Application Partnership’s input on the quality and efficiency measures under 

consideration for adoption in CY 2012 was transmitted to the Secretary on February 1, 2012 and 

is available at 

(http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=69885). As 

required by section 1890A(a)(4) of the Act, we considered these recommendations in selecting 

quality and efficiency measures for the ESRD QIP. 

Four proposed measures for the PY 2015 ESRD QIP (that is, three for dialysis adequacy 

and one for hypercalcemia) were made publicly available in accordance with section 

1890A(a)(2) of the Act and were reviewed by the Measures Application Partnership. The 

Measures Application Partnership gave support to two of the proposed measures, NQF #1454: 

Proportion of patients with hypercalcemia and NQF #1423: Minimum spKt/V for Pediatric 
Hemodialysis Patients. The Measures Application Partnership supported the direction of a 

proposed composite measure comprised of two NQF-endorsed measures, NQF #0249: 

Hemodialysis Adequacy Clinical Performance Measure III: Hemodialysis Adequacy--HD 

Adequacy-- Minimum Delivered Hemodialysis Dose and NQF #0318: Peritoneal Dialysis 

Adequacy Clinical Performance Measure III - Delivered Dose of Peritoneal Dialysis Above 

Minimum. The Measures Application Partnership recommended that the composite measure 

comprised of the two NQF dialysis adequacy measures be tested to ensure feasibility. We have 

taken these comments into consideration for the PY 2015 ESRD QIP. We will further discuss 

these considerations and our proposals for the PY 2015 ESRD QIP measures in the section 

below. 

C. Proposed Measures for the PY 2015 ESRD QIP and Subsequent PYs of the ESRD QIP 

Similar to our other quality reporting and pay for performance programs, we are 

proposing that once a quality measure is selected and finalized for the ESRD QIP through 

rulemaking, the measure would continue to remain part of the program for all future years, 

unless we remove or replace it through rulemaking or notification. We believe that this will 

streamline the rulemaking process, provide continuity of quality measurement, and allow ESRD 

facilities to plan both quality reporting and quality improvement activities. In general, we 

anticipate considering quality measures for removal or replacement if: (1) measure performance 

among the majority of ESRD facilities is so high and unvarying that meaningful distinctions in 

improvements or performance can no longer be made; (2) performance or improvement on a 

measure does not result in better or the intended patient outcomes; (3) a measure no longer aligns 

with current clinical guidelines or practice; (4) a more broadly applicable (across settings, 

populations, or conditions) measure for the topic becomes available; (5) a measure that is more 
proximal in time to desired patient outcomes for the particular topic becomes available; (6) a 

measure that is more strongly associated with desired patient outcomes for the particular topic 

becomes available; or (7) collection or public reporting of a measure leads to negative 

unintended consequences. If there is reason to believe that a measure raises potential safety 

concerns, we are proposing that we would take immediate action to remove the measure from the 

ESRD QIP and not wait for the annual rulemaking cycle. Such measures would be promptly 

removed from the measure set, and we would confirm the removal in the next ESRD QIP 

rulemaking cycle. ESRD facilities and the public would be immediately notified of our decision 

to remove a measure that raises potential safety concerns through the usual ESRD program 

communication channels, including memos, email notification, and web postings. 

Many of the quality measures used in different Medicare and Medicaid reporting 

programs are endorsed by NQF. As part of its regular maintenance process for endorsed 

performance measures, the NQF requires measure stewards to submit annual measure 

maintenance updates and undergo maintenance of endorsement review every 3 years. Under the 

measure maintenance process, the measure steward (owner/developer) is responsible for 

updating and maintaining the currency and relevance of the measure and confirming 

specification changes to NQF on an annual basis. NQF solicits information from measure 

stewards for annual reviews in order to review measures for continued endorsement in a specific 

3-year cycle. Non-NQF-endorsed measures may also go through similar maintenance by their 

measure stewards; such maintenance includes reviewing and updating measures. 

Through the measure maintenance process, measures are sometimes updated to 

incorporate changes that we believe do not substantially change the nature of the measures. 

Examples could be changes to exclusions to the patient population, changes to definitions, or 
extension of the measure endorsement to apply to other settings. We believe these types of 

maintenance changes are distinct from more substantive changes to measures that result in what 

are considered new or different measures, and that they do not trigger the same agency 

obligations under the Administrative Procedure Act. 

In this proposed rule, we are proposing that if a measure that we have adopted for the 

ESRD QIP is updated in a manner that we consider to not substantially change the nature of the 

measure, we would use a subregulatory process to incorporate those updates to the measure 

specifications that apply to the program. Specifically, we would revise our previously adopted 

measure specifications to clearly identify the updates made by the NQF or other measure steward 

and either post the updates directly on the CMS website or provide links to where the updates 

can be found. We would also provide sufficient lead time for facilities to implement the changes 

where changes to the data collection systems would be necessary. 

We would continue to use the rulemaking process to adopt changes to a measure that we 

consider to substantially change the nature of the measure. We believe that this proposal 

adequately balances our need to incorporate updates to ESRD QIP measures in the most 

expeditious manner possible, while preserving the public’s ability to comment on updates that so 

fundamentally change an endorsed measure that it is no longer the same measure that we 

originally adopted. We invite public comment on this proposal and on our proposal that once a 

quality measure is adopted, it is retained for use in the subsequent ESRD QIP payment years 

unless we remove or replace it as discussed above. 

Consistent with these goals and policies, we previously finalized six measures (including 

one measure with two measure sub-components) (Table 2) for the PY 2014 ESRD QIP (76 FR 

70228). We propose to continue to use five of these measures for the PY 2015 ESRD QIP; 
however, we propose to augment two (NHSN Dialysis Event reporting and Mineral Metabolism 

reporting) of these five measures used in PY 2014 to continue to promote improvement in the PY 

2015 ESRD QIP. We are proposing to remove the PY 2014 URR Dialysis Adequacy measure. 

In addition, we are proposing to add three new measures of dialysis adequacy, an anemia 

management reporting measure, and a hypercalcemia clinical measure. 

Table 2. Measures Adopted for the PY 2014 ESRD QIP 

NQF # Measure Title 

N/A Percent of Patients with Hemoglobin Greater Than 12 g/dL* 

N/A URR Hemodialysis Adequacy 

Hemodialysis Vascular Access- Maximizing Placement of Arterial Venous 

Fistula (AVF)* (NQF#0257) N/A for 

composite 

measure Vascular Access Type 

Hemodialysis Vascular Access- Minimizing use of Catheters as Chronic 

Dialysis Access* (NQF#0256) 

N/A1

NHSN Dialysis Event Reporting*+ 

Enroll and report 3 months of dialysis event data. 

N/A2

In-Center Hemodialysis Consumer Assessment of Healthcare Providers and Systems (ICH 

CAHPS) Survey Reporting* 

Facilities are required to attest that they administered the ICH CAHPS survey via a third 

party during the performance period. 

N/A3 

 Mineral Metabolism Reporting 

Facilities are required to attest that they have monitored each of their Medicare patient’s 

phosphorus and calcium levels monthly throughout the performance period.*+

1 We note that an NQF-endorsed bloodstream infection measure (NQF#1460) exists, and data for this measure is collected as part 

of dialysis event reporting in NHSN. It is our intention to use this measure in future years of the ESRD QIP. We believe that a 

reporting measure is a necessary step in reaching our goal to use NQF#1460. 2

 We note that a related measure utilizing the results of this survey has been NQF-endorsed (#0258), and it is our intention to use 

this measure in future years of the ESRD QIP. We believe that a reporting measure is a necessary step in reaching our goal to use 

NQF#0258. 

3

 We note that the NQF has previously endorsed phosphorus and calcium monitoring measures (#0261 and #0255) upon which 

this measure is based. 

* Indicates a measure we are proposing for PY 2015 and future years of the ESRD QIP. +

 Indicates a measure we are proposing to augment for PY 2015 and future years of the ESRD QIP. 

 Along with the measures that have been previously adopted and which we propose to 

continue for use in the PY 2015 ESRD QIP as well as subsequent years of the program, Table 3,
below, lists the new measures that are being proposed for the PY 2015 ESRD QIP and 

subsequent years of the program. Table 4 lists the measures we are considering for future years 

of the ESRD QIP. 

Table 3. New Measures Proposed for the ESRD QIP PY 2015 and Future Years of the 

Program 

NQF# Measure Title 

N/A Anemia Management Reporting 

0249 Hemodialysis Adequacy Clinical Performance Measure III: Hemodialysis 

Adequacy--HD Adequacy-- Minimum Delivered Hemodialysis Dose 

0318 Peritoneal Dialysis Adequacy Clinical Performance Measure III - Delivered Dose 

of Peritoneal Dialysis Above Minimum 

1423 Minimum spKt/V for Pediatric Hemodialysis Patients 

1454 Proportion of Patients with Hypercalcemia 

Table 4. Measures Under Consideration for Future Years of the ESRD QIP 

NQF# Measure Title 

1463 Standardized Hospitalization Ratio for Admissions (SHR) 

0369 Dialysis Facility Risk-Adjusted Standardized Mortality Ratio (SMR) 

1. PY 2014 Measures Continuing for PY 2015 and Subsequent Payment Years 

 We are proposing to continue using two measures and one measure topic adopted in PY 

2014 for the PY 2015 ESRD QIP and future years of the program. Proposals for scoring these 

measures are discussed below. For the reasons stated in the CY 2012 ESRD PPS final rule (76 

FR 70262, 70264 through 65, 70269), we propose to continue using: (i) the Hemoglobin Greater 

than 12 g/dL measure; (ii) the Vascular Access Type measure topic comprised of two measures, 

(a) the Hemodialysis Vascular Access- Maximizing Placement of AVF (NQF #0257) measure, 

and (b) the Hemodialysis Vascular Access- Minimizing use of Catheters as Chronic Dialysis 

Access (NQF #0256) measure; and (iii) the ICH CAHPS survey reporting measure. The 

technical specifications for these measures can be found at 
http://www.dialysisreports.org/pdf/esrd/public-measures/AnemiaManagement-HGB-2015-

NPRM.pdf; http://www.dialysisreports.org/pdf/esrd/public-measures/VascularAccess-Catheter2015-NPRM.pdf; http://www.dialysisreports.org/pdf/esrd/public-measures/VascularAccessFistula-2015-NPRM.pdf; and http://www.dialysisreports.org/pdf/esrd/publicmeasures/ICHCAHPS-2015-NPRM.pdf. We request comment on the proposed continuation of 

these measures. 

2. Expansion of Two PY 2014 Measures for PY 2015 and Subsequent Payment Years 

 As stated earlier, we believe it is important to continue using measures from one payment 

year to the next payment year of the program to encourage continued improvements in patient 

care. Since we believe that continued improvement in patient care is important, we are 

proposing to expand the requirements under two reporting measures that we adopted for the PY 

2014 ESRD QIP. These proposed expanded requirements would apply to the measures for PY 

2015 and future payment years of the ESRD QIP. 

a. Proposed Expanded NHSN Dialysis Event Reporting Measure 

HAIs are a leading cause of preventable mortality and morbidity across different settings 

in the healthcare sector, including dialysis facilities. In a national effort to reduce this outcome, 

HHS agencies, including CMS, are partnering with the Centers for Disease Control and 

Prevention (CDC) to encourage facilities to report to the NHSN as a way to track and facilitate 

action intended to reduce HAIs. The NHSN is currently a 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 

2006 and tracks data from acute care hospitals, long-term 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 facilities supports 

national goals for patient safety, particularly goals for the reduction of HAIs. 

For the reasons stated above, we are proposing to retain the NHSN Dialysis Event 

reporting measure that we adopted for the PY 2014 ESRD QIP (76 FR 70268 through 70269), 

but with an expanded reporting period. For PY 2014, ESRD QIP facilities were required to: (i) 

enroll in the NHSN and complete any training required by the CDC related to reporting dialysis 

events via the NHSN system; and (ii) submit three or more consecutive months of dialysis event 

data to the NHSN. For the PY 2015 ESRD QIP and future payment years, we propose to retain 

the NHSN measure and expand the reporting period to a full 12 months of dialysis event data. 

Although we expect most facilities to have enrolled and trained in the NHSN dialysis event 

system by the end of CY 2012, we note that facilities that have not done so by January 1, 2013 or 

facilities that receive a CMS certification number (CCN) during 2013 must enroll and complete 

this training before reporting the data in order to fulfill the requirements of this reporting 

measure. The information reported to NHSN would be provided by the CDC to CMS for use in 

the ESRD QIP. 

As discussed in more detail below, we are proposing that the performance period for the 

PY 2015 ESRD QIP would be CY 2013. We propose that facilities must report dialysis event 

data monthly to the NHSN. We also propose that facilities be granted a “grace period” of one 

month to report this data. For example, a facility’s dialysis event data for January 2013 must be 

reported on or before February 28, 2013. The final month of data from the performance period 

would be reported on or before January 31, 2014. For further information regarding the NHSN’s 

dialysis event reporting protocols, please see http://www.cdc.gov/nhsn/psc_da_de.html. This 

link provides general information and links to more detailed, specialized information. 
We note that this proposed measure only applies to facilities treating in-center patients. 

For purposes of the NHSN Dialysis Event reporting measure, we determine whether a facility 

treats in-center patients by referencing the facility’s information in CMS data sources (that is, 

SIMS and CROWNWeb). Facilities report the types of patients that they serve in these data 

sources. If a facility lists in-center services, we are proposing that the facility would be required 

to comply with the NHSN dialysis event reporting measure. 

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 NQF). Under the exception set forth in 1881(h)(2)(B)(ii) 

of the Act, in the case of a specified area or medical topic determined appropriate by the 

Secretary for which a feasible and practical measure has not been endorsed by the entity with a 

contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so 

endorsed so long as due consideration is given to measures that have been endorsed or adopted 

by a consensus organization identified by the Secretary. 

An NQF-endorsed bloodstream infection measure (NQF#1460) exists and is collected by 

the CDC as part of dialysis event reporting in NHSN. This measure assesses the number of 

hemodialysis patients with positive blood cultures. This measure differs from the dialysis event 

reporting measure that we adopted for the PY 2014 ESRD QIP and are proposing to expand 

beginning with the PY 2015 program because it evaluates the number of hemodialysis 

outpatients with positive blood cultures over a specified time period. By contrast, the proposed 

NHSN Dialysis Event reporting measure assesses facilities based on whether they enroll and 

report dialysis event data to the NHSN, not based on what the data reported are. We intend to 
propose to adopt NQF #1460 once facilities have reported enough data to enable us to compute 

performance standards, achievement thresholds, improvement thresholds, and benchmarks for 

the measure. 

For the reasons stated in the CY 2012 ESRD PPS final rule (76 FR 70268 through 69), 

we propose to retain the measure and expand the reporting period for PY 2015 and future years 

of the program. We request comment on this proposal. The technical specifications for this 

measure are located at http://www.dialysisreports.org/pdf/esrd/publicmeasures/NHSNDialysisReporting-2015-NPRM.pdf. 

b. Proposed Expanded Mineral Metabolism Reporting Measure 

Undertreatment of bone mineral metabolism disease can cause severe consequences for 

ESRD patients. For PY 2014, it was not yet feasible to adopt a clinical measure evaluating 

facilities based on their patients’ bone mineral metabolism rates because facilities did not report 

serum phosphorus and serum calcium values during the baseline and performance periods that 

we finalized with respect to that year. Instead, for PY 2014, we finalized a measure assessing 

whether facilities routinely monitored the serum calcium and serum phosphorus levels in their 

patients. For PY 2015, we propose to expand this measure by requiring facilities to report a 

serum calcium and serum phosphorus level for each qualifying patient each month according to 

the requirements in CROWNWeb. Facilities would be required to enter these values into 

CROWNWeb on a monthly basis. Facilities would be granted a “grace period” of one month to 

enter the data. For example, we would require a facility to report serum calcium and serum 

phosphorus data for January 2013 on or before February 28, 2013. The final month of data from 

the performance period would be reported on or before January 31, 2014. 
 We do not intend for this proposed measure to encourage unnecessary testing or unduly 

burden a facility. Consequently, for purposes of scoring the measure, we considered proposing 

to require facilities to report the required information for less than 100 percent of their patients. 

Specifically, we considered lowering the threshold to reporting 98 percent of patients for a 

month in order to receive credit for that month. We chose 98 percent in order to encourage 

improvement, and to ensure that we do not undermine the current level of high-reporting (based 

on the CrownWeb pilot data). We recognize that 100 percent might not be appropriate due to 

some individual cases that may not fit specified criteria. We ultimately decided that a facility 

should be required to take and report these values for every patient at least once per month so 

that each beneficiary receives the highest standard of care. We realize, however, that there are 

circumstances beyond a facility’s control wherein it may not be able to draw a sample for this 

patient. Therefore, we are not proposing that the facility itself must draw the serum phosphorus 

and serum calcium levels. If, for example, a patient is hospitalized or transient during a claim 

month, the facility may report the serum calcium and serum phosphorus readings for the patient 

for a month if a patient has labs drawn by another provider/facility and those labs are evaluated 

by an accredited laboratory (a laboratories that is accredited by, for example, the Joint 

Commission, the College of American Pathologists, the AAB (American Association of 

Bioanalysts), or State or Federal agency), and the dialysis facility obtains the serum calcium and 

serum phosphorus readings. Additionally, we propose to only consider a patient qualified for 

this measure (i) if the patient is alive at the end of the month; (ii) if the patient is treated incenter, that patient was treated at that facility at least twice during the claim month; and (iii) if 

the patient receives dialysis at home, a claim is submitted for that patient. We believe that these 

proposals will provide more flexibility for facilities and will also discourage facilities from 
drawing blood, even when not necessary, for fear that the patient will fail to come to the facility 

again during that month. We request comment on this proposal. We also request comment on 

whether facilities should only have to report data for 98 percent of their patients.

Section 1881(h)(2)(B)(i) of the Act requires that, unless the exception set forth in section 

1881(h)(2)(B)(ii) 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 NQF). Under the exception set forth in 1881(h)(2)(B)(ii) 

of the Act, in the case of a specified area or medical topic determined appropriate by the 

Secretary for which a feasible and practical measure has not been endorsed by the entity with a 

contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so 

endorsed so long as due consideration is given to measures that have been endorsed or adopted 

by a consensus organization identified by the Secretary. 

An NQF-endorsed measure assessing hypercalcemia exists (NQF #1454) and we are 

proposing to adopt this measure for the PY 2015 ESRD QIP and subsequent payment years, as 

further discussed below. The NQF-endorsed hypercalcemia measure, however, does not score 

facilities based only on whether or not that facility reported serum calcium values. The Mineral 

Metabolism reporting measure, unlike the Hypercalcemia measure, would assess only whether 

facilities report serum calcium and serum phosphorus values. It would not score facilities based 

on the actual values that they report. We believe it is important to continue to encourage 

reporting independent of a measure that scores based on the actual values reported because we 

need such values to monitor aspects of bone mineral metabolism, for example phosphorus 

management, independent of hypercalcemia; this information will allow us to develop 

comprehensive bone mineral metabolism measures for use in future years of the ESRD QIP. 
In the CY 2012 ESRD PPS final rule, we discussed the basis for the Mineral Metabolism 

reporting measure (76 FR 70270 through 71). We stated that “the NQF has previously endorsed 

phosphorus and calcium monitoring measures (NQF #0261 and NQF #0255) and, in 2008, we 

adopted serum calcium and serum phosphorus monitoring as Clinical Performance Measures 

(http://www.dialysisreports.org/ESRDMeasures.aspx).” The NQF measures referenced above 

call for monitoring these serum calcium and serum phosphorus values, but they do not require 

actual reporting of these values, as is the intent of the Mineral Metabolism reporting measure. 

For these reasons, we propose to expand the Mineral Metabolism reporting measure for 

PY 2015 and subsequent payment years under 1881(h)(2)(B)(ii) of the Act. The technical 

specifications for this measure can be found at http://www.dialysisreports.org/pdf/esrd/publicmeasures/MineralMetabolism-Reporting-2015-NPRM.pdf. We further note that requiring the 

reporting of serum calcium and serum phosphorus levels for the PY 2015 ESRD QIP will allow 

us to develop mineral metabolism measures based on clinical data in the future. We request 

comment on this proposal to expand the Mineral Metabolism reporting measure. 

3. New Measures Proposed for PY 2015 and Subsequent Payment Years of the ESRD QIP 

 As the program evolves, we believe it is important to continue to evaluate and expand the 

measures selected for the ESRD QIP. Therefore, for the PY 2015 ESRD QIP and subsequent 

payment years, we are proposing to adopt five new measures. The proposed new measures 

include: three measures of dialysis adequacy (together comprising one dialysis adequacy 

measure topic); one measure of hypercalcemia, and one reporting measure involving hemoglobin 

and ESA dosages for all patients. 

a. Proposed Kt/V Dialysis Adequacy Measure Topic 
 Section 1881(h)(2)(A)(i) states that the ESRD QIP must evaluate facilities based on 

measures of “dialysis adequacy”. For PYs 2012-2014, the ESRD QIP included a hemodialysis 

adequacy measure evaluating the number of patients with a URR of at least 65 percent. For the 

PY 2015 ESRD QIP, and future payment years, we are proposing to remove the URR 

Hemodialysis Adequacy measure. In its place, we are proposing to adopt three measures of 

dialysis adequacy (together comprising one dialysis adequacy measure topic) based on Kt/V (K 

= clearance, t = dialysis time, and V = volume of distribution) for the PY 2015 ESRD QIP and 

future payment years of the program. Kt/V is a widely accepted measure of dialysis adequacy in 

the ESRD community because it takes into account the amount of urea removed with excess 

fluid. Further, while the URR Hemodialysis Adequacy measure only applies to in-center 

hemodialysis patients, the proposed Kt/V measures will allow us to evaluate dialysis adequacy in 

adult hemodialysis (HD) patients (in-center and home hemodialysis (HHD)) receiving three 

treatments weekly, adult peritoneal dialysis (PD) patients, and pediatric HD patients receiving 

three to four treatments weekly. We are proposing to adopt the following NQF-endorsed Kt/V 

measures of dialysis adequacy, each one applicable to a different patient population: 

(i) NQF #0249: Hemodialysis Adequacy Clinical Performance Measure III: 

Hemodialysis Adequacy--HD Adequacy--Minimum Delivered Hemodialysis Dose; 

(ii) NQF #0318: Peritoneal Dialysis Adequacy Clinical Performance Measure III - 

Delivered Dose of Peritoneal Dialysis Above Minimum; and 

(iii) NQF #1423: Minimum spKt/V for Pediatric Hemodialysis Patients. 

The proposed measures assess whether Medicare dialysis patients (PD, HD, and pediatric 

hemodialysis) meeting the modality specific Kt/V threshold. Performance on the measures are 

expressed as a proportion of patient-months meeting the measure threshold. 
For the reasons stated above, we are proposing to use Kt/V as the measure of dialysis 

adequacy for the PY 2015 ESRD QIP and future payment years of the program. Kt/V would be 

measured for adult HD patients using NQF #0249, adult PD patients using NQF #0318, and 

pediatric hemodialysis patients using NQF #1423. Additionally, we are proposing to remove the 

URR Hemodialysis Adequacy measure; we request comments on these proposals. The technical 

specifications for this measure can be found at http://www.dialysisreports.org/pdf/esrd/publicmeasures/PediatricHemodialysisAdequacy-ktv-2015-NPRM.pdf; 

http://www.dialysisreports.org/pdf/esrd/public-measures/PeritonealDialysisAdequacy-ktv-2015-

NPRM.pdf; and http://www.dialysisreports.org/pdf/esrd/publicmeasures/HemodialysisAdequacy-ktv-2015-NPRM.pdf. We request comment on these 

proposals. The proposed scoring and weighting of the Kt/V Dialysis Adequacy measure topic is 

discussed below. 

b. Hypercalcemia 

 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 are exceedingly 

common and contribute significantly to morbidity and mortality in patients with advanced 

Chronic Kidney Disease (CKD). Numerous studies have associated disorders of mineral 

metabolism with morbidity, including fractures, cardiovascular disease, and mortality. 

Therefore, we believe it is necessary to adopt a clinical measure that encourages proper bone 

mineral metabolism management. 

One indicator of bone mineral metabolism management is hypercalcemia. We are, 

therefore, proposing to use the NQF-endorsed measure, NQF #1454: Proportion of patients with 
hypercalcemia, to evaluate ESRD facilities for the PY 2015 and future payment years of the 

ESRD QIP. This measure assesses the number of patients with uncorrected serum calcium 

greater than 10.2 mg/dL for a 3-month rolling average. “Uncorrected” means not corrected for 

serum albumin concentration. Performance on this measure is expressed as a proportion of 

patient-months for which the 3-month rolling average exceeds the measure threshold. Because 

the NQF-endorsed measure calls for a 3-month rolling average, we are proposing that the first 

measure rate for this measure would be calculated using the first 3 months of data collected 

during the proposed performance period (that is, there would be no measure rate for the first 2 

months of the performance period; we would calculate the first measure rate for the performance 

period using the first 3 months of data and would then calculate a rate each successive month, 

dropping the oldest month and adding the newest month). Because we are proposing to adopt 

this measure not only for PY 2015, but also subsequent payment years, we also propose that, 

beginning with the PY 2016 program, we would measure hypercalcemia beginning in January of 

the applicable performance period. This will allow us to have a 3-month rolling average for all 

months in the performance period. We propose that the 3-month rolling average rate for January 

would be calculated using the rates from November and December of the previous year as well 

as January of that year. Likewise, we propose that the rate for February would be calculated 

using the rates from December, January and February to calculate the 3-month rolling average, 

and so on. Technical specifications for this measure can be found 

at http://www.dialysisreports.org/pdf/esrd/public-measures/MineralMetabolism-Hypercalcemia2015-NPRM.pdf. We welcome comments on these proposals. 

c. Proposed Anemia Management Reporting Measure 

 Section 1881(h)(2)(A)(i) requires “measures on anemia management that reflect the 
labeling approved by the Food and Drug Administration (FDA) for such management.” 

Although the current FDA-approved label for Erythropoiesis-Stimulating Agents (ESAs) only 

specifically addresses hemoglobin levels greater than 11 g/dL, previous FDA-approved labels 

suggested patients on ESAs maintain a hemoglobin level of 10-12 g/dL. As we noted in the CY 

2012 ESRD PPS final rule, upon further research, the FDA determined that there is no evidence 

suggesting a lower target level at which hemoglobin does not cause increased risks of death, 

serious adverse cardiovascular reactions, and stroke and, therefore, changed its approved label on 

June 24, 2011 (76 FR 70257). 

As a result of the changes in the FDA approved-label and the implementation of the 

ESRD QIP, we are monitoring trends and indicators of anemia management for the Medicare 

ESRD population. We have found that the average monthly blood transfusion rate increased 

from 2.7 percent in 2010 to 3.2 percent in 2011. We are working through our ESRD QIP 

monitoring and evaluation program to further assess this issue. We believe that it is important 

that we continue monitoring hemoglobin levels in patients to ensure that anemia is properly 

treated, and we are proposing to adopt a measure for PY 2015, and future payment years, which 

requires facilities to report ESA dosage (if applicable) and hemoglobin and/or hematocrit levels 

for patients on at least one monthly claim. In addition to this measure, proposed below, we plan 

to continue to monitor the rate of transfusions and may consider the adoption of relevant quality 

measures through future rulemaking if necessary. 

 Since January 1, 2012, facilities have been required to report hemoglobin or hematocrit1 

levels for each patient on every claim (CR 7640). Beginning April 1, 2012, if a hemoglobin or 

hematocrit value is not included in the claim, the claim is returned to the facility (CR 7593). If a 

 

1 Hematocrit values are used to calculate hemoglobin levels by taking the hematocrit value and dividing by 

three. 
hemoglobin or hematocrit value is not available for a patient, a facility can enter a default value 

of 99.99 on the claim and the claim will not be returned, provided the facility is not billing for an 

ESA. The default value is not acceptable when the claim includes an ESA, in such a case, the 

claim will be returned to the provider. 

 We are concerned that our current policy of paying claims that include a default 

hemoglobin or hematocrit value of 99.99 could lead to the under-reporting of patients’ 

hemoglobin or hematocrit levels and ESA dosage by facilities; we are specifically concerned that 

we will not receive complete and accurate hemoglobin/hematocrit readings for those patients not 

receiving ESAs because a default value of 99.99 can be reported on claims, and these claims will 

be paid, if no ESA is administered to the patient. Additionally, we believe that facilities might 

choose to strategically not report certain patients’ hemoglobin or hematocrit levels on certain 

claims – those where the patient’s hemoglobin levels are greater than 12 g/dL – in order to make 

the performance rate of their Hemoglobin Greater Than 12 g/dL measure seem better and reduce 

the likelihood of a payment reduction under the ESRD QIP. 

Because it is possible that facilities could under-report hemoglobin or hematocrit levels, 

we are proposing to adopt an Anemia Management reporting measure for the PY 2015 ESRD 

QIP, and future payment years of the program. For this measure, we propose to require facilities 

to report a hemoglobin or hematocrit value and, as applicable, an ESA dosage for all Medicare 

patients at least once per month via claims. We propose to consider claims with 99.99 values as 

not meeting the requirements of this measure (that is, claims reporting 99.99 will be counted as if 

the hemoglobin or hematocrit value were left blank). 

 We do not intend for this proposed measure to encourage unnecessary testing or unduly 

burden a facility. Consequently, for purposes of scoring the measure, we considered proposing 
to require facilities to report the required information for less than 100 percent of their patients. 

Specifically, we considered lowering the threshold to reporting 98 percent of patients for a 

month in order to receive credit for that month. We ultimately decided that a facility should be 

required to take and report these values for every patient at least once per month so that each 

beneficiary receives the highest standard of care. We realize, however, that there are 

circumstances beyond a facility’s control wherein it may not be able to draw a sample for this 

patient. Therefore, we are not proposing that the facility itself must draw blood for each patient. 

If, for example, a patient is hospitalized or transient during a claim month, the facility may report 

the hemoglobin/hematocrit readings and ESA dosage (if applicable) for the patient for a month if 

a patient has labs drawn by another provider/facility and those labs are evaluated by an 

accredited laboratory (a laboratories that is accredited by, for example, the Joint Commission, the 

College of American Pathologists, the AAB (American Association of Bioanalysts), or State or 

Federal agency), and the dialysis facility obtains the hemoglobin/hematocrit readings and ESA 

dosage. Additionally, we propose to only consider a patient qualified for this measure (i) if the 

patient is alive at the end of the month; (ii) if the patient is treated in-center, that patient was 

treated at that facility at least twice during the claim month; and (iii) if the patient receives 

dialysis at home, a claim is submitted for that patient. We believe that these proposals will 

provide more flexibility for facilities and will also discourage facilities from drawing blood, even 

when not necessary, for fear that the patient will fail to come to the facility again during that 

month. We request comment on this proposal. We also request comment on whether facilities 

should only have to report data for 98 percent of their patients.

The proposed Anemia Management reporting measure was not included in the list of 

measures under consideration in accordance with section 1890A(a)(2) of the Act because we had 
not yet fully assessed the impact of the new FDA-endorsed ESA label on the ESRD population. 

We have since received and analyzed more, but still incomplete, anemia management data; we 

believe it is necessary to require facilities to provide complete data so that we may fully 

understand the effect of the FDA guidance and other factors. The proposed Anemia 

Management reporting measure will play a critical role in patient safety. As noted above, our 

monitoring activities indicate that there has been a slight but noticeable increase in transfusions 

since the adoption of the ESRD PPS. Additionally, a United States Renal Data System analysis 

presented in May 2012 found an increase in blood transfusion rates among ESRD patients 

concurrent with the implementation of the ESRD PPS. Although the association of changes in 

transfusion rates with the ESRD PPS, FDA label changes, and other factors are not yet known, 

we believe proactive facility engagement in regular monitoring of patient hemoglobin or 

hematocrit levels regardless of ESA use is critical to maintaining safe care, protecting the safety 

of beneficiaries, and monitoring the program effectively. We further believe that the data 

collected from the proposed measure are necessary for measure development in a clinical area of 

critical significance to patient safety—anemia and transfusion. Delay in proposing to adopt this 

reporting measure may prevent us from creating clinical measures for use in future years of the 

program and pose a risk to patients. Finally, we note that section 1881(h) of the Act specifically 

highlights the importance of anemia management measures, and we do not believe it would be in 

the best interest of the program to wait an additional year to propose this measure. 

For the reasons stated above, we propose to adopt an Anemia Management reporting 

measure for the PY 2015 ESRD QIP and subsequent payment years. For the technical 

specifications for this measure, see http://www.dialysisreports.org/pdf/esrd/publicmeasures/AnemiaManagement-Reporting-2015-NPRM.pdf. We request public comment on this 
proposal. 

4. Measures under Consideration for Future Payment Years of the ESRD QIP 

 In addition to the PY 2015 ESRD QIP, we are also considering measures for future 

payment years of the program. We are specifically considering whether we should propose in 

future rulemaking to adopt the following two measures, 

• NQF #1463: Standardized Hospitalization Ratio for Admissions (SHR) and 

• NQF #0369: Dialysis Facility Risk-adjusted Standardized Mortality Ratio (SMR). 

We intend to adopt these measures for future payment years of the ESRD QIP, possibly 

beginning with the PY 2018 program. We are notifying facilities of our intent and soliciting 

comments on incorporating these measures into future payment years of the ESRD QIP. 

a. Standardized Hospitalization Ratio (SHR) 

Hospitalizations are an important indicator of patient quality of life and morbidity. The 

SHR is an NQF-endorsed (#1463), risk-adjusted measure of hospitalization for dialysis patients. 

The measure is claims-based and describes, as a ratio, the number of ESRD Medicare patient 

actual admissions versus expected hospitalizations adjusted for the facility’s Medicare patient 

case mix. Please refer to the NQF Measures Website (www.qualityforum.org) to obtain more 

detail about this measure. 

b. Standardized Mortality Ratio (SMR) 

 The SMR measure is an NQF-endorsed (#0396) critical patient-centered, outcome 

measure of overall patient care furnished by facilities. We believe that the SMR measure would 

encourage appropriate overall patient care by facilities and incentivize facilities to examine the 

holistic health of the patient rather than treating the patient based on an individual measure-bymeasure basis. The SMR measure describes, as a ratio, the number of ESRD Medicare patient 
actual deaths versus expected deaths adjusted for the facility’s Medicare patient case mix. Please 

refer to the NQF Measures Website (www.qualityforum.org) to obtain more detail about this 

measure. 

c. Public Reporting of SHR and SMR Measures 

Although the SHR and SMR measures may not be adopted for the ESRD QIP until a 

future payment year, we intend to publicly report these measure rates/ratios to the public via 

Dialysis Facility Compare (DFC) to encourage facilities to improve their care. Section 4558(b) 

of the Balanced Budget Act of 1997 (Pub. L. 105-33) (BBA) directs the Secretary to develop, not 

later than January 1, 1999, and implement, not later than January 1, 2000, a method to measure 

data reflective of the quality of renal dialysis services provided under the Medicare program. 

Under this authority, we began reporting the SMR measure on DFC in January, 2001 as a 

survival measure and used three categories to rate facility performance: “as expected,” “worse 

than expected,” and “better than expected.” The SMR measure that we are considering adopting 

for the ESRD QIP was developed in 1999 and facilities are required to submit this data via form 

2746. The SHR measure that we are considering adopting for the ESRD QIP was developed in 

1995, presented to a Technical Expert Panel after modifications to risk adjustment and statistical 

modeling in 2007, and received NQF-endorsement in 2011. The data needed to calculate the 

SHR measure have been regularly reported to DFR since 1995 and have been used by facilities 

for quality improvement activities. We plan to add the SHR data to the DFC effective January 

2013; additionally we will report the actual SMR rates/ratio on the DFC beginning January 2013. 

We originally proposed to adopt the SHR measure for the PY 2014 program, but did not 

finalize the proposal, in part, because commenters voiced concerns regarding accuracy of the comorbidity data used in the calculation of the measures. Details on public comments and why we 
did not adopt the SHR measure are articulated in the CY 2012 ESRD PPS final rule (76 FR 

70267). Since that time, we have identified that the claim form UB 92 with the type of bill 

(TOB) field 72X allows a facility to input up to 17 co-morbid conditions per claim submission. 

We acknowledge that patient co-morbidities can change with time and since the capability 

already exists on the UB 92 TOB, we believe the best means for facilities to update patient comorbidities is through the ESRD 72x claims form. Details on this form can be found in the 

Medicare Claims Processing Manual, Chapter 8 – Outpatient ESRD Hospital, Independent 

Facility, and Physician/Supplier Claims 

(https://www.cms.gov/manuals/downloads/clm104c08.pdf). 

In addition, because the NQF-endorsed SHR and SMR measures are risk-adjusted for 

ESRD patients that reside in nursing homes, in order to calculate the measure rates on DFC, we 

will utilize data from the Minimum Data Set (MDS) to identify those individuals in nursing 

homes. We would use this data not only for reporting the measure rates on DFC at present, but 

also for calculating the measures if we adopted them for us in future years of the ESRD QIP. 

The Omnibus Budget Reconciliation Act (OBRA) of 1987 requires that all Medicare and 

Medicaid certified nursing homes complete MDS assessments on all of their patients. 

We request comment regarding the feasibility of adopting these measures for future 

payment years of the ESRD QIP. 

5. Other Potential Future Measures Under Development 

 As part of our effort to continuously improve the ESRD QIP, we are working on 

developing additional, robust measures that provide valid assessments of the quality of care 

furnished to ESRD beneficiaries by facilities. Some areas of measure development are discussed 

below. In addition, we are considering the feasibility of developing quality measures in other 
areas such as kidney transplantation, quality of life, health information technology for quality 

improvement at the point of care and the electronic exchange of information for care 

coordination, and transfusions. We request comment on these potential areas of future 

measurement and welcome suggestions on other topics for measure development. 

a. Thirty-Day Hospital Readmissions 

 One of the major areas our VBP programs seek to promote is care coordination. Care 

coordination measures assess caregivers not only on the care directly under their control, but also 

on their success in coordinating care with other providers and suppliers. Hospital readmission is 

often the outcome of uncoordinated care. Care coordination measures encourage primary 

caregivers, ESRD facilities, physicians, and hospitals to work together to improve the quality of 

care. A 30-day hospital readmissions measure is a primary example of care coordination. This 

measure is currently under development for ESRD, and we request comment regarding our use 

of such a measure in future payment years. 

b. Efficiency 

 One of the main goals of our VBP programs is not only to enhance quality of care but 

also efficiency in providing that care. At present, we are not aware of an efficiency measure that 

is appropriate for the ESRD population. We are, however, interested in receiving comments 

regarding this concept. 

c. Population/Community Health 

 We are aware that unintended consequences, specifically those involving access to care, 

may result from the ESRD QIP. To address these concerns, we are currently monitoring access 

to care and exploring the development of new measures or adjustments to existing measures that 

would mitigate the unintended consequences and/or incentivize facilities caring for patients who 
may, generally, contribute to lower facility measure rates. We request comment on developing 

such a measure or adjustments to measures, specifically with regard to access to care issues. 

6. Proposed Scoring for the PY 2015 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 facility based on the performance standards established 

with respect to the measures selected for the performance period. For the PY 2014 ESRD QIP, 

we adopted a performance scoring methodology that assessed facilities on both their 

achievement and improvement on clinical measures. We stated that we believe that this scoring 

methodology will more accurately reflect a facility’s performance on the measures because it 

will enable us to differentiate between 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 stated that we believe that the PY 2014 methodology 

appropriately incentivizes facilities to both achieve high Total Performance Scores and improve 

the quality of care they provide (76 FR 70272). We believe that the methodology set forth for 

PY 2014 continues to incentivize facilities to meet the goals of the ESRD QIP; therefore, with 

the exception of the proposed changes further discussed in the applicable section below, we 

propose to adopt a scoring methodology for the PY 2015 ESRD QIP that is nearly identical to 

the PY 2014 ESRD QIP. 

7. Proposed Performance Period for the PY 2015 ESRD QIP 

 Section 1881(h)(4)(D) of the Act requires the Secretary to establish the performance 

period with respect to a year. For the PY 2014 ESRD QIP, we finalized a performance period of 

CY 2012. We stated that we believe that, at this point, a 12-month performance period is the 

most appropriate for the program because this period accounts for any potential seasonal 
variations that might affect a facility’s score on some of the measures, and also provides 

adequate incentive and feedback for facilities and Medicare beneficiaries (76 FR 70271). We 

continue to believe that a 12-month performance period will best meet these policy objectives, 

and we considered what 12-month period would be closest in time to the payment year but would 

still allow us to time to operationalize the program, calculate scores, and grant facilities a period 

of time to preview and ask questions regarding these scores before they are published and impact 

payment. We have determined that CY 2013 is the latest period of time during which we can 

collect a full 12 months of data and still implement the payment reductions beginning with 

January 1, 2015 services. Therefore, for the PY 2015 ESRD QIP, we propose to establish CY 

2013 as the performance period for all of the measures. We request comments on this proposal. 

8. Proposed Performance Standards for the PY 2015 ESRD QIP 

Similar to the PY 2014 ESRD QIP, we propose to adopt performance standards for the 

PY 2015 ESRD QIP measures under section 1881(h)(4)(A) of the Act. This section provides 

that “the Secretary shall establish performance standards with respect to measures selected . . . 

for a performance period with respect to a year.” Section 1881(h)(4)(B) of the Act further 

provides that the “performance standards . . . shall include levels of achievement and 

improvement, as determined appropriate by the Secretary.” We use the performance standards to 

establish the minimum score a facility must achieve to avoid a payment reduction. 

a. Proposed Clinical Measure Performance Standards 

With respect to the seven proposed clinical measures, we propose to set the PY 2015 

improvement performance standard and achievement performance standard (collectively, the 

“performance standard”) for each measure at the national performance rate (which we would 

define as the 50th percentile) of all facilities’ performance on the measure during CY 2011 (the 
proposed comparison period – discussed in more detail below). 

 For the PY 2014 ESRD QIP, we set the performance standards at the national 

performance rate during a baseline period of July 1, 2010 – June 30, 2011. This period of time, 

however, did not allow us to publish the numerical values for the performance standards 

concurrently with the final rule because of the length of time needed for us to compile claimsbased measure data at the individual facility level and calculate the measure rates. Instead, we 

included an estimate of the numerical values for the performance standards in the final rule, 

using nine months of data, and posted the numerical values of the performance standards based 

on the full 12 months of data on http://www.dialysisreports.org/pdf/esrd/publicmeasures/UpdatedBaseline-2014-FR.pdf by the end of December 2011. In order to ensure that 

we have enough time to calculate and assign numerical values to the proposed performance 

standards for the PY 2015 program, we are proposing to set the performance standards based on 

the national performance rate (that is, the 50th percentile) of facility performance in CY 2011. 

By choosing this time period for PY 2015, however, the data on which we base the performance 

standards would only capture 6 months of more recent data when compared to PY 2014 and 

would also overlap with 6 months of the data used to calculate the PY 2014 performance 

standards. We are also concerned that if we finalize this period of time, we would not be 

adequately addressing stakeholder requests that we take steps to minimize the length of “data 

lag” between the dates used to calculate the performance standards and the payment year. We 

recognize that stakeholders might prefer that we base performance standards on data as close in 

time to PY 2015 as possible. 

 The period of time closest to the payment year that would allow us to post the numerical 

values for the performance standards before the end of the first month of the performance period 
is parallel to that of PY 2014, from July 1, 2011 through June 30, 2012. As with PY 2014, 

selecting this time period for purposes of calculating numerical values for the performance 

standards would not allow us to publish these numerical values until late 2012 or early 2013, 

which is closer in time and may possibly be during the performance period. However, as in PY 

2014, we would still be able to provide estimates for the numerical values of the performance 

standards at the time of final rule publication and post the actual numbers as soon as they are 

available in December 2012 or January 2013. 

 Based on these considerations, we are proposing CY 2011 as the basis for the 

performance standards (that is, the national performance rates). We do, however, request 

comment concerning whether we should instead use data closer in time to the payment year and 

set the performance standards using July 1, 2011 through June 30, 2012 data. 

 For two of the PY 2015 measure topics, Kt/V Dialysis Adequacy and Hypercalcemia, we 

do not possess data for the entirety of CY 2011, the year on which we propose to base the 

performance standards. We did not begin collecting uniform data on the Kt/V hemodialysis 

adequacy measure until January 1, 2012 (see Change Request 7460), and, under the conditions 

for coverage, facilities were not required to report serum calcium values that will be used to 

calculate the Hypercalcemia clinical measure until their submission of May, 2012 data with the 

June 2012 national implementation of CROWNweb. Despite these issues, we do have data on 

which we can base performance standards. Although facilities are not yet required to report 

serum calcium levels, approximately 63 percent of facilities, which treat approximately 80 

percent of the Medicare ESRD patient population, have been voluntarily reporting this data via 

CROWNWeb piloting since July 2008. Additionally, we have compared the serum calcium 
values reported by facilities in 2010 as part of a clinical data reporting program called ELab,2 to 

values that have been voluntarily reported by facilities in 2010 through CROWNWeb, and the 

values are significantly similar. We believe that these similarities will also extend to data 

reported in 2011. Therefore, we propose to calculate performance standards for the 

Hypercalcemia measure using the data that we collected via CROWNWeb Pilots collected 

during CY 2011. 

Uniform Kt/V reporting for hemodialysis patients did not begin until January 1, 2012 

(CR 7640). Before this time, facilities could use a number of different methodologies to calculate 

Kt/V values, with the result that the values could be different depending on which methodology 

was used. We have analyzed the data collected during the CROWNWeb pilot and found that 88 

percent of facilities that reported to CROWNWeb had reported Kt/V values using a NQF 

specified calculation method (this method is also specified in Change Request 7640) that yields 

consistent results and that is part of the specifications for each of the hemodialysis Kt/V 

measures that we are proposing to adopt for the PY 2015 program. Though we are not able to 

tell what calculation method a facility used by reviewing a claim, we believe it is reasonable to 

assume that roughly the same percentage of facilities reported Kt/V on their claims prior to 2012 

using the same formula that they used to report it under the CROWNWeb pilot. For this reason, 

we propose to calculate the performance standards for the three proposed Kt/V measures using 

CY 2011 claims data. This is the best data we have available at this time to set reliable 

performance standards for Kt/V. We understand, however, that stakeholders may be concerned 

about the nuances of the data and we invite public comment on this proposal. 

 If, after consideration of the comments, we decide to not adopt the adult, hemodialysis 

Kt/V measure for PY 2015, we propose to continue to use URR as a measure of hemodialysis 

 

2 http://www.esrdnet11.org 
adequacy for this population. As we have noted, Kt/V is preferred over URR. Because the 

pediatric hemodialysis measure faces the same methodological issues as the adult hemodialysis 

measure, we propose that if we do not adopt the Kt/V measure for adult hemodialysis patients, 

we would also not adopt the Kt/V measure for pediatric hemodialysis patients. We note that the 

NQF endorsed measure for Kt/V measure for peritoneal dialysis adequacy does not specify the 

body surface area formulas or the total body water formulas to utilize; and we would accept the 

submission of peritoneal adequacy Kt/V values that utilize the methods currently in use as 

industry standards. We believe it is important to include peritoneal dialysis patients in the ESRD 

QIP and are soliciting comments on the inclusion of the peritoneal dialysis Kt/V adequacy 

measure. We propose that, were we to retain the URR measure for adult hemodialysis, we 

would still adopt the Kt/V peritoneal dialysis measure. We propose that these measures would 

still comprise a Dialysis Adequacy measure topic and would be scored in the same manner as we 

propose for the Kt/V measures, below. 

Even with the challenges outlined above, we believe that the advantages of adopting the 

Kt/V hemodialysis measure for PY 2015 outweigh the disadvantages. Therefore, we propose 

Kt/V as the measure for hemodialysis adequacy for PY 2015, but we specifically solicit 

comments regarding whether we should continue to use URR for adult hemodialysis patients for 

PY 2015.3 

 We also considered calculating performance standards for the Kt/V Dialysis Adequacy 

measure topic based on data from January 1, 2012 – June 30, 2012, to ensure that the data was 

calculated consistently. We are, however, aware that a shortened data period may affect the 

 

3 Note that, as further explained below, the issue we have discussed with respect to the reporting of Kt/V 

values prior to CY 2012 would not be an issue for the calculation of improvement scores because we are proposing 

CY 2012 as the period used to calculate the improvement threshold; beginning January 1, 2012, all facilities are 

required to report Kt/V uniformly on their claims. 
measure rates’ reliability. Therefore, we are proposing to calculate performance standards based 

on the data from CY 2011 discussed above, but we invite comment on an alternative 6 month 

period beginning on or after the date on which uniform reporting began, January 1, 2012. 

b. Estimated Performance Standards 

 At this time, we do not have the necessary data to assign numerical values to the 

proposed performance standards for the clinical measures because we do not yet have all of the 

data from CY 2011. However, we are able to estimate these numerical values based on the latest 

full year of data available. In Table 5, we have provided the estimated performance standards for 

all of the measures, except for the Hypercalcemia measure, based on data from October 1, 2010 

– September 30, 2011. For the Hypercalcemia measure, we currently have only 6 months of data 

based on approximately 63 percent of facilities reporting; the estimate, therefore, is based on data 

from April 2011 – October 2011. 

Table 5. Estimated Numerical Values for the Performance Standards for the PY 2015 

ESRD QIP Clinical Measures Using the Most Recently Available Data 

Measure Performance Standard 

Hemoglobin > 12 g/dL 2% 

Vascular Access Type 

 %Fistula 59% 

 %Catheter 13% 

Kt/V 

 Adult Hemodialysis 93% 

 Adult, Peritoneal Dialysis 83% 

 Pediatric Hemodialysis 90% 

Hypercalcemia 3%1

1 As noted above, the performance standard forthe Hypercalcemia measure is based on approximately 63 percent of facilities (accounting for 

approximately 80 percent of the Medicare ESRD population) reporting serum calcium values in CROWNWeb. 

 In accordance with our statements in the CY 2012 ESRD PPS final rule (76 FR 70273), if 

the final numerical values for the PY 2015 performance standards are worse than PY 2014 for a 

measure, we propose to substitute the PY 2014 performance standard for that measure. We 
believe that the ESRD QIP should not have lower standards than previous years. We request 

comments on this proposal. 

c. Proposed Performance Standards for PY 2015 Reporting Measures 

 We established the performance standards for the reporting measures for PY 2014 based 

upon whether facilities met certain reporting requirements rather than achieved or improved on 

specific clinical values. We propose to establish the same performance standard for the ICH 

CAHPS reporting measure for PY 2015 that we established for PY 2014. Under this proposed 

performance standard, facilities would be required to provide an attestation that they successfully 

administered the ICH CAHPS survey via a third party in accordance with the measure 

specifications. We propose that this attestation must be completed in CROWNWeb by January 

31, 2014. 

 For the NHSN Dialysis Event reporting measure we propose to set the performance 

standard as successfully reporting 12 months of data from CY 2013. If a facility has not yet 

enrolled and trained in the NHSN dialysis event system, we are proposing that the performance 

standard for that facility would also include completion of these requirements. 

 For the Mineral Metabolism reporting measure we propose to set the performance 

standard as successfully reporting serum phosphorus and calcium values for all 12 months of the 

performance period for (i) in-center hemodialysis patients the facility treats at least twice during 

the applicable month and (ii) all peritoneal and home hemodialysis patients that the facility 

treats. 

 For the Anemia Management reporting measure we propose to set the performance 

standard as successfully reporting hemoglobin or hematocrit and ESA dosage (if applicable) for 

all 12 months of the performance period for (i) in-center hemodialysis patients the facility treats 
at least twice during the applicable month and (ii) all peritoneal and home hemodialysis patients 

that the facility treats. 

 Further information regarding the reporting requirements is found in sections III.C.2.a, 

III.C.2.b, III.C.3.c, and III.C.9.c of this proposed rule. We request comment on these proposals. 

9. Proposed Scoring for the PY 2015 ESRD QIP Proposed Measures 

In order to assess whether a facility has met the performance standards, we finalized a 

methodology for the PY 2014 program under which we separately score each clinical and 

reporting measure. We score facilities based on an achievement and improvement scoring 

methodology for purposes of assessing their performance on the clinical measures. Under the 

PY 2014 ESRD QIP scoring methodology, a facility’s performance on each of the clinical 

measures is determined based on the higher of (i) an achievement score or (ii) an improvement 

score (76 FR 70273). We propose to use a similar methodology for purposes of scoring facilities 

performance on each of the clinical measures for the PY 2015 ESRD QIP. 

As in PY 2014, in determining a facility’s achievement score for the PY 2015 program, 

we propose that facilities would, based on their performance in CY 2013 (the proposed 

performance period), receive points along an achievement range, which we would define as a 

scale that runs from the achievement threshold to the benchmark. We propose to define the 

achievement threshold for each of the proposed clinical measures as the 15th percentile of 

national facility performance during CY 2011. We believe that this achievement threshold will 

provide an incentive for facilities to continuously improve their performance while not reducing 

the incentives to facilities that score at or above the national performance rate for the clinical 

measures (76 FR 70276). We propose to define the benchmark as the 90th percentile of the 

national facility performance during CY 2011 because it represents a demonstrably high but 
achievable standard of excellence that the best performing facilities reached. We further propose 

that, for the proposed Kt/V Dialysis Adequacy measures and the proposed Hypercalcemia 

measure, we would use the same data we proposed above to use to calculate the performance 

standards for purposes of calculating the achievement thresholds and the benchmarks for these 

measures. We request comment on these proposals. 

In determining an improvement score for the clinical measures, we propose that facilities 

receive points along an improvement range, defined as a scale running between the improvement 

threshold and the benchmark. We propose to define the improvement threshold as the facility’s 

rate on the measure during CY 2012. The facility’s improvement score would be calculated by 

comparing its performance on the measure during CY 2013 (the proposed performance period) 

to its performance on the measure during CY 2012. We are proposing to base the improvement 

threshold on data from CY 2012 rather than CY 2011 (the period of time we have proposed to 

use to calculate the performance standards, achievement thresholds, and benchmarks) because, as 

we explain above, we do not have complete facility level CY 2011 data that we can use to 

calculate an improvement threshold for every facility on the Kt/V Dialysis Adequacy measures 

and the Hypercalcemia measure. Rather than proposing to adopt a policy under which no facility 

could receive an improvement score on these measures, we are proposing to use data from CY 

2012 to calculate the improvement thresholds. Additionally, we believe by using CY 2012 to 

calculate the improvement thresholds, we will more closely align timing of the payment 

reduction with the period of time we use to calculate improvement thresholds. Note that, for the 

proposed Hypercalcemia measure, we did not require data collection via CROWNWeb until June 

2012, and, therefore, the data we are proposing to use to set the improvement threshold for each 

facility would only include May 2012 – December 2012 data. 
Our proposals for the time periods used for the various calculations for clinical measures 

are depicted below in Table 6. We request comments on our proposal to use data from CY 2012 

to calculate improvement thresholds. 

When considering the time period we would use to calculate improvement thresholds, we 

sought to mitigate data lag issues as much as possible by selecting a period in time as close as 

possible to the performance period. However, to entirely mitigate this data lag, we also 

considered a period that would take place during the performance period. Using this approach, 

to calculate an improvement score, we would derive an improvement threshold from either the 

first quarter of CY 2013 or the first 6 months of CY 2013 and compare it to the facility’s 

measure rate in the last quarter of CY 2013 or the last 6 months of CY 2013, respectively. We 

ultimately decided not to propose this approach because, when possible, we prefer to use 12 

months of data to calculate measure rates to ensure more reliable rates, particularly for lowvolume facilities. Additionally, using this approach, part of the performance period for purposes 

of calculating the facility’s performance rate and achievement score (all of CY 2013) could 

overlap with the data we use to calculate the improvement threshold (first quarter or 6 months of 

CY 2013). Although we are proposing to calculate improvement thresholds based on data from 

CY 2012, we also request comment regarding use of these alternative periods for purposes of 

calculating the improvement threshold. 

Table 6. Proposed Periods used for PY 2015 Calculations 

Measure 

Proposed Period of Time Used 

in Calculating Achievement 

Thresholds, Benchmarks, and 

Performance Standards 

Proposed Period of Time 

Used in Calculating 

Improvement Thresholds 

Hemoglobin > 12 g/dL CY 2011 CY 2012 

Vascular Access Type 

 %Fistula CY 2011 CY 2012 

 %Catheter CY 2011 CY 2012 
Kt/V 

 Adult Hemodialysis CY 2011 (data from facilities 

using all methods to calculate 

Kt/V) 

CY 2012 

 Adult, Peritoneal Dialysis CY 2011 (data from facilities 

using all methods to calculate 

Kt/V) 

CY 2012 

 Pediatric Hemodialysis CY 2011 (data from facilities 

using all methods to calculate 

Kt/V) 

CY 2012 

Hypercalcemia CY 2011 (data from 

CROWNWeb Pilot reporting) 

CROWNWeb – May 1, 

2012 to December 31, 2012 

 Like the performance standards, at this time, we do not have the necessary data to assign 

numerical values to the proposed achievement thresholds and benchmarks for the clinical 

measures. However, we are able to estimate them based on the latest full year of data available. 

In Table 7, we have provided the estimated achievement thresholds and benchmarks for all of the 

measures, except for Hypercalcemia, based on data from October 1, 2010 – September 30, 2011. 

For the Hypercalcemia measure, we currently have only 7 months of data; the estimate, 

therefore, is based on data from April 2011 – October 2011. 

Table 7. Estimated Proposed Achievement Thresholds and Benchmarks for the Proposed 

PY 2015 ESRD QIP Clinical Measures Using the Most Recently Available Data 

Measure Achievement Threshold Benchmark 

Hemoglobin > 12 g/dL 7% 0%

Vascular Access Type 

 %Fistula 46% 74%

 %Catheter 23% 5%

Kt/V 

 Adult Hemodialysis 86% 97%

 Adult, Peritoneal Dialysis 58% 94%

 Pediatric Hemodialysis 78% 96%

Hypercalcemia 6%1 0%1

1 As noted above, the performance standard forthe Hypercalcemia measure is based on approximately 63 percent of facilities (accounting for 

approximately 80 percent of the Medicare ESRD population) reporting serum calcium values in CROWNWeb. 

 In accordance with our statements in the CY 2012 ESRD PPS final rule (76 FR 70273), if 
the final PY 2015 numerical values for the achievement thresholds and benchmarks are worse 

than PY 2014 for a measure, we propose to substitute the PY 2014 achievement thresholds and 

benchmarks for that measure. We believe that the ESRD QIP should not have lower standards 

than previous years. We request comments on this proposal. 

a. Proposals for Scoring Facility Performance on Clinical Measures Based on Achievement 

We propose to award between 0 and 10 points for each of the clinical measures. As 

noted, we propose that this score be based upon the higher of an achievement or improvement 

score on the measure. For purposes of scoring achievement for the measures, we propose to base 

the score on where a facility’s performance falls relative to the achievement threshold and the 

benchmark for that measure. We propose that, identical to PY 2014, if a facility’s measure rate 

during the performance period is: 

• Equal to or greater than the benchmark, the facility would receive 10 points for 

achievement; 

• Less than the achievement threshold, the facility would receive 0 points for 

achievement; or 

• Equal to or greater than the achievement threshold, but below the benchmark, the 

following formula would be used to derive the achievement score: 

[9 * ((Facility’s performance period rate – achievement threshold) / (benchmark – 

achievement threshold))] + .5, with all scores rounded to the nearest integer, with 

half rounded up. 

Using this formula, a facility would receive a score of 1 to 9 points based on a linear 

scale disturbing 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. 

b. Proposals for Scoring Facility Performance on Clinical Measures Based on Improvement 

We propose that facilities would earn between 0 and 9 points for each of the clinical 

measures based on how much their performance on the measure during CY 2013 improved from 

their performance on the measure during CY 2012. A unique improvement range for each 

measure would be established for each facility. We propose that if a facility’s measure rate 

during the performance period is: 

• Less than the improvement threshold, the facility would receive 0 points for 

improvement; or 

• Equal to or greater than the improvement threshold, but below the benchmark, the 

following formula would be used to derive the improvement score: 

[10 * ((Facility performance period rate – Improvement threshold) / (Benchmark 

– Improvement threshold))] – .5, with all scores rounded to the nearest integer, 

with half rounded up. 

Note that if the facility score is equal to or greater than the benchmark, it would receive 10 points 

on the measure per the achievement score methodology discussed above. 

c. Proposals for Calculating the Reporting Measure Scores 

As noted, reporting measures differ from clinical measures in that they are not scored 

based on clinical values, but rather, are scored based on whether facilities are successful in 

achieving the reporting requirements associated with each of these proposed measures. The 

proposed criteria that would apply to each reporting measure is discussed below. 

With respect to the proposed Anemia Management, Mineral Metabolism, and NHSN 
Dialysis Event reporting measures, we propose, for each measure, to award facilities: 

(i) 5 points for meeting the reporting requirements for at least 6-consecutive months 

during the performance period; 

(ii) 10 points for meeting the reporting requirements for all 12 months of the performance 

period; and 

(iii) 0 points for meeting the reporting requirements for less than 6-consecutive months 

during the performance period. 

We believe that requiring 6-consecutive months of data rather than 6 non-consecutive 

months of data for a facility to receive points on these measures will hold facilities to the highest 

level of quality; facilities will be encouraged to continue to improve their reporting mechanisms 

throughout the performance period. We are concerned that awarding points for 6 nonconsecutive months of reporting may cause facilities to be less diligent in their reporting efforts 

overall. We specifically request comment regarding whether the proposed 6-consecutive month 

reporting requirement will improve quality more than a non-consecutive month reporting 

requirement. We also propose, as discussed in more detail below, that facilities would need to 

receive a CCN prior to July 1, 2013 in order to receive a score on a reporting measure. Finally, 

for purposes of the NHSN Dialysis Event reporting measure, we propose that to be awarded 5 or 

10 points, any facility that has not yet enrolled and trained in the NHSN dialysis event system 

must do so and must agree to the required consent 

(http://www.cdc.gov/nhsn/PDFs/PurposesEligibilityRequirementsConfidentiality.pdf). 

With respect to the proposed ICH CAHPS reporting measure, we propose to retain the 

PY 2014 scoring methodology for the PY 2015 ESRD QIP. An in-center hemodialysis facility 

will receive a score of 10 points if it attests that it successfully administered the ICH CAHPS 
survey via a third party during the performance period according to the specification found at 

https://www.cahps.ahrq.gov/Surveys-Guidance/ICH.aspx. Eligible facilities (facilities providing 

adult, in-center hemodialysis) that do not provide such an attestation would receive 0 points on 

the measure. We propose that this attestation must be entered via CROWNWeb by January 31, 

2014. We note that the ICH CAHPS survey is only available to adult patients who are treated incenter. For purposes of the ICH CAHPS reporting measure, we determine whether a facility 

treats adult, in-center patients by referencing the facility’s information in CMS data sources (that 

is, SIMS and CROWNWeb). Facilities report the types of patients that they serve in these data 

sources. If a facility lists adult in-center services, we are proposing that the facility would be 

required to comply with the ICH CAHPS reporting measure. 

 We request comment on the proposed methodology for scoring the PY 2015 ESRD QIP 

reporting measures. We also request comment regarding whether facilities should receive points 

for partially reporting data and whether such reporting need be for consecutive months. 

10. Proposals for Weighting the PY 2015 ESRD QIP Measures and Calculation of the PY 2015 

ESRD QIP Total Performance Score 

Section 1881(h)(3)(A)(iii) of the Act provides that the methodology for assessing facility 

total performance shall include a process to weight the performance scores with respect to 

individual measures to reflect priorities for quality improvement such as weighting the scores to 

ensure that 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 2015 ESRD QIP measures for purposes of calculating Total 

Performance Scores, we considered two criteria. Specifically, we considered the number of 

measures we have proposed to include in the PY 2015 ESRD QIP as well as the National Quality 
Strategy priorities. 

a. Proposals for Weighting Individual Measures to Compute Measure Topic Scores for the Kt/V 

Dialysis Adequacy Measure Topic and the Vascular Access Type Measure Topic 

 Because the Kt/V Dialysis Adequacy measure topic and the Vascular Access Type 

measure topic are comprised of multiple measures, it is necessary for us to discuss how we will 

derive an overall score for each measure topic. For these measure topics, we propose that each 

measure be scored separately for each facility using the achievement and improvement 

methodology discussed above. After calculating the individual measure scores within a measure 

topic, we propose to calculate a measure topic score using the following steps: (1) dividing the 

number of patients in the denominator of each measure by the sum of the denominators for all of 

the applicable measures in the measure topic; (2) multiplying that figure by the facility’s score 

on the measure; (3) summing the results achieved for each measure; and (4) rounding this sum 

(with half rounded up). We are proposing that, if a facility does not have enough patients to 

receive a score on one of the measures in the measure topic (this proposal is discussed below), 

that measure would not be included in the measure topic score for that facility. Only one 

measure within the measure topic need have enough cases to be scored in order for the measure 

topic to be scored and included in the calculation of the Total Performance Score. We believe it 

is important to proportionately weight the measures within a measure topic because we seek to 

give equal importance to each patient. Finally, we are proposing that the measure topic score 

would be equal to one clinical measure in the calculation of the Total Performance Score. 

 For additional explanation of our proposal to calculate measure topic scores, please see 

the following examples: 

Example 1: Facility X serves hemodialysis (HD), peritoneal dialysis (PD), and 
pediatric patients. For HD patients, Facility X’s Kt/V measure rate is 50/60. For 

PD patients, Facility’s X’s Kt/V measure rate is 15/20. For pediatric patients, 

Facility X’s Kt/V measure rate is 10/20. There are 100 patients included in the 

measure topic (60+20+20). Assume that the facility’s measure rates lead to the 

following measure scores: HD – 7; PD – 8; pediatric – 5. To compute the Kt/V 

Dialysis Adequacy measure topic score for Facility X, we would calculate the 

following: (7*60/100)+(8*20/100)+(5*20/100) = 6.8, which we would round to 

7. The Kt/V Dialysis Adequacy measure topic score would then be treated as one 

clinical measure when calculating the Total Performance Score. 

Example 2: Facility Y serves HD patients and PD patients. For HD patients, 

Facility Y’s Kt/V measure rate is 50/60; assume that this rate leads to a score of 6. 

For PD patients, Facility Y’s Kt/V measure rate is 4/7. Facility Y has no Kt/V 

measure rate for pediatric patients because it does not serve this population. 

Assume that the minimum case number for scoring a measure is 11. Because 

there are only seven cases in Facility Y’s denominator, Facility Y would not 

receive a PD Kt/V measure score. Furthermore, Facility Y did not treat any 

pediatric patients, so it would not receive a pediatric Kt/V measure score. 

Therefore, the Kt/V Dialysis Adequacy measure topic score for Facility Y would 

be 6. The Kt/V Dialysis Adequacy would then be treated as one clinical measure 

when calculating the Total Performance Score. 

 We request comment on the proposed method of weighting individual measure 

scores to derive a measure topic score. 

b. Proposals for Weighting the Total Performance Score 
We believe that weighting the finalized clinical measures/measure topics equally will 

incentivize 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. 

We also believe that, while the reporting measures are valuable, the clinical measures value 

actual patient outcomes and therefore justify a higher combined weight. We do, however, 

propose to weight the clinical measures slightly less for the PY 2015 ESRD QIP than we did for 

the PY 2014 ESRD QIP. For the PY 2015 ESRD QIP, we believe it is important to begin to 

more rigorously incentivize reporting, specifically since for three of the four reporting measures, 

we now require actual data submission. We intend to use these data for purposes of developing 

and creating clinical measures in the future; thus, complete and correct data submission in these 

areas is essential to the program’s overall goal of continued and improved ESRD quality care. 

For these reasons, we propose to equally weight the clinical measures/measure topics for which a 

facility receives a score equal to 80 percent of the Total Performance Score; we also propose to 

equally weight the reporting measures for which a facility receives a score as 20 percent of the 

Total Performance Score. We request comment on this proposed methodology for weighting the 

clinical and reporting measures. 

We have also considered the issue with awarding a Total Performance Score to facilities 

that do not report data on the proposed minimum number of cases with respect to one or more of 

the finalized measures/measure topics. As we stated in the CY 2012 ESRD PPS final rule, we 

believe it is important to include as many facilities as possible in the ESRD QIP. We have, 

however, revisited our policy of including any facility that receives a score on one measure, 

whether that measure is a clinical or reporting measure, and we have decided to propose a 

different approach for PY 2015. We believe it is preferable to require a facility to have at least 
one clinical and one reporting measure to receive a Total Performance Score. By requiring this 

minimum, we ensure that a facility is not included in the program unless it meets the minimum 

case requirement for at least one clinical measure/measure topic. In the case of a facility that has 

sufficient data (11 cases, as proposed below) from the performance period, but lacks sufficient 

data (11 cases, as proposed below) to calculate the improvement threshold, we propose to only 

calculate its achievement score, because it would not be possible to calculate its improvement 

score. We request comment on our proposals to require a facility to qualify for a score on at 

least one reporting and one clinical measure in order to receive a Total Performance Score. 

Finally, we propose that all Total Performance Scores be rounded to the nearest integer, 

with half being rounded up, and we request comment on this proposal. For further examples 

regarding measure and Total Performance Score calculations, we refer readers to the figures 

below. 

c. Examples of the Proposed PY 2015 ESRD QIP Scoring Methodology 

Below, we provide examples to illustrate the proposed scoring methodology for PY 2015. 

Figures 1-3 illustrate the scoring for a clinical measure. Figure 1 shows Facility A’s 

performance on an example clinical measure. Note that for this example clinical measure, the 

facility is attempting to achieve a high rate (that is, the higher the measure rate, the higher the 

measure score). The example benchmark (which is the 90th percentile of performance nationally 

in CY 2011) calculated for this measure is 74 percent, and the example achievement threshold 

(which is the 15th percentile of performance nationally in CY 2011) is 46 percent. Facility A’s 

performance rate of 86 percent during the performance period meets or exceeds the benchmark 

of 76 percent, 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 1. Measure Rate at or above the Benchmark. 

Figure 2 shows the scoring for another facility, Facility B. As illustrated below, the facility’s 

performance on the example clinical measure improved from 26 percent in CY 2012 to 54 percent 

during the performance period. The achievement threshold is 46 percent, the performance standard 

is 58 percent, and the benchmark is 74 percent.
Figure 2. Measure Rate within the Achievement Range and within the Improvement 

Range. 

 

Because the facility’s performance during the performance period is within both the achievement 

range and the improvement range, we must calculate both the improvement and achievement 

score to find the example clinical measure score. To calculate the achievement score, we would 

employ the formula discussed above. 

The result of this formula for this example is [9 * ((54 – 46)/(74 - 46))] + .5, which equals 3.07 

and we round to 3. 

 Facility Performance Rate – Achievement Threshold 

9 x + 0.5 

 Benchmark – Achievement Threshold 
Likewise, to calculate the improvement score, we employ the improvement formula discussed 

above. 

The result of this formula for this example is [10 * ((54 - 26) / (74 - 26))] – .5, which equals 5.33 

and we round to 5. Therefore, for this example clinical measure, Facility B’s achievement score 

is 3, and its improvement score is 5. We award Facility B the higher of the two scores. Thus, 

Facility B’s score on this example measure is 5. 

In Figure 3 below, Facility C’s performance on the example clinical measure drops from 

53 percent in CY 2012 to 40 percent in CY 2013, a decline of 13 percent. 

Figure 3. Measure Rate below the Achievement Range and the Improvement Range 

Because Facility C’s performance during the performance period falls below the achievement 

threshold of 46 percent, it receives 0 points for achievement. Facility C also receives 0 points for 

 Facility Performance Rate – Improvement Threshold 

10 x - 0.5 

 Benchmark – Improvement Threshold 
improvement because its performance during the performance period was lower than its 

performance during CY 2012. Therefore, in this example, Facility C would receive 0 points for 

the example clinical measure. 

The method illustrated above would be applied to each clinical measure in order to obtain 

a score for each measure. Scores for reporting measures are calculated based upon their 

individual criteria, as proposed. 

After calculating the scores for each measure, we would calculate the Total Performance 

Score. As an example, applying the weighting criteria to a facility that receives a score on all 

finalized measures, we would calculate the facility’s Total Performance Score using the 

following formula: 

Total Performance Score = [(.200 * Hemoglobin Greater Than 12g/dL Measure) 

+ (.200 * Kt/V Dialysis Adequacy Measure Topic) + (.200 * Vascular Access 

Type Measure Topic) + (.200 * Hypercalcemia Measure) + (.05 * NHSN Dialysis 

Event Reporting Measure) + (.05 * ICH CAHPS Survey Reporting Measure) + 

(.05 * Mineral Metabolism Reporting Measure) + (.05 * Anemia Management 

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 facility did not receive a score on the proposed 

Hypercalcemia measure, the facility’s Total Performance Score would be calculated as follows: 

Total Performance Score = [(.267 * Hemoglobin Greater Than 12g/dL Measure) 

+ (.267 * Kt/V Dialysis Adequacy Measure Topic) + (.267 * Vascular Access 

Type Measure Topic) + (.05 * NHSN Dialysis Event Reporting Measure) + (.05 * 
ICH CAHPS Survey Reporting Measure) + (.05 * Mineral Metabolism Reporting 

Measure) + (.05 * Anemia Management Reporting Measure)] * 10 

Again, 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). 

Finally, if, for example, a facility qualified for only two of the reporting measures, 

the facility’s Total Performance Score would be calculated as follows: 

Total Performance Score = [(.200 * Hemoglobin Greater Than 12g/dL Measure) 

+ (.200 * Kt/V Dialysis Adequacy Measure Topic) + (.200 * Vascular Access 

Type Measure Topic) + (.200 * Hypercalcemia Measure) + (.100 * Mineral 

Metabolism Reporting Measure) + (.100 * Anemia Management Reporting 

Measure)] * 10. 

Again, 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). 

11. Proposed Minimum Data for Scoring Measures for the PY 2015 ESRD QIP 

 We are proposing to only score facilities on clinical measures for which they have a 

minimum number of cases during the performance period. We have assessed how reliable each 

proposed clinical measure is using the currently available data. Specifically, we studied the 

degree the measures assess the actual differences in performance among facilities as opposed to 

the variation within a facility. Thus, in order for a facility to be scored on any clinical measure, 

we are proposing that the facility must report a minimum number of cases qualifying for that 

measure over the course of the 12-month performance period. This proposed minimum seeks to 

ensure that facilities are being evaluated based on the care they provide. 

a. Proposed Minimum Data for Scoring Measures for the PY 2015 ESRD QIP 
 Dialysis facilities tend to have a small, relatively stable patient census, with each facility 

reporting on an average of 50-60 cases per measure. In previous rules, commenters have asked 

that we consider the effect of case size on measure reliability in the context of the ESRD QIP. 

We recognize that as a general principle, reliability improves with increasing case size; that is, 

the reliability of a measure or score describes numerically to what extent that measure or score 

assesses the actual differences in performance among facilities as opposed to the random 

variation within facilities. Furthermore, we wish to be responsive to public comment and to 

ensure that dialysis facilities with extremely small numbers of patients are not penalized by the 

ESRD QIP due to random variation in their patient samples. Thus, we have developed and 

propose here a new methodology to make favorable adjustments to the clinical measure rates of 

facilities with very small numbers of patients. We also propose a case minimum for clinical 

measures to protect patient privacy, which we believe could be compromised if the publicly 

reported data for a facility is based on a small patient population. 

i. Proposed Case Minimum for Clinical Measures 

Given the ESRD QIP’s potential to encourage quality improvement, our goal is to ensure 

the full participation of as many facilities as possible in the program. However, we must ensure 

that all measure rates capture a large enough number of patients so that the privacy of each 

patient is protected. A case minimum allows us to achieve these policy objectives of 

measurement reliability and patient privacy. 

For the first 3 payment years of the ESRD QIP, we set the minimum number of cases to 

be scored on a clinical measure at 11. Eleven cases has historically been the case minimum for 

displaying measures on DFC. We have determined that in the context of DFC, 11 cases will 

meet the requirement that individual patients are not identifiable in the aggregate measure rate. 
Given that we believe that 11 cases is sufficient to address privacy concerns and that our policy 

objective is to maximize the number of facilities that participate in the ESRD QIP, we propose to 

set a proposed case minimum threshold of 11 cases. Under this proposal, facilities must report at 

least 11 qualifying cases over the course of the 12-month performance period to be scored on a 

given clinical measure. We seek public comment on this proposal. 

ii. Proposed Adjustment Methodology for Clinical Measures 

We indicated in the CY 2012 ESRD PPS final rule that we would continue to assess the 

reliability of our measures in future payment years of the program (76 FR 70259). To further 

explore this issue in response to comments, we evaluated the reliability of measure rates and the 

Total Performance Score for facilities of various sizes using the PY 2014 program clinical 

measures. Specifically, we performed a simulation of the PY 2014 QIP to calculate the InterUnit Reliability (IUR) stratified by facility size. The IUR is a statistic commonly adopted for 

assessing the reliability of measures or scores, and is the ratio of the between-facility variance to 

the sum of the between-facility variance and the within-facility variance. 

We found the reliability of the Total Performance Score to be acceptable for all strata 

(IUR>0.6). However, we recognize that facilities with very small numbers of patients are more 

likely to have a lower IUR. In a facility with a low IUR, the case mix might potentially shift its 

measure rate higher or lower than the rate the same facility would report if it were treating an 

“average” ESRD population. In the context of the ESRD QIP, a favorable skew would not have 

a negative effect on facility payment, but an unfavorable skew potentially could result in the 

facility receiving a payment reduction. We cannot identify which specific facilities will have a 

low IUR until after the performance period has concluded. However, in performing the 

stratification analysis, we found that a favorable adjustment to the two strata with the lowest 
number of cases would reduce the risk of penalizing facilities in those strata for random withinfacility variation. The average number of cases contributing to the Total Performance Score in 

the second stratum is 25. Accordingly, we have developed and propose below a favorable 

adjustment to the measure rates for facilities with at least the minimum case threshold of 11 and 

fewer than the adjustment threshold of 26 cases. This methodology would give facilities “the 

benefit of the doubt” and ensure that any error in measure rates due to a small number of cases 

will not adversely affect payment. 

Specifically, if a facility reports at least a proposed adjustment threshold of 26 cases during 

the 12-month performance period on a measure, it would be scored based on its raw performance 

rate on the measure. If the facility reports between 11 and 25 cases during the 12-month 

performance period, it would be scored based on its raw performance rate plus a favorable 

reliability adjustment to account for a possible unfavorable skew in the measure rate due to small 

sample size. 

We propose the following methodology to adjust the measure rate used to score facilities 

with 11-25 cases for a given measure. The adjustment factors in facility size and the standard 

error of the measure, which can be estimated using an analysis of variance (ANOVA). This 

analysis allows us to estimate how much better the measure rate could have been if that facility 

were treating an “average” population of patients and make a favorable adjustment to the 

facility’s score in that amount. For example, as a facility treats more patients, the reliability of 

the measure rate improves, and the difference between the facility’s measure rate and the 

measure rate we statistically would expect to see if the facility were treating an “average” panel 

of patients decreases. Thus, the magnitude of the adjustment factor increases as the number of 

cases decreases from 25 to 11. 
Because the adjustment factor takes into account a facility’s performance (standard error of 

the measure) and the number of cases for the measure, it is computed separately for each 

measure. The specific methodology we propose follows: 

• ANOVA provides an estimate sw of the square root of within facility variance, given by the 

within subject mean square. 

• Then for the i

th facility, the standard error of the average measure (denoted by ) is 

given by SE(xi)= , where ni is the number of patients in the i

th facility. Now 

denote C as the minimum case number. We propose the following adjustment for the 

original score by introducing a weight depending on facility size. 

• Let if < C, and = 0 if , where C is the lower bound of cases 

for facilities that will not receive any adjustment. 

• For measures where large values of xi are good (i.e., for the PY 2015 ESRD QIP, the 

fistula measure and the Kt/V Dialysis Adequacy measure topic): 

o The new score is: (If , we set ). 

• In cases where lower values of xi are better (i.e., for the PY 2015 ESRD QIP, the 

Hemoglobin Greater Than 12g/dL, catheter, and Hypercalcemia measures): 

o The new score is: (If , we set ). 

This approach gives facilities an allowance to account for the uncertainty in the estimate by 

accounting for the size of the patient population in both weights and standard errors. As 

explained above, this allowance decreases when the case size increases (from 11 to 26 or more) – 
the larger the case size, the smaller the allowance. For example, when C=26, this implies that for 

measures with 26 cases and above, no allowance is made. We seek public comment on this 

methodology and the proposed adjustment threshold.

In summary, based on these analyses, we propose for PY 2015 a new approach to account 

for facilities with low case numbers. A facility would fall into one of three categories with 

respect to each clinical measure. 

• If the facility reported at least the adjustment threshold for a clinical measure (that 

is, at least 26 cases meeting the measure specifications), we would calculate the 

measure score with no adjustment. 

• If the facility reported fewer cases than the case minimum for a clinical measure 

(that is, fewer than 11 cases meeting the measure specifications), we would not 

calculate a score for the measure. 

• If the facility reported at least the case minimum, but fewer than the adjustment 

threshold for a measure (that is, at least 11 but fewer than 26 cases meeting the 

measure specifications), we would use an adjustment to calculate a score for the 

measure. 

We believe that this proposal balances the competing interests of privacy, measure and 

Total Performance Score reliability, and allows for the inclusion of as many facilities in the 

ESRD QIP as possible. We request public comment on the case minimum proposals. 

While one model is presented above, we invite comment on alternative approaches that 

are consistent with our intent to include as many facilities as possible in the ESRD QIP and at the 

same time address concerns from stakeholders regarding the reliability of measures where there 
are small numbers of cases. We believe that this adjustment is appropriate for the ESRD QIP 

considering the particular measure set and scoring methodology for PY 2015. As the program 

grows and evolves, we will continue to assess reliability based on the measures and scoring 

methodology for that payment year. 

b. Proposed Minimum Data Requirements for Reporting Measures by New Facilities 

 For purposes of the PY 2014 ESRD QIP, we stated that a facility that receives a CCN on 

or after July 1, 2012 has the option to choose whether or not it is scored on each reporting 

measure (76 FR 70275). We considered using the same approach for PY 2015 as we did in PY 

2014 (that is, allowing new facilities to choose whether or not they will be scored on each 

reporting measure). Under that approach, if a new facility reports enough information to receive 

10 points on a reporting measure, the facility is scored on that measure. If a new facility scores 

zero or 5 points on a reporting measure, it is not scored on that measure. As the program 

evolves, we believe it is important to continuously push improvement in all facilities – both old 

and new. Additionally, we wish to incentivize new facilities to put reporting mechanisms in 

place as soon as possible. For these reasons, we propose to modify the reporting measure 

minimum data requirement from that of PY 2014. 

For PY 2015, we propose that any facility receiving a CCN before July 1, 2013 be scored 

on the reporting measures. However, since a facility receiving a CCN after January 1, 2013 

would not be able to report a full 12 months of data, we do not believe it is appropriate to require 

it to do so in order to receive a full 10 points on the reporting measures. Instead, we propose to 

score these facilities proportionately for the time for which they have a CCN during the 

performance period. To earn 10 points on the ICH CAHPS reporting measure, we propose to 

require that a facility receiving a CCN between January 1, 2013 and June 30, 2013 attest that it 
successfully administered the survey during the time for which it had a CCN during the 

performance period. For purposes of the Anemia Management, NHSN Dialysis Event, and 

Mineral Metabolism reporting measures, we propose that if a facility receives a CCN on or after 

January 1, 2013, but before July 1, 2013, it would receive 10 points for reporting for all months 

for which it has a CCN and 5 points for consecutively reporting half of the months for which it 

has a CCN during the performance period. If a facility has a CCN for an odd number of months, 

we would round down to calculate the number of months for which it must report to receive 5 

points. Finally, we propose to begin counting the number of months for which a facility is open 

on the first day of the month after the facility receives a CCN. For example, assume a facility 

receives a CCN on March 15, 2013. In order for this facility to receive 10 points on the 

applicable reporting measure, it must report data from April 1, 2013 – December 31, 2013 (or 9 

months of data). In order for it to receive 5 points, it must report half of the months for which it 

is open, consecutively. For this facility to receive 5 points, it would need to report 4.5 months of 

data. Since we have proposed to round down, this facility would be required to report 4 months 

of data to receive 5 points. 

We realize that facilities receiving a CCN on or after July 1, 2013, may have difficulty 

meeting the requirements of the reporting measures, such as enrolling and training for the NHSN 

Dialysis Event reporting measure or hiring a third-party to administer the ICH CAHPS survey, 

because of the short period of time left in the performance period. We also do not believe it is 

appropriate to reduce payment for a one year period based on less than 6 months of performance. 

Therefore, we propose to exclude facilities receiving a CCN on or after July 1, 2013 from the 

requirements of the reporting measures. Because we have proposed, as discussed above, that a 

facility will not receive a Total Performance Score unless it receives a score on at least one 
clinical and one reporting measure, finalizing this proposal would result in facilities not being 

eligible for a payment reduction if they receive a CCN on or after July 1, 2013. We request 

comment regarding these proposals. We also elicit comments regarding whether there would be 

a more appropriate way to score these new facilities on reporting measures so that they may be 

eligible for inclusion in the ESRD QIP. 

12. Proposed Payment Reductions for the PY 2015 ESRD QIP 

Section 1881(h)(3)(A)(ii) of the Act requires the Secretary to ensure that the application 

of the scoring methodology results in an appropriate distribution of payment reductions across 

facilities such that facilities achieving the lowest Total Performance Scores receive the largest 

payment reductions. For PY 2014, we adopted an approach under which a facility did not have 

to meet or exceed the performance standards with respect to each of the finalized clinical 

measures to avoid receiving a payment reduction under the ESRD QIP. Rather, even if a facility 

failed to meet or exceed the performance standards with respect to one or more of these 

measures, the facility could avoid a payment reduction if it achieved a minimum Total 

Performance Score that is equal to or greater than the minimum Total Performance Score it 

would receive if it had met the performance standards for each of the clinical measures or, in the 

case of the Vascular Access Type Measure, for the two subcomponent measures. 

For PY 2014, in calculating this minimum Total Performance Score, we excluded the 

reporting measures because we believed this approach best underscored the importance of the 

clinical measures. For PY 2015, we propose to retain the same approach as in PY 2014. We 

discuss the methodology for deriving the performance standards for the measure topics, above. 

We request comments on these proposals. 

Alternately, in order to better incentivize compliance with reporting measures, we also 
considered raising the minimum Total Performance Score to include 50 percent of the total 

points a facility could have received had it met all of the reporting requirements for each 

measure. In other words, because a facility could receive up to 40 points in PY 2015 for meeting 

all of the reporting measure requirements, we considered raising the minimum Total 

Performance Score by 20 points (one-half of 40). This approach would ensure that facilities 

receiving a CCN before August 1, 2013 could still achieve the minimum Total Performance 

Score by meeting, on average, the performance standards for the clinical measures and achieving 

as many points on the reporting measures as is possible. We request comment regarding whether 

the reporting measures should be scored at greater than 0 when calculating the minimum Total 

Performance Score. 

 Section 1881(h)(3)(A)(ii) of the Act requires that facilities achieving the lowest Total 

Performance Scores receive the largest payment reductions. For PY 2014, we adopted an 

approach we intend to continue for PY 2015. We believe that this consistency will allow the 

program to be more understandable to both facilities and the general public. Therefore, we 

propose that the payment reduction scale be the same as the PY 2014 program. Therefore, for 

each 10 points a facility falls below the minimum Total Performance Score, it would receive an 

additional 0.5 percent payment reduction on its ESRD payments for PY 2015, with a maximum 

reduction of 2.0 percent. As we stated in the CY 2012 ESRD PPS final rule, we believe that 

such a sliding scale will incentivizes facilities to meet the performance standards and continue to 

improve their performance because even if a facility fails to achieve the minimum Total 

Performance Score, such facility will still be incentivized to strive for, and attain, better 

performance rates in order to reduce the amount of its payment reduction (76 FR 70281). We 

request comments on the proposed payment reduction scale. 
 Because we are not yet able to calculate the performance standards for each of the 

clinical measures, we are also not able to calculate the minimum Total Performance Score. 

Based on the estimated performance standards listed above, we estimate that a facility must meet 

or exceed a minimum Total Performance Score of 52 to avoid a payment reduction. Facilities 

failing to meet this minimum will receive payment reductions in the estimated amounts indicated 

in the Table 8 below. 

Table 8. Estimated Payment Reduction Scale for PY 2015 based on the Most Recently 

Available Data. 

Total Performance Score Reduction 

100-52* 0% 

51-42 0.5% 

41-32 1.0% 

31-22 1.5% 

21-0 2.0% 

13. Proposed Data Validation 

 One of the critical elements of the ESRD QIP’s success is ensuring that the data 

submitted to calculate measure scores and Total Performance Scores is accurate. To that end, we 

have procured the services of a data validation contractor who will be tasked with validating a 

national sample of facilities’ records as they report data under the ESRD QIP. Beginning in CY 

2013, we propose to begin a pilot data validation program for the ESRD QIP. Because data 

validation for the ESRD QIP is new to both facilities as well as CMS, we believe that the first 

year of validation should result in no payment reductions to facilities. Accordingly, we propose 

that, beginning in CY 2013, we would randomly sample the records of approximately 750 

facilities. We anticipate that a CMS-designated contractor would request approximately 10 

records from each of these facilities. We propose that the facility must comply with this request 
for records within 60-days of receiving notice. The contractor would review these records to 

ensure accuracy and reliability of the data reported by the facility for purposes of the ESRD QIP. 

As noted above, we propose that, in the first year of this program, no facility will receive 

a payment reduction resulting from the data validation process. In future years of the program, 

we intend to evolve our pilot program into a full, data validation effort. We are also discussing 

a data validation measure whereby facilities would be scored based on the accuracy of their 

records. Finally, we are contemplating increasing a facility’s payment reduction by one tier (for 

example, from 0.5 percent to 1.0 percent) if its data is incorrect beyond a certain threshold. In 

future years, we intend to propose more detailed procedures regarding data validation process 

that may result in penalties. We request comment on our data validation proposals for PY 2015 

and the methods we are considering for PY 2016.

14. Proposals for Scoring Facilities Whose Ownership has Changed 

 During our first year of implementation of the ESRD QIP, PY 2012, facilities requested 

guidance regarding how a change in ownership affects any applicable ESRD QIP payment 

reduction. We propose that, for all future years of the ESRD QIP, the application of an ESRD 

QIP payment reduction would depend on whether the facility retains its CCN after the ownership 

transfer. If the facility’s CCN remains the same after the facility is transferred, for purposes of 

the ESRD QIP, we would consider the facility to be the same facility (despite the change in 

ownership) and we would apply any ESRD QIP payment reduction for the transferor to the 

transferee. Likewise, as long as the facility retains the same CCN, we would calculate the 

measure scores using the data submitted during the applicable period regardless of whether the 

ownership changed during one of these periods. If, however, a facility receives a new CCN as a 

result of a change in ownership, we would treat the facility as a new facility for purposes of the 
ESRD QIP as of the date it received the new CCN. We believe that these proposals are the most 

operationally efficient and will allow facilities the most certainty when they change ownership. 

We propose to apply these rules beginning with the PY 2014 ESRD QIP, and we request public 

comment on these proposals. 

15. Proposals for Public Reporting Requirements 

Section 1881(h)(6)(A) of the Act requires the Secretary to establish procedures for 

making information regarding facilities’ performance under the ESRD QIP available to the 

public, including information on the Total Performance Score (as well as appropriate 

comparisons of facilities to the national average with respect to such scores) and performance 

scores for individual measures achieved by each facility. Section 1881(h)(6)(B) of the Act 

further requires that a facility have an opportunity to review the information to be made public 

with respect to that facility prior to such information’s publication. In addition, section 

1881(h)(6)(C) of the Act requires the Secretary to provide each 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 facilities and 

performance-score data on the CMS Web site. 

In the PY 2012 ESRD QIP final rule, we adopted uniform requirements based on sections 

1881(h)(6)(A) through 1881(h)(6)(D) of the Act, establishing procedures for facilities to review 

the information to be made public and the procedures for informing the public through facilityposted certificates for the first 3 payment years of the ESRD QIP (76 FR 636 through 639). We 

propose that these requirements generally apply to PY 2015 and subsequent payment years. 

However, we are proposing to make some modifications, as outlined below, to these 

requirements and that these modifications, if finalized, become effective upon the effective date 
of this final rule; thus, these requirements, if finalized, would apply in PY 2014 and for 

subsequent payment years. All other previously finalized requirements would remain the same. 

First, for the first year of the program, PY 2012, we did not explicitly state that we would be 

publishing a list of facility performance on or after December 1 of the year before the payment 

consequence year. We did, however, make this list available for the pubic via the CMS website. 

For the PY 2013 ESRD QIP and subsequent payment years, and in accordance with section 

1881(h)(6)(D) of the Act, we propose to publish such aggregate list on the CMS website at 

www.cms.gov and any other website controlled by CMS. This list will include information on 

the facility, specifically: 

(i) name and address; 

(ii) measure rates (which may include numerators and denominators) and scores; 

(iii) and Total Performance Scores. 

This list will also indicate those facilities which do not have enough data to calculate one or 

more measure rates and/or a Total Performance Score. We believe it is important to publish such 

a list because it allows beneficiaries, the public, and facilities access to this information without 

having to individually download a certificate for each facility, and, because of such access, we 

believe it will ultimately improve quality. The data will be more accessible, Medicare 

beneficiaries and their families will have the information more easily to make choices about their 

care, and facilities can more readily compare their performance to other facilities or across 

facilities. Therefore, beginning in January 2013, we propose to publish a list of facility 

information described above for each payment year after facilities have the ability to review their 

scores. 

Second, for PY 2012, we required facilities to prominently post certificates within five 
days of us making these certificates available for download from Dialysis Facility Reports (DFR) 

in accordance with section 1881(h)(6)(C) of the Act (76 FR 637). We are proposing to modify 

the previously finalized requirements for posting certificates in two ways. We no longer believe 

it is necessary for facilities to post these certificates within five days of their availability. The 

certificates are provided in late December, and it was our experience in the PY 2012 program 

that many individuals responsible for the certificates were away on holiday during this period of 

time. Therefore, we are proposing to change this requirement so that, beginning with the PY 

2014 program, facilities will be required to post their certificates on or before the first business 

day after January 1 of each payment year. Certificates are typically available for download on or 

around December 15, and we believe that this two week amount of time is long enough to allow 

facilities to post them. Therefore, beginning PY 2014, we propose that facilities be required to 

post their Performance Score Certificates on or before the first business day after January 1 of 

each payment year in a prominent place for the duration of that payment year and otherwise 

comply with the requirements listed in the PY 2012 final rule (76 FR 637). 

Third, for the PY 2012 ESRD QIP, we required facilities to post one copy of the 

certificate in their facility (76 FR 637). Beginning PY 2014, we propose to require facilities to 

post two copies of this certificate, one copy in English and one copy in Spanish. Both of these 

certificates (which are posted as a single file) will be provided by CMS, both must be posted by 

the first business day after January 1 of the payment year, and both must be posted for the 

entirety of such year in a prominent location. We are proposing to require the certificate to be 

posted in both English and Spanish to make the certificate more understandable to native Spanish 

speakers. Thus, to best serve a greater number of ESRD patients, we propose to finalize the 

requirement that facilities must post both an English and a Spanish certificate prominently in 
their facility. The only additional burden for facilities in adding this Spanish certificate is its 

printing and posting. 

IV. Limitation on Payments to All Providers, Suppliers and Other Entities Entitled 

to Bad Debt 

A. Background 

Under section 1861(v)(1) of the Act and current regulations at 42 CFR §§413.89 and 

413.178, Medicare pays some or all of the uncollectible deductible and coinsurance amounts to 

those entities eligible to receive reimbursement for bad debt. To determine if bad debt amounts 

are allowable, the requirements at §413.89 must be met. Chapter 3 of the Provider 

Reimbursement Manual (PRM) (CMS Pub. 15, Part I) provides guidance on the standards 

governing bad debt reimbursement. 

Under section 1861(v)(1)(T) of the Act and §413.89(h)(1) of the regulations, Medicare 

payments for allowable bad debt amounts for hospitals are reduced by 30 percent for cost 

reporting periods beginning on or after October 1, 2001. Also, under section 1861(v)(1)(V) of 

the Act and §413.89(h)(2) of the regulations, Medicare payments for allowable bad debt amounts 

for patients that are not dual eligible individuals in skilled nursing facilities (SNFs) with cost 

reporting periods beginning on or after October 1, 2005, are currently reduced by 30 percent. 

Section 413.89(h)(2) also defines a dual eligible individual for bad debt purposes as an 

individual that is entitled to benefits under Part A of Medicare and is determined eligible by the 

State for Medical Assistance under Title XIX of the Act as described in 42 CFR §423.772 

paragraph (2) under the definition of a “full-benefit dual eligible individual.” 

For all other providers, suppliers, and entities eligible to receive bad debt payment, 

including critical access hospitals (CAHs), rural health clinics (RHCs), Federally qualified health 
centers (FQHCs), community mental health centers (CMHCs), swing bed hospitals, as defined at 

42 CFR §413.114(b), and patients that are dual eligible individuals in SNFs, Medicare pays 100 

percent of allowable bad debt amounts. Although Medicare pays end-stage renal disease 

(ESRD) facilities 100 percent of allowable bad debt amounts, these payments are currently 

capped at the facility’s reasonable cost in accordance with §413.178(a). In addition, for health 

maintenance organizations (HMOs) reimbursed on a cost basis and competitive medical plans 

(CMPs) defined under section 1876 of the Act, and for health care prepayment plans (HCPPs) 

defined under section 1833(a)(1)(A) of the Act, Medicare pays a portion of bad debt amounts 

under 42 CFR §417.536(f) of our regulations.

B. Section 3201 of The Middle Class Tax Extension and Job Creation Act of 2012 Pub. L. No.

112-96 

Sections 3201(a) and (b) of the Middle Class Tax Extension and Job Creation Act of 

2012 (Pub. L. No. 112-96) amended section 1861(v)(1)(T) and section 1861 (v)(1)(V) of the Act, 

respectively, by further reducing the percentage of allowable bad debt attributable to the 

deductibles and coinsurance amounts payable to hospitals and SNFs. Section 3201(b) of The 

Middle Class Tax Extension and Job Creation Act of 2012 revised the SNF bad debt reductions 

to include both dual eligible beneficiaries and non-dual eligible beneficiaries under section 

1861(v)(1)(V) of the Act and to apply such reductions to swing bed hospitals for cost reporting 

periods beginning during fiscal year 2013 and subsequent fiscal years. 

Finally, section 3201(c) of The Middle Class Tax Extension and Job Creation Act of 

2012 added a new subparagraph 1861(v)(1)(W) to the Act, which applied a reduction in bad debt 

payments to “providers” not addressed under subparagraphs 1861(v)(1)(T) or 1861 (v)(1)(V) of 

the Act. For the purpose of subparagraph 1861(v)(1)(W) of the Act, section 3201(c) of The 
Middle Class Tax Extension and Job Creation Act of 2012 defined “providers” as a supplier or 

any other type of entity that receives payment for bad debts under the authority of section 

1861(v)(1)(A) of the Act. These providers include, but are not limited to, CAHs, RHCs, FQHCs, 

CMHCs, HMOs reimbursed on a cost basis, CMPs, HCPPs and ESRD facilities. 

C. Summary of Provisions of this Proposed Rule

1. Self-Implementing Provisions of section 3201 of The Middle Class Tax Extension and Job 

Creation Act of 2012 (Pub. L. No. 112-96) 

The provisions of subsections 3201(a), (b), and (c) of The Middle Class Tax Extension and 

Job Creation Act of 2012 permit no discretion on the part of the Secretary and thus, are self 

implementing, with the exception of ESRD facilities as discussed below. We are proposing to 

codify these provisions, as summarized below, in our regulations. 

• Payment of allowable bad debt to hospitals for cost reporting periods beginning during 

fiscal year 2013 and subsequent fiscal years would be reduced by 35 percent. 

• Payment of allowable bad debt to SNFs and swing bed hospitals for cost reporting 

periods beginning during fiscal year 2013 or a subsequent fiscal year would be reduced by 35 

percent for coinsurance amounts for services furnished to a beneficiary who is not a dual eligible 

individual. 

• Payment of allowable bad debt to SNFs and swing bed hospitals for coinsurance for 

services furnished to a beneficiary who is a dual eligible individual would be: 

• for cost reporting periods beginning during fiscal year 2013, reduced by 12 

percent; 

• for cost reporting periods beginning during fiscal year 2014, reduced by 24 

percent and; 
• for cost reporting periods beginning during fiscal year 2015, reduced by 35 

percent. 

• Payment of allowable bad debt to all other providers, suppliers and any other entity that 

receives payment for bad debts under the authority of section 1861(v)(1)(A) of the Act would be: 

• for cost reporting periods beginning during fiscal year 2013, reduced by 12 

percent; 

• for cost reporting periods beginning during fiscal year 2014, reduced by 24 

percent; 

• and for cost reporting periods beginning during fiscal year 2015 and subsequent 

fiscal years, by 35 percent. 

A summary of the changes in Medicare bad debt payment percentages required by 

section 3201 of The Middle Class Tax Extension and Job Creation Act of 2012 is reflected in 

Table 9 below: 

Table 9—Summary of Medicare Bad Debt Reimbursement by Provider Types For 

Cost Reporting Periods That Begin During FY 2013, 2014, 2015 and Subsequent Years4 

Provider Type Allowable Bad Debt 

Amount During FY 

2012

Allowable Bad 

Debt Amount 

During FY 2013

Allowable Bad 

Debt Amount

During FY 2014

Allowable Bad 

Debt Amount

During FY 2015 

&

Subsequent FYs

Hospitals 70% 65% 65% 65% 

SNFs: Non-Full Dual Eligibles 70% 65% 65% 65% 

Swing Bed Hospitals: Non-Full Dual 

Eligibles

100% 65% 65% 65% 

SNFs: Full Dual Eligibles 100% 88% 76% 65% 

Hospital Swing Beds: Full Dual 

Eligibles

100% 88% 76% 65% 

CAHs 100% 88% 76% 65% 

ESRD Facilities 100% 88% 76% 65% 

CMHCs 100% 88% 76% 65% 

FQHCs 100% 88% 76% 65% 

 
Provider Type Allowable Bad Debt 

Amount During FY 

2012

Allowable Bad 

Debt Amount 

During FY 2013

Allowable Bad 

Debt Amount

During FY 2014

Allowable Bad 

Debt Amount

During FY 2015 

&

Subsequent FYs

RHCs 100% 88% 76% 65% 

Cost Based HMOs 100% 88% 76% 65% 

Health Care 

Pre-Payment Plans 

100% 88% 76% 65% 

Competitive Medical 

Health Plans 

100% 88% 76% 65% 

1 ESRD facility bad debt payments will continue to be subject to the cap up to the facility’s reasonable costs. 

2. Remove and Reserve §413.178 

 We are proposing to move specific requirements to reimburse ESRD bad debt amounts 

from §413.178 to §413.89 and remove and reserve §413.178. 

3. Technical corrections 

We are also proposing a technical correction to 42 CFR 417.536(f)(1) to refer to 42 CFR 

413.89 as the appropriate cross reference to Medicare bad debt reimbursement policy, to revise 

the existing language describing bad debt to conform to §413.89(a), and to remove requirements 

that already are set out at §413.89. 

D. Proposed Changes to Medicare Bad Debt Policy 

In this rule, we are proposing to conform existing regulations text found at §413.89(h) to 

the self-implementing provisions of section 3201 of The Middle Class Tax Extension and Job 

Creation Act of 2012. We currently cap bad debt reimbursement to an ESRD facility’s 

reasonable costs under §413.178(a). In this rule, we are proposing to move the current provision 

at §413.178(a) to proposed §413.89(h)(3), and to add ESRD facilities to the list of facilities to 

which §413.89 “Bad debts, charity, and courtesy allowances,” applies. We also propose to 

remove duplicate provisions and reserve §413.178 for further use. In addition, we are making a 

technical correction to §417.536(f)(1) to clarify Medicare bad debt reimbursement policy. 

1. Proposed Changes to 42 CFR 413.89(h) 
Under each paragraph of our existing regulations at §413.89(h), we describe the limits on 

bad debt payment to be reductions to the amount of bad debt otherwise treated as allowable 

costs. Under §413.89(a), bad debts are deductions from revenue and are not to be included in 

allowable cost. Therefore, we are proposing to clarify that the limits on bad debt payments are 

reductions to amount of allowable bad debt. 

We propose to revise §413.89(h)(1)(iv) to set forth the percentage reduction in 

reimbursable bad debt payments to hospitals for cost reporting periods beginning during fiscal 

years 2001 through 2012. 

We propose to add a new §413.89(h)(1)(v), which would set forth the percentage 

reduction in reimbursable bad debt payments required by section 1861(v)(1)(T)(v) of the Act to 

hospitals for cost reporting periods beginning during fiscal year 2013 and subsequent fiscal 

years. 

We propose to revise §413.89(h)(2) to add paragraphs (h)(2)(i) and (h)(2)(ii). Paragraph 

(h)(2)(i) would set forth the percentage reduction in reimbursable bad debt payments required 

by section 1861(v)(1)(V)(ii) of the Act for SNFs and swing bed hospitals for cost reporting 

periods beginning during fiscal year 2006 and subsequent fiscal years for a patient that was not 

a dual eligible individual. Paragraph (h)(2)(ii) would set forth the reduction in reimbursable bad 

debt payments for SNFs and swing bed hospitals, for cost reporting periods beginning during 

fiscal year 2013, fiscal year 2014, fiscal year 2015, and subsequent fiscal years, for a patient 

that was a dual eligible individual. 

We propose to revise §413.89(h)(3) to set forth the percentage reduction in allowable 

bad debt payments required by section 1861(v)(1)(W) of the Act for ESRD facilities for cost 

reporting periods beginning during fiscal year 2013, fiscal year 2014, fiscal year 2015 and 
subsequent fiscal years and to reimburse the reduced amount of bad debt up to the facility’s costs 

as discussed below. 

We propose to add a new §413.89(h)(4) to set forth the percentage reduction in 

reimbursable bad debt payments for all other entities required by section 1861(v)(1)(W) of the 

Act not described in §413.89(h)(1), (h)(2), or (h)(3) that would be eligible to receive 

reimbursement of bad debt for cost reporting periods beginning during fiscal year 2013, fiscal 

year 2014, fiscal year 2015 and subsequent fiscal years. 

2. Rationale for Removing 42 CFR 413.178 

For ESRD facilities, §413.178(a) states that CMS will reimburse each facility its 

allowable Medicare bad debts, as defined in §413.89(b), up to the facility’s costs, as determined 

under Medicare principles, in a single lump sum payment at the end of the facility’s cost 

reporting period. This cap on bad debt payments will remain in place along with applying the 

reductions in bad debt payments discussed above. 

Currently, we reimburse an ESRD facility 100 percent of its allowable bad debt up to the 

facility’s reasonable cost. We considered applying the FY reduction percentage after the cap is 

applied, however, we are proposing to apply the FY reduction percentage to allowable bad debt 

prior to applying the cap. We believe that our proposed application of the reduction percentage 

is more appropriate and consistent with how we currently determine the amount of allowable bad 

debt that is capped at the facility’s cost. 

We are proposing to make the following revisions to §413.89(h)(3) to implement the 

ESRD facilities’ bad debt reduction effective October 1, 2012 in accordance with section 

1861(v)(1)(W) of the Act and to apply the cap on ESRD facilities’ bad debt payments as required 
under §413.178(a). For illustrative purposes only, we have included examples of the 

computation of bad debt payments for each proposed revision to §413.89(h)(3). 

We are proposing to add §413.89(h)(3)(i) for cost reporting periods that begin before 

October 1, 2012, where the cap on bad debt payments would be applied as follows: 

1. Unrecovered costs = $90.00 

2. Allowable bad debt = $110.00 

3. Allowable bad debt of $110.00 is capped at the unrecovered costs of $90.00, 

therefore, the facility would receive $90.00. 

We are proposing to add §413.89(h)(3)(ii) for cost reporting periods that begin during FY 

2013, where the amount of allowable bad debt is reduced by 12 percent and the cap would be 

applied as follows: 

1. Unrecovered costs = $90.00 

2. Allowable bad debt = $110.00 

3. Allowable bad debt of $110.00 would be reduced by 12 percent to $96.80 which is 

capped at the unrecovered costs, therefore, the facility would receive $90.00. 

We are proposing to add §413.89(h)(3)(iii) for cost reporting periods that begin during 

FY 2014, where the amount of allowable bad debt is reduced by 24 percent and the cap would be 

applied as follows: 

1. Unrecovered costs = $90.00 

2. Allowable bad debt = $110.00 

3. Allowable bad debt of $110.00 would be reduced by 24 percent to $83.60 which 

does not exceed the unrecovered costs, therefore, the facility would receive $83.60. 

We are proposing to add §413.89(h)(3)(iv) for cost reporting periods that begin during a 

subsequent FY, where the amount of allowable bad debt is reduced by 35 percent and the cap 

would be applied as follows: 

1. Unrecovered costs = $50.00 

2. Allowable bad debt = $110.00 

3. In this example, allowable bad debt of $110.00 would be reduced by 35 percent to 

$71.50 which is capped at the unrecovered costs. Because, under this example, 

unrecovered costs are set at $50.00, the facility would receive $50.00. 
We propose to remove current regulations text at §413.178(a) since the requirement to 

apply the cap on bad debt payments will be at proposed §413.89(h)(3). We also propose to 

remove current regulations text at §413.178(b), (c), and (d)(1) since these provisions already 

exist in the discussions of our bad debt requirements §413.89, Chapter 3 of the PRM Part I, and 

in the Medicare cost report instructions in the PRM Part II. In addition, we are proposing to 

move the current general bad debt exception at §413.89(i) to new paragraph §413.89(i)(1) in 

order to propose moving the ESRD facilities’ bad debt exception provision currently discussed at 

§413.178(d)(2) to proposed new paragraph §413.89(i)(2). Since we are proposing to remove all 

existing regulations under §413.178 we are proposing to reserve this section for future use. 

3. Technical Corrections to 42 CFR 417.536(f)(1) 

In this rule, we are proposing to revise the regulations text at 417.536(f)(1) to correct the 

cross-reference to the Medicare bad debt reimbursement regulation, so that §417.536(f) (1) 

would reference 42 CFR 413.89 instead of the current outdated reference to §413.80. In 

addition, we are revising the existing language at 42 CFR 417.536(f)(1) to conform to the 

description of bad debt in §413.89(a) and we are removing §§417.536(f)(1)(i) and (ii) since these 

provisions already exist in the discussions of our bad debt requirements §413.89, Chapter 3 of 

the PRM Part I, and in the Medicare cost report instructions in the PRM Part II.. 

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 

In this proposed rule, we are not proposing any changes to regulatory text for the ESRD 

PPS in CY 2013. 

C. Additional Information Collection Requirements 

This proposed rule does not impose any new information collection requirements in the 

regulation text, as specified above. However, this proposed rule does make reference to several 

associated information collections that are not discussed in the regulation text contained in this 

document. The following is a discussion of these information collections. 

1. ESRD QIP 

a. Display of Certificates for the PY 2015 ESRD QIP 

Section III.C.15 of this proposed rule discusses a disclosure requirement for the PY 2014 

and PY 2015 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 with 

their Total Performance Scores under the ESRD QIP. This section also requires each facility that 

receives an ESRD QIP certificate to display it prominently at the facility. 
To comply with this requirement, we proposed to issue one English and one Spanish 

ESRD QIP certificate beginning in PY 2014 to facilities via a generally accessible electronic file 

format. We have previously finalized other display requirements for the program, including that 

each facility prominently display the applicable ESRD QIP certificate in the patient area, take the 

necessary measures to ensure the security of the certificate in the patient areas, and have staff 

available to answer questions about the certificate in an understandable manner, taking into 

account that some patients might have limited English proficiency. 

The burden associated with the aforementioned requirements is the time and effort 

necessary for facilities to print the applicable ESRD QIP certificates, display the certificates 

prominently in patient areas, ensure the safety of the certificates, and respond to patient inquiries 

in reference to the certificates. We do not anticipate that posting the Spanish certificate will add 

more time or burden to the Collection of Information requirements outlined in the CY 2011 

ESRD PPS final rule (76 FR 70298 through 70299) for the PY 2014 ESRD QIP. Therefore, this 

analysis only applies to the burden associated with the PY 2015 and beyond requirements. 

We estimate that approximately 5,633 facilities will receive ESRD QIP certificates in PY 

2015 and will be required to display them. We also estimate that it will take each facility 10 

minutes per year to print, prominently display, and secure the ESRD QIP certificates, for a total 

estimated annual burden of 939 hours (10/60 hours * 5,633 facilities). According to the Bureau 

of Labor Statistics, the mean hourly wage of a registered nurse is $33.23. Since we anticipate 

nurses (or administrative staff) will post these certificates, we estimate that the aggregate cost of 

this requirement will be $31,203 ($33.23/hour x 939 hours). We estimate that approximately 

one-third of ESRD patients, or 100,000 patients, will ask a question about the ESRD QIP 

certificate. We further estimate that it will take each facility approximately five minutes to 
answer each patient question about the applicable ESRD QIP certificate, or 1.52 hours per 

facility each year. The total estimated annual burden associated with this requirement is 8,563 

hours (1.52 hours/facility x 5,633 facilities). The total estimated annual burden for both 

displaying the ESRD QIP certificates and answering patient questions about the certificates is 

9,502 hours (8,563 hours + 939 hours). While the total estimated annual burden associated with 

both of these requirements as discussed is 9,502 hours, we do not believe that there will be a 

significant cost associated with these requirements because we are not proposing to require 

facilities to complete new forms. We estimate that the total cost for all ESRD facilities to 

comply with the collection of information requirements associated with the certificates each year 

would be less than $315,752 ($33.23/hour x 9,502 hours). 

b. Proposed NHSN Dialysis Event Reporting Requirement for the PY 2015 ESRD QIP 

As stated above in section III.C.2 of this proposed rule, we propose to include reporting 

dialysis events to the NHSN as a reporting measure for the PY 2015 ESRD QIP. Specifically, 

we would require facilities to submit 12 months of dialysis event data to the NHSN. The burden 

associated with this requirement for existing facilities is the time and effort necessary for 

facilities to submit 12 months of data. According to our most recent data, 5,490 facilities treat 

in-center hemodialysis and/or pediatric hemodialysis patients and are, then, eligible to receive a 

score on this measure; therefore, we estimate that approximately 5,490 facilities will submit the 

required data. Based on data previously collected, we further estimate that the average number 

of dialysis events is 0.08 per patient per month and that each facility has approximately 75 

patients. Accordingly, we estimate the number of dialysis events in a 12-month period for all 

facilities to be 395,230 (0.08 events/patient/month x 75 patients/facility x 5,490 facilities x 12 

months) for the PY 2015 ESRD performance period. We estimate it will require 10 minutes to 
collect and submit data on these events and the estimated burden for submitting 12 months of 

data will be 65,880 hours (395,230 dialysis events x 10/60 minutes). If the dialysis events were 

distributed evenly across all 5,490 facilities that would result in an additional 12 hour (67,596 

hours/5,490 facilities) burden for each facility at a cost of $399 ($33.23/hour x 12 hours) per 

facility. In total, we believe that the cost for all ESRD facilities to comply with the reporting 

requirements associated with NHSN Dialysis Event measure would be approximately $2.2 

million ($399 x 5,490 facilities= $2,190,510) per year. 

In addition, we recognize that some facilities are new and would not have completed the 

required training and enrollment required by the NHSN. We estimate that the number of ESRD 

facilities increases by 3 percent per year. Accordingly, we believe that 169 facilities (.03 x 5,633 

facilities) will be new in PY 2015. As noted in the CY 2011 ESRD QIP final rule (76 FR 

70299), we estimate that it will take each new provider 8 hours to enroll and complete the 

required training. The total estimated burden for these facilities to enroll and train is 1,352 hours 

(169 x 8 hours) or $44,927 ($33.23/hour x 1,352 hours). In sum, we estimate the total cost for 

all facilities to comply with the NHSN Dialysis Events reporting requirement to be less than $2.2 

million ($2,190,510 + $44,927) 

c. ICH CAHPS Survey Attestation Requirement for the PY 2015 ESRD QIP 

As stated above in section III.C.1 of this proposed rule, we proposed to include a measure 

that assesses facility usage of the ICH CAHPS survey as a reporting measure for the PY 2015 

ESRD QIP. The burden associated with this requirement is the time and effort necessary for 

facilities to administer the ICH CAHPS survey through a third party and submit an attestation to 

CMS that they successfully administered the survey. 

We estimate that approximately 5,489 facilities treat adult, in-center hemodialysis 
patients and are, therefore, eligible to receive a score on this measure. We estimate that all 5,489 

facilities will administer the ICH CAHPS survey through a third-party and submit an attestation 

to that effect. We estimate that it will take each facility’s third-party administrator 16 hours per 

year to be trained on the survey features. We further estimate that it will take each facility 

approximately five minutes to submit the attestation each year. The estimated total annual 

burden on facilities is 88,281 hours ((16 hours x 5,489 facilities) + ((5/60 minutes) x 5,489 

facilities) which is valued at approximately $3 million (88,281 hours x $33.23), or $547 per 

facility ($3,000,000/5,489). We estimate that it would take each patient 30 minutes to complete 

the survey (to account for variability in education levels) and that approximately 75 surveys per 

year would be taken per facility.5 Interviewers from each facility would spend a total of 

approximately 37.5 hours per year with patients completing these surveys (30/60 minutes * 75 

minutes) or $1,247 (37.5 hours x $33.23) for an estimated annual burden of 205,838 hours (37.5 

hours * 5,489 facilities) which is valued at approximately $6.9 million (205,838 hours x 

33.23/hour). We estimate that time burden for ESRD facilities to comply with the collection of 

information requirements associated with administering the ICH CAHPS survey each year would 

be approximately $1,794 ($547 + $1,247) or $9.9 million ($1,794 x 5,489 facilities =$9,847,266) 

across all ESRD facilities. 

d. Data Validation Requirements 

Section III.C.13 of the proposed rule outlines our data validation proposals. We proposed 

to randomly sample records from 750 facilities; each sampled facility would be required to 

 

5 Last year, we stated that we believed that 200 surveys would be administered per facility per year (76 FR 

70299). Upon further review, however, we note that the ICH CAHPS specifications require a sample of 200 surveys 

only for those facilties with a large patient population. Facilties with fewer than 200 patients are required to survey 

a sample of patients, aiming for a 40 percent response rate. 

(http://www.cahps.ahrq.gov/~/media/Files/SurveyDocuments/ICH/Admin_Survey/53_fielding_the_ich_survey.pdf). 

Since we estimate that each facility serves approximately 75 patients, we believe that the average facility, at most, 

would survey 75 patients per year. 
produce approximately 10 records. The burden associated with this validation requirement is the 

time and effort necessary to submit validation data to a CMS contractor. We estimate that it will 

take each facility approximately 2.5 hours to comply with these requirements. If 750 facilities 

are tasked with providing the required documentation, the estimated annual burden across all 

facilities would be 1,875 hours (750 facilities x 2.5 hours) at a total of $62, 307 (1,875 hours x 

$33.23/hour) or $83.08 ($62,307/750) per facility in the sample. We also anticipate that the 

sampled facilities will be reimbursed by our validation contractor for the costs associated with 

copying and mailing the requested records. 

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-1352-P]

 Fax: (202) 395-6974; or 

 Email: OIRA_submission@omb.eop.gov 

2. Reductions to Bad Debt Payments for all Medicare Providers 
The statutorily mandated reductions of bad debt payments to providers, suppliers, and 

other entities that are currently receiving bad debt payments will not result in any changes to or 

any additional collection of information requirements. 

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 examined the impacts of this proposed rule as required by Executive Order 12866 

(September 30, 1993, Regulatory Planning and Review) and Executive Order 13563 on 

Improving Regulation and Regulatory Review (January 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 economically significant under section 3(f)(1) of Executive Order 12866. 

Accordingly, the rule has been reviewed by the Office of Management and Budget. We have 
prepared a Regulatory Impact Analysis that to the best of our ability presents the costs and 

benefits of the proposed rule. We solicit comments on the regulatory impact analysis provided. 

2. Statement of Need 

This rule proposes a number of routine updates for renal dialysis services in CY 2013, 

proposes to implement the third year of the ESRD PPS transition, and proposes to make several 

policy changes and clarifications to the ESRD PPS. These include proposed updates and 

changes to the ESRD PPS and composite rate base rates, wage index values, wage index budgetneutrality adjustment factors, outlier payment policy, and transition budget-neutrality adjustment. 

Failure to publish this proposed rule would result in ESRD facilities not receiving appropriate 

payments in CY 2013. 

This rule proposes to implement the QIP for PY 2015 and beyond by establishing 

measures, scoring, and payment reductions to incentivize improvements in dialysis care as 

directed by section 1881(h) of the Act. Failure to establish QIP program parameters in this rule 

would prevent continuation of the QIP beyond PY 2014. 

 This proposed rule implements the reduction percentages of bad debt reimbursement 

required by section 3201 of The Middle Class Tax Extension and Job Creation Act of 2012. 

Section 3201(c) of The Middle Class Tax Extension and Job Creation Act of 2012 added a new 

subparagraph-1861(v)(1)(W) to the Act, which applied a reduction in bad debt payments to 

“providers” not addressed under subparagraphs 1861(v)(1)(T) or 1861 (v)(1)(V) of the Act. For 

the purpose of subparagraph 1861(v)(1)(W) of the Act, section 3201(c) of The Middle Class Tax 

Extension and Job Creation Act of 2012 defined “providers” as a supplier or any other type of 

entity that receives payment for bad debts under the authority of section 1861(v)(1)(A) of the 

Act. These providers include, but are not limited to, CAHs, RHCs, FQHCs, CMHCs, HMOs 
reimbursed on a cost basis, CMPs, HCPPs and ESRD facilities. 

3. Overall Impact 

We estimate that the proposed revisions to the ESRD PPS will result in an increase of 

approximately $320 million in payments to ESRD facilities in CY 2013, which includes the 

amount associated with the increase in the ESRDB market basket reduced by the productivity 

adjustment, updates to outlier amounts, and the effect of changing the blended payments from 50 

percent under the composite rate payment and 50 percent under the ESRD PPS to 25 percent 

under the composite rate payment and 75 percent under the ESRD PPS. 

We estimate that the proposed requirements related to the ESRD QIP for PY 2015 will 

cost approximately $12.4 million and the predicted payment reductions will equal about $8.5 

million to result in a total impact from the proposed ESRD QIP requirements of $20.9 million. 

In section IV of this proposed rule, we discuss the provisions required by section 3201 of 

The Middle Class Tax Extension and Job Creation Act of 2012, which apply percentage 

reductions in bad debt reimbursement to all providers eligible to receive bad debt 

reimbursement; these provisions are specifically prescribed by statute and thus, are selfimplementing. Table 9 in section IV.C.1 of this proposed rule depicts a comparison of the bad 

debt payment percentages prior to and after FY 2013. We estimate these self implementing 

provisions of section 3201 of The Middle Class Tax Extension and Job Creation Act of 2012 will 

result in savings to the Medicare program of $10.92 billion over the period from 2012 through 

2022. 

B. Detailed Economic Analysis 

1. CY 2013 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 in CY 2013. To estimate the impact among various classes of 

ESRD facilities, it is imperative that the estimates of payments in CY 2012 and CY 2013 contain 

similar inputs. Therefore, we simulated payments only for those ESRD facilities for which we 

are able to calculate both current payments and new payments. 

For this proposed rule, we used the December 2011 update of CY 2011 National Claims 

History file as a basis for Medicare dialysis treatments and payments under the ESRD PPS. We 

updated the 2011 claims to 2012 and 2013 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 II.B. of this proposed rule. In addition, in order to prepare an impact 

analysis, since some ESRD facilities 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 2011 amounts for the CYs 2012 and 2013 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 continues to be an appropriate amount. 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. We updated the last 
available quarter of actual ASP data for the top twelve drugs (the second quarter of 2012) thru 

2013 by using the quarterly growth in the Producer Price Index (PPI) for Drugs, consistent with 

the method for addressing price growth in the ESRDB market basket. This resulted in increases 

of 1.5 percent, 0.6 percent, 2.8 percent, 0.3 percent, 0.9 percent and 1.4 percent, respectively, for 

the third quarter of 2012 thru the fourth quarter of 2013. 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 10 below shows the updates 

used for the drugs. 

We updated payments for laboratory tests paid under the laboratory fee schedule to 2012 

and 2013 using the statutorily required update of the CPI-U increase with any legislative 

adjustments. For this proposed rule, the growth from 2011 to 2012 is 0.7 percent and the growth 

from 2011 to 2013 is 0.3 percent. 

Table 10. Price Increases from 2011 to 2012 and 2011 to 2013 of Former Separately Billable 

Part B Drugs.

 Price Update 

2011 to 2012 

Price Update 

2011 to 2013 

EPO 0.3% 5.8% 

Paricalcitol -27.4% -25.5% 

Sodium_ferric_glut -20.3% -20.7% 

Iron_sucrose -13.1% -11.0% 

Levocarnitine 22.7% 29.3% 

Doxercalciferol -72.2% -77.1% 

Calcitriol 90.7% 65.7% 

Vancomycin -8.2% -1.9% 

Alteplase 13.2% 19.4% 

Aranesp 6.4% 12.3% 

Daptomycin 9.5% 15.0% 

Ferumoxytol -7.0% -2.9% 

Other Injectibles -7.4% -3.1% 
Table 11 shows the impact of the estimated CY 2013 ESRD payments compared to 

estimated payments to ESRD facilities in CY 2012. 

Table 11. Impact of Proposed Changes in Payments to ESRD Facilities for CY 2013 ESRD 

Proposed Rule 

[Percent change in total payments to ESRD facilities (both program and beneficiaries)] 

 A B C D E 

Facility Type 

Number 

of 

Facilities

Number of 

Treatments 

(in millions) 

Effect of 

2013 

Changes in 

Outlier 

Policy 

Effect of 

2013 

Changes in 

Wage 

Indexes 

Effect of Total 

2013 changes3

All Facilities 5,633 37.0 0.4% 0.0% 3.1% 

Type 

 Freestanding 5,089 34.0 0.4% 0.0% 3.0% 

 Hospital based 544 2.9 0.2% 0.2% 3.7% 

Ownership Type 

 Large dialysis organization 3,663 24.5 0.5% 0.0% 3.0% 

 Regional chain 915 6.3 0.3% 0.1% 3.1% 

 Independent 617 3.9 0.2% 0.0% 3.2% 

 Hospital based1 429 2.2 0.2% 0.3% 3.7% 

 Unknown 9 0.0 0.3% 1.3% 4.2% 

Geographic Location 

 Rural 1,249 6.1 0.5% -0.2% 3.0% 

 Urban 4,384 30.9 0.4% 0.0% 3.1% 

Census Region 

 East North Central 916 5.5 0.5% 0.1% 3.2% 

 East South Central 464 2.8 0.6% -0.4% 2.7% 

 Middle Atlantic 623 4.5 0.4% 0.1% 3.2% 

 Mountain 332 1.7 0.3% -0.2% 2.8% 

 New England 167 1.2 0.5% 0.6% 3.6% 

 Pacific 662 5.0 0.2% 0.5% 3.3% 

 Puerto Rico and Virgin Islands 41 0.3 -0.2% -2.4% 0.4% 

 South Atlantic 1,244 8.5 0.5% -0.3% 2.9% 

 West North Central 411 2.0 0.3% 0.2% 3.4% 

 West South Central 773 5.4 0.4% -0.1% 3.0% 

Facility Size 

 Less than 4,000 treatments2 1,043 2.8 0.3% 0.2% 3.4% 

 4,000 to 9,999 treatments 2,163 10.4 0.5% 0.0% 3.1% 

 10,000 or more treatments 2,270 23.4 0.4% 0.0% 3.1% 

 Unknown 157 0.3 0.3% 0.0% 2.9% 

Percentage of Pediatric Patients 

 Less than 2% 5,524 36.6 0.4% 0.0% 3.1% 
 Between 2% and19% 45 0.3 0.3% 0.0% 3.1% 

 Between 20% and 49% 9 0.0 -1.9% -0.1% 2.0% 

 More than 50% 55 0.0 -0.3% 0.1% 2.2% 

 

1 Includes hospital based facilities not reported to have large dialysis organization or regional chain ownership. 

2 Of the 1,043 Facilities with less than 4,000 treatments, only 322 qualify for the low-volume adjustment. The low-volume adjustment 

 is mandated by Congress, and is not applied to pediatric patients. The impact to these Low volume Facilities is a 3.5% increase in 

payments. 

3 Includes the effect of ESRDB Market Basket minus productivity increase of 2.5% to the ESRD PPS base and the Composite Rate. 

Includes the effect of the change in the drug add-on percentage from 14.3% to 14.0% for those facilities that opted to be paid under the 

transition. 

Includes the effect of the blend changing from 50/50 to 25/75 for CY 2012 to CY 2013 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 the impact table indicates the number of ESRD facilities for each impact 

category and column B indicates the number of dialysis treatments (in millions). The overall 

effect of the proposed changes to the outlier payment policy described in section II.B.7 of this 

proposed rule, is shown in column C. For CY 2013, the impact on all facilities as a result of the 

changes to the outlier payment policy would be a 0.4 percent increase in estimated payments. 

The estimated impact of the changes to outlier payment policy ranges from a 1.9 percent 

decrease to a 0.6 percent increase. Most ESRD facilities are anticipated to experience a positive 

effect in their estimated CY 2013 payments as a result of the proposed outlier policy changes. 

Column D shows the effect of the wage index on ESRD facilities and reflects the CY 

2013 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 2.4 percent decrease in estimated payments in CY 2013. 

Since most of the facilities in this category are located in Puerto Rico, the decrease is primarily 

due to the reduction in the wage index floor, (which only affects facilities in Puerto Rico in CY 

2013). The other categories of types of facilities in the impact table show changes in estimated 

payments ranging from a 0.4 percent decrease to a 1.3 percent increase due to the update of the 
wage index. 

Column E reflects the overall impact (that is, the effects of the proposed outlier policy 

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 50 

percent of payments based on the composite rate system and 50 percent based on the ESRD PPS 

in 2012, to 25/75, respectively, for 2013, for those facilities that opted to be paid under the 

transition). We expect that overall, ESRD facilities will experience a 3.1 percent increase in 

estimated payments in 2013. ESRD facilities in Puerto Rico and the Virgin Islands are expected 

to receive a 0.4 percent increase in their estimated payments in CY 2013. This small increase is 

primarily due to the negative impact of the wage index. The other categories of types of 

facilities in the impact table show positive impacts ranging from an increase of 2.0 percent to 4.2 

percent in their 2013 estimated payments. 

b. Effects on Other Providers 

Under the ESRD PPS, ESRD facilities are paid directly for the renal dialysis bundle and 

other provider types such as laboratories, DME suppliers, and pharmacies, may no longer bill 

Medicare directly for renal dialysis services. Rather, effective January 1, 2011, such other 

providers can only furnish renal dialysis services under arrangements with ESRD facilities and 

must seek payment from ESRD facilities rather than Medicare. Under the ESRD PPS, Medicare 

pays ESRD facilities one payment for renal dialysis services, which may have been separately 

paid to suppliers by Medicare prior to the implementation of the ESRD PPS. Therefore, in CY 

2013, the third 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 2013 will be approximately $8.7 billion. This estimate is based on various price 

update factors discussed in section VII.B.1.a in this proposed rule and takes into account a 

projected increase in fee-for-service Medicare dialysis beneficiary enrollment of 4.6 percent in 

CY 2013. 

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 going through 

the ESRD PPS transition. As a result of the projected 3.1 percent overall increase in the 

proposed ESRD PPS payment amounts in CY 2013, we estimate that there will be an increase in 

beneficiary co-insurance payments of 3.1 percent in CY 2013, which translates to approximately 

$70 million. 

e. Alternatives Considered 

We considered eliminating the AY modifier use by ESRD facilities in CY 2013, which 

could address program integrity concerns but could also require Medicare beneficiaries to incur 

additional injections, medical visits and co-insurance liabilities and accordingly, we did not 

pursue this alternative. Rather, we decided to monitor the use of the AY modifier and consider 

the elimination of the AY modifier in future rulemaking if we determine that it is being used 

inappropriately. 

2. End-Stage Renal Disease Quality Incentive Program 

a. Effects of the PY 2015 ESRD QIP 

The ESRD QIP provisions are intended to prevent possible reductions in the quality of 

ESRD dialysis facility services provided to beneficiaries as a result of payment changes under 
the ESRD PPS by implementing a ESRD QIP that reduces ESRD payments by up to 2 percent 

for dialysis 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 facility’s Total Performance Score is 

described in section III.C.10 of this proposed rule. Any reductions in ESRD payments would 

begin on January 1, 2015 for services furnished on or after January 1, 2015. 

As a result, based on the ESRD QIP outlined in this proposed rule, we estimate that, of 

the total amount of dialysis facilities (including those not receiving an ESRD QIP Total 

Performance Score), approximately 14 percent or 801 of the facilities would likely receive a 

payment reduction for PY 2015. Facilites that do not receive a TPS are not eligible for a 

payment reduction. 

The ESRD QIP impact assessment assumes an initial count of 5,633 dialysis facilities 

paid through the PPS. Table 12 shows the overall estimated distribution of payment reductions 

resulting from the PY 2015 ESRD QIP. 

Table 12. Estimated Distribution of PY 2015 ESRD QIP Payment Reductions. 

Payment Reduction 

Number of 

Facilities 

Percent of 

Facilities 

0.0% 4563 85.1%

0.5% 470 8.8%

1.0% 190 3.5%

1.5% 77 1.4%

2.0% 64 1.2%

* Note: this table excludes 268 facilities that did not receive a score because they did not have enough data to 

receive a Total Performance Score. 

To estimate whether or not a facility would receive a payment reduction under the 

proposed approach, we scored each facility on achievement and improvement for each of the 
proposed clinical measures using the most recent data available for each measure shown in Table 

13. 

Table 13. Data used to Estimate PY 2015 ESRD QIP Payment Reductions. 

Measure Period of Time Used to Calculate 

Achievement Thresholds, 

Performance Standards, 

Benchmarks, and Improvement 

Thresholds 

Performance Period 

Hemoglobin Greater Than 12 

g/dL Jan 2010 – Dec 2010 Jan 2011 – Sep 2011 

Vascular Access Type 

 % Fistula Oct 2010 – Mar 2011 Apr 2011 – Sep 2011 

 %Catheter Oct 2010 – Mar 2011 Apr 2011 – Sep 2011 

Kt/V 

 Adult HD Jul 2010 – Dec 2010 Jan 2011 – Sep 2011 

 Adult PD Jul 2010 – Dec 2010 Jan 2011 – Sep 2011 

 Pediatric HD Jul 2010 – Dec 2010 Jan 2011 – Sep 2011 

Hypercalcemia Mar 2010 – Dec 2010 Apr 2011 – Oct 2011 

For the all of the measures except Hypercalcemia, we used claims data for these 

calculations. For the Hypercalcemia measure, we used CROWNWeb data. Clinical measures 

with less than 11 cases for a facility were not included in that facility’s Total Performance Score. 

Clinical measures with 11-25 cases for a facility received an adjustment as outlined in section 

III.C.1 of this proposed rule. Each facility’s Total Performance Score was compared to the 

estimated minimum Total Performance Score and the payment reduction table found in section 

III.C.12 of this proposed rule. Facilities were required to have a score on at least one clinical 

measure to receive a Total Performance Score. For these simulations, reporting measures were 

not included due to lack of data availability. Therefore, the simulated facility Total Performance 

Scores were calculated using only the clinical measure scores. 

 To estimate the total payment reductions in PY 2015 for each facility resulting from this 

proposed rule, we multiplied the total Medicare payments to the facility during the one year 
period between October 2010 and September 2011 by the facility’s estimated payment reduction 

percentage expected under the ESRD QIP, yielding a total payment reduction amount for each 

facility: (Total ESRD payment in October 2010 through September 2011 times the estimated 

payment reduction percentage). For PY 2015 the total payment reduction for all of the 801 

facilities expected to receive a reduction is approximately $8.5 million ($8,523,594). Further, we 

estimate that the total costs associated with the collection of information requirements for PY 

2015 described in section V.C.2 of this proposed rule would be approximately $12.4 million for 

all ESRD facilities. As a result, we estimate that ESRD facilities will experience an aggregate 

impact of $20.9 million ($12,398,455 + 8,523,594 = $20,922,049) as a result of the PY 2015 

ESRD QIP. 

Table 14 below shows the estimated impact of the finalized ESRD QIP payment 

reductions to all ESRD facilities for PY 2015. The table details the distribution of ESRD 

facilities by facility size (both among facilities considered to be small entities and by number of 

treatments per facility), geography (both urban/rural and by region), and by facility type (hospital 

based/freestanding facilities). Given that the time periods used for these calculations will differ 

from those we propose to use for the PY 2015 ESRD QIP, the actual impact of the PY 2015 

ESRD QIP may vary significantly from the values provided here. 

Table 14. Impact of Proposed QIP Payment Reductions to ESRD Facilities for PY 2015 

Number 

of 

Facilities

Number of 

Medicare 

Treatments 

2011 (in 

millions)3

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 5,633 37.0 5,364 801 -0.12%

Facility Type: 

Freestanding 5,089 34.0 4,956 679 -0.10%
Number 

of 

Facilities

Number of 

Medicare 

Treatments 

2011 (in 

millions)3

Number 

of 

Facilities 

with QIP 

Score 

Number of 

Facilities 

Expected 

to Receive 

a Payment 

Reduction 

Payment 

Reduction 

(percent 

change in 

total ESRD 

payments) 

Hospital-based 544 2.9 408 122 -0.31%

Ownership Type: 

Large Dialysis 3,663 24.5 3, 586 459 -0.09%

Regional Chain 915 6.3 876 119 -0.12%

Independent 617 3.9 583 125 -0.20%

Hospital-based (non-chain) 429 2.2 314 96 -0.33%

Unknown 9 0.0 5 2 -0.20%

Facility Size: 

Large Entities 4,578 30.8 4,462 578 -0.09%

Small Entities1 1,046 6.1 897 221 -0.24%

Unknown 9 0.0 5 2 -0.20%

Urban/Rural Status: 

Rural 1,249 6.1 1,186 173 -0.11%

Urban 4,384 30.9 4,178 628 -0.12%

Census Region: 

Northeast 784 5.7 741 117 -0.13%

Midwest 1,320 7.5 1,223 229 -0.16%

South 2,476 16.7 2,407 346 -0.11%

West 991 6.7 954 96 -0.08%

US Territories2 62 0.3 39 13 -0.24%

Census Division: 

East North Central 916 5.5 847 175 -0.18%

East South Central 464 2.8 451 65 -0.12%

Middle Atlantic 623 4.5 582 100 -0.14%

Mountain 332 1.7 318 37 -0.08%

New England 167 1.2 159 17 -0.10%

Pacific 662 5.0 636 59 -0.08%
Number 

of 

Facilities

Number of 

Medicare 

Treatments 

2011 (in 

millions)3

Number 

of 

Facilities 

with QIP 

Score 

Number of 

Facilities 

Expected 

to Receive 

a Payment 

Reduction 

Payment 

Reduction 

(percent 

change in 

total ESRD 

payments) 

South Atlantic 1,244 8.5 1,209 188 -0.12%

West North Central 411 2.0 376 54 -0.11%

West South Central 773 5.4 747 93 -0.10%

US Territories2 41 0.3 39 13 -0.24%

Facility Size (# of total treatments) 

Less than 4,000 treatments 1,043 2.8 899 143 -0.17%

4,000-9,999 treatments 2,163 10.4 2,121 299 -0.10%

Over 10,000 treatments 2,270 23.4 2,249 324 -0.10%

Unknown 157 0.3 95 35 -0.47%

1

 Small Entities include hospital-based and satellite facilities and non-chain facilities based on DFC self-reported 

status. 

2 Includes Puerto Rico and Virgin Islands. 

3

Based on claims data through September 2011. 

b. Alternatives Considered for the PY 2015 ESRD QIP 

 In developing the proposed PY 2015 ESRD QIP, we selected measures that we believe 

are important indicators of patient outcomes and quality of care as discussed in sections III.C.1, 

III.C.2, and III.C.3 of of this proposed rule. 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. We also considered proposing to adopt the Standardized Hospitalization Ratio 

Admissions (SHR) measure and the Standardized Mortality Ratio (SMR) measures as part of the 

PY 2015 ESRD QIP. While we decided not to propose to adopt the SHR and SMR measures 

for the PY 2015 ESRD QIP, we will publicly report these measure rates/ratios to the public via 

DFC to encourage facilities to improve their care. We believe the measures selected will allow 
us to continue focusing on improving the quality of care that Medicare beneficiaries receive from 

ESRD dialysis facilities. 

 In developing the proposed scoring methodology for the PY 2015 ESRD QIP, we 

considered a number of alternatives including various improvement ranges, achievement 

thresholds, and benchmarks. We also considered whether some of the new measures should be 

scored based on only achievement. We also discussed scoring some of the clinical measures 

using a binary methodology (that is, facilities receive either zero or 10 points for missing or 

achieving a standard, respectively). We ultimately decided to propose to mirror the PY 2014 

ESRD QIP scoring methodology as closely as possible. We aim to design a scoring 

methodology that is straightforward and transparent to facilities, patients, and other stakeholders, 

and we believe one of the ways to obtain this transparency is to be as consistent as possible from 

year-to-year of the program. We believe that this consistency will allow us to better assess the 

impacts of the ESRD QIP upon facilities and beneficiaries. Finally, we believe that all scoring 

methodologies for Medicare VBP programs should be aligned as appropriate given their specific 

statutory requirements, and the scoring methodology proposed for the ESRD QIP is similar to 

the Hospital Inpatient VBP Program. 

 When deciding upon how to best score the Vascular Access Type and Kt/V Dialysis 

Adequacy measure topics, we considered combining all of the measures within the measure topic 

into one composite measure (that is, having one, combined numerator and one, combined 

denominator for all of the measures within the topic) rather than individually scoring each 

measure and weighting it appropriately in the measure topic. We believe that it is important to 

mirror the NQF specifications for each measure as much as possible; we also heeded the 

suggestion of the Measures Application Partnership to further test composite measures before 
implementing them. Therefore, we decided to propose measure topics where each measure 

within the measure topic is scored individually and then weighted appropriately. 

 In order to receive credit for a month of reporting, we considered proposing to require 

facilities to report the required information for less than 100 percent of their patients for the 

Mineral Metabolism and Anemia Management reporting measures. Specifically, we considered 

lowering the threshold to reporting 98 percent of patients for a month in order to receive credit 

for that month. We ultimately decided that, in order to encourage the best care for patients, it is 

appropriate to hold facilities to the higher standard. Because the measures allow facilities to 

report values taken by other providers/facilities and because we require reporting only for those 

hemodialysis patients that a facility sees at least twice in a claim month or for those peritoneal 

dialysis patients for which a facility submits a claim, we believe that the measures afford 

facilities enough flexibility while also requiring the best quality care. 

 We also considered multiple baseline periods for purposes of scoring facilities on 

achievement and improvement. We considered periods of the same time and duration, periods 

occurring at different times, and periods with various durations. We ultimately decided that a 

baseline period of 12-months for both the achievement and improvement scores is best because it 

is consistent with the PY 2014 program. Additionally, a 12-month baseline period prevents 

issues related to seasonality. We decided to propose achievement and improvement baseline 

periods occurring over different periods of time because we believe that this approach mitigates 

data lag as much as possible and also allows us to score all of the measures on both achievement 

and improvement. Finally, we decided to propose an achievement baseline period spanning a 

calendar year (CY 2011) because this approach allows us to publish the numerical values for the 

performance standards before the beginning of the performance period. 
 In deciding upon the minimum number of cases required for a facility to be scored on a 

measure, we reviewed and discussed many options. We considered keeping the program the 

same as PY 2014 by excluding measures with less than 11 cases and applying no adjustment. 

We also discussed excluding measures with less than 26 and less than 51 cases. Finally, we 

discussed an adjustment applicable to measures with 26 – 50 cases. We believe that, given the 

alternatives, the proposed methodology strikes an appropriate balance between maximizing 

facility inclusion in the program and preventing results for very small facilities from limiting the 

reliability of total performance scores. 

 Finally, in deciding upon the calculation of the minimum Total Performance Score, we 

considered a score that includes a value for each of the reporting measures. We decided, 

however, to propose to adhere to the PY 2014 methodology – calculating the minimum Total 

Performance Score as if the reporting measures were excluded from the calculation. Again, we 

believe that consistently scoring the ESRD QIP will allow us to better assess its impacts and 

allow facilities to plan for future years of the program. 

3. Reductions to Bad Debt Payments for all Medicare Providers 

Section 3201 of The Middle Class Tax Extension and Job Creation Act of 2012 that 

requires reductions in bad debt reimbursement to all providers, supplies and other entities 

eligible to receive bad debt reimbursement will have a significant impact on the operations of all 

affected entities. However, these provisions are specifically prescribed by statute and thus, are 

self-implementing. It is estimated that the savings in the CY 2013 would be $330 million. 

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/Savings ESRD PPS for CY 2013 

Category Transfers 

Annualized Monetized Transfers $250 million 

From Whom to Whom Federal government to ESRD providers 

Category Transfers

Increased Beneficiary Co-insurance Payments $70 million 

From Whom to Whom Beneficiaries to ESRD providers 

ESRD QIP for PY 2015 

Category Transfers

Annualized Monetized Transfers -$8.5 million* 

 

From Whom to Whom Federal government to ESRD providers 

Category Costs

Annualized Monetized ESRD Provider Costs 12.4 million** 

Savings from Congressionally Mandated Reductions of Bad Debt Payments in CY 

2013 

Category Transfers

Annualized Monetized Bad Debt Payments $-330 million 

From Whom to Whom Federal government to Medicare 

providers. 

* It is the reduced payment to the ESRD facilities, which fall below the quality standards as stated in section III.C.12 of this 

 proposed rule. 

** It is the cost associated with the collection of information requirements for all ESRD facilities. 

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 

19 percent of ESRD dialysis facilities are considered small entities according to the Small 

Business Administration’s (SBA) size standards, which classifies small businesses as those 

dialysis facilities having total revenues of less than $34.5 million in any 1 year. Individuals and 
States are not included in the definitions of a small entity. For more information on SBA’s size 

standards, see the Small Business Administration’s Web site at 

http://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 used to estimate payments to ESRD facilities in this RFA analysis and 

RIA do not identify which dialysis facilities are part of a large dialysis organization (LDO), 

regional chain, or other type of ownership because each individual dialysis facility has its own 

provider number and bills Medicare using this number. Therefore, in previous RFA analyses and 

RIAs presented in proposed and final rules that updated the basic case-mix adjusted composite 

payment system, we considered each ESRD facility to be a small entity for purposes of the RFA 

analysis. 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 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 of 50,000 or less, and therefore, they are not enumerated or 

included in this estimated RFA analysis. Individuals and States are not included in the definition 

of a small entity. 

For purposes of the RFA, we estimate that approximately 19 percent of ESRD facilities 

are small entities as that term is used in the RFA (which includes small businesses, nonprofit 

organizations, and small governmental jurisdictions). This amount is based on the number of 

ESRD facilities shown in the ownership category in Table 11. Using the definitions in this 

ownership category, we consider the 617 facilities that are independent and the 429 facilities that 

are shown as hospital-based to be small entities. The ESRD facilities that are owned and 
operated by LDOs and regional chains would have total revenues of more than $34.5 million in 

any year when the total revenues for all locations are combined for each business (individual 

LDO or regional chain), and are not, therefore, included as small entities. 

For the ESRD PPS updates proposed in this rule, a hospital-based ESRD facility (as 

defined by ownership type) is estimated to receive a 3.7 percent increase in payments for CY 

2013. An independent facility (as defined by ownership type) is estimated to receive a 3.2 

percent increase in payments for 2013. 

Based on the proposed QIP payment reduction impacts to ESRD facilities for PY 2015, 

we estimate that of the 801 ESRD facilities expected to receive a payment reduction, 221 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 14 above. We anticipate the payment reductions to 

average approximately $10,462 per facility among the 801 facilities receiving a payment 

reduction, with an average of $12,509 per small entity facilities receiving a payment reduction. 

Using our projections of facility performance, we then estimated the impact of anticipated 

payment reductions on ESRD small entities, by comparing the total payment reductions for the 

221 small entities expected to receive a payment reduction, with the aggregate ESRD payments 

to all small entities. We estimate that there are a total of 897 small entity facilities. For this 

entire group of 897 ESRD small entity facilities, a decrease of 0.24 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 will have a significant impact on operations of a substantial 

number of small rural hospitals because most dialysis facilities are freestanding. While there are 

178 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 178 rural hospital-based dialysis 

facilities will experience an estimated 3.4 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. 

In addition, section 3201 of The Middle Class Tax Extension and Job Creation Act of 

2012 that requires reductions in bad debt reimbursement to all providers, supplies and other 

entities eligible to receive bad debt reimbursement will have a significant impact on the 

operations of a substantial number of small entities and small rural hospitals. However, these 

provisions are specifically prescribed by the Congress and thus, are self-implementing. Thus, we 

are not providing a Regulatory Flexibility Act Analysis to codify these mandated reductions in 

bad debt payments. 

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 2012, that threshold is approximately $139 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 $139 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 will 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 website at http://www.cms.gov/ESRDPayment/PAY/list.asp, should contact Michelle 

Cruse at (410) 786-7540. 
List of Subjects 

42 CFR Part 413 

Health facilities, Kidney diseases, Medicare, Reporting and recordkeeping requirements. 

42 CFR Part 417 

Administrative practice and procedure, Grant programs-health, Health care, Health 

insurance, Health maintenance organizations (HMO), Loan programs-health, Medicare, 

Reporting and recordkeeping requirements 

For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services 

proposes to amend 42 CFR chapter IV as follows: 

PART 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 is revised to read as follows: 

Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and (n), 1861(v), 1871, 1881, 1883 

and 1886 of the Social Security Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), 

and (n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of Pub.L. 106-113 (113 

Stat. 1501A-332) and sec. 3201 of Pub.L. 112-96 (126 Stat. 156). 

Subpart F – Specific Categories of Costs 

2. Section 413.89 is amended by revising paragraphs (h)(1) introductory text, (h)(1)(iv) 

(h)(2), (h)(3), and (i), and by adding paragraphs (h)(1)(v) and (h)(4) to read as follows: 

§ 413.89 Bad debts, charity, and courtesy allowances. 

 * * * * * 
(h) * * * 

(1) Hospitals. In determining reasonable costs for hospitals, the amount of allowable bad 

debt (as defined in paragraph (e) of this section) is reduced: 

 * * * * * 

(iv) For cost reporting periods beginning during fiscal years 2001 through 2012, by 30 

percent. 

(v) For cost reporting periods beginning during a subsequent fiscal year, by 35 percent. 

(2) Skilled nursing facilities and swing bed hospitals. For the purposes of this paragraph 

(h)(2), a dual eligible individual is defined as an individual that is entitled to benefits under Part 

A of Medicare and is determined eligible by the State for medical assistance under Title XIX of 

the Act as described under paragraph (2) of the definition of a “full-benefit dual eligible 

individual” at § 423.772 of this chapter. In determining reasonable costs for a skilled nursing 

facility and for post-hospital SNF care furnished in a swing bed hospital, as defined in 42 CFR 

413.114(b) of this part, the amount of allowable bad debt (as defined in paragraph (e) of this 

section) is reduced: 

(i) For non-dual eligible individuals - (A) For cost reporting periods beginning during 

fiscal years 2006 through 2012, by 30 percent, for a patient in a skilled nursing facility. 

(B) For cost reporting periods beginning during a subsequent fiscal year, by 35 percent, 

for a patient in a skilled nursing facility or receiving post-hospital SNF care in a swing bed 

hospital. 

(ii) For dual eligible individuals – (A) For cost reporting periods beginning during fiscal 

year 2013, by 12 percent, for a patient in a skilled nursing facility or receiving post-hospital 

SNF care in a swing bed hospital. 
(B) For cost reporting periods beginning during fiscal year 2014, by 24 percent, for a 

patient in a skilled nursing facility or receiving post-hospital SNF care in a swing bed hospital. 

(C) For cost reporting periods beginning during a subsequent fiscal year, by 35 percent, 

for a patient in a skilled nursing facility or receiving post-hospital SNF care in a swing bed 

hospital. 

(3) End-stage renal dialysis facilities. In determining reasonable costs for an end-stage 

renal dialysis facility, the amount of allowable bad debt (as defined in paragraph (e) of this 

section) is: 

(i) For cost reporting periods beginning before October 1, 2012, reimbursed up to the 

facility's costs. 

(ii) For cost reporting periods beginning during fiscal year 2013, reduced by 12 percent 

and reimbursed up to the facility’s costs. 

(iii) For cost reporting periods beginning during fiscal year 

2014, reduced by 24 percent and reimbursed up to the facility’s costs. 

(iv) For cost reporting periods beginning during a subsequent 

fiscal year, reduced by 35 percent and reimbursed up to the facility’s costs. 

(4) All other providers. In determining reasonable costs for all other providers, suppliers 

and other entities not described elsewhere in paragraph (h) of this section that are eligible to 

receive reimbursement for bad debts under this section, the amount of allowable bad debts (as 

defined in paragraph (e) of this section) is reduced: 

(i) For cost reporting periods beginning during fiscal year 

2013, by 12 percent. 

(ii) For cost reporting periods beginning during fiscal year 
2014, by 24 percent. 

(iii) For cost reporting periods beginning during a subsequent fiscal year, by 35 percent. 

(i) Exceptions applicable to Bad Debt Reimbursement. (1) Bad debts arising from 

covered services paid under a reasonable charge-based methodology or a fee schedule are not 

reimbursable under the program. 

(2) For end-stage renal dialysis services furnished on or after January 1, 2011 and paid 

for under the end-stage renal dialysis prospective payment system described in § 413.215, bad 

debts arising from covered items or services that, prior to January 1, 2011 were paid under a 

reasonable charge-based methodology or a fee schedule, including but not limited to drugs, 

laboratory tests, and supplies are not reimbursable under the program. 

§ 413.178 [Removed and Reserved] 

3. Section 413.178 is removed and reserved. 

PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE 

MEDICAL PLANS, AND HEALTH CARE PREPAYMENT PLANS 

4. The authority citation for part 417 continues to read as follows: 

Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 

1395hh), secs. 1301, 1306, and 1310 of the Public Health Service Act (42 U.S.C. 300e, 300e–5, 

and 300e–9), and 31 U.S.C. 9701. 

Subpart O – Medicare Payment: Cost Basis 

5. Section 417.536 is amended by revising paragraph (f)(1) to read as follows: 

§417.536 Cost payment principles. 

* * * * * 

(f) * * * 
(1) Bad debts attributable to Medicare deductible and coinsurance amounts are allowable 

only if the requirements of § 413.89 of this chapter are met, subject to the limitations described 

under § 413.89(h) and the exceptions for services described under § 413.89(i). 

* * * * * 

(Catalog of Federal Domestic Assistance Program No. 93.773, Medicare--Hospital Insurance; 

and Program No. 93.774, Medicare--Supplementary Medical Insurance Program) 

Dated: June 22, 2012

 _________________________ 

 Marilyn Tavenner, 

 Acting Administrator, 

 Centers for Medicare & Medicaid Services. 

Approved: ___June 27, 2012_________________ 

_____________________________ 

 Kathleen Sebelius, 

 Secretary, 

Department of Health and Human Services. 

BILLING CODE 4120-01-P 
[FR Doc. 2012-16566 Filed 07/02/2012 at 4:15 pm; Publication Date: 07/11/2012]