Federal Register, Volume 76 Issue 131 (Friday, July 8, 2011)

[Federal Register Volume 76, Number 131 (Friday, July 8, 2011)]
[Proposed Rules]
[Pages 40498-40550]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-16874]

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Vol. 76

Friday,

No. 131

July 8, 2011

Part III

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 413 and 414

Medicare Program; Changes to the End-Stage Renal Disease Prospective
Payment System for CY 2012, End-Stage Renal Disease Quality Incentive
Program for PY 2013 and PY 2014; Ambulance Fee Schedule; and Durable
Medical Equipment; Proposed Rule

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

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 413 and 414

[CMS-1577-P]
RIN 0938-AQ27

Medicare Program; Changes to the End-Stage Renal Disease
Prospective Payment System for CY 2012, End-Stage Renal Disease Quality
Incentive Program for PY 2013 and PY 2014; Ambulance Fee Schedule; and
Durable Medical Equipment

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would update and make certain revisions to
the End-Stage Renal Disease (ESRD) prospective payment system (PPS) for
calendar year (CY) 2012. This proposed rule would also set forth
proposed requirements for the ESRD quality incentive program (QIP) for
payment years (PYs) 2013 and 2014. In addition, this proposed rule
would revise the ambulance fee schedule regulations to conform with
statutory changes. Finally, this proposed rule would revise the
definition of durable medical equipment (DME) by adding a 3-year
minimum lifetime criterion that must be met by an item or device in
order to be considered durable for the purpose of classifying the item
under the Medicare benefit category for DME. (See the Table of Contents
for a listing of the specific issues addressed in this proposed rule.)

DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on August 30, 2011.

ADDRESSES: In commenting, please refer to file code CMS-1577-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed):
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1577-P, P.O. Box 8010,
Baltimore, MD 21244-8010.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-1577-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments before the close of the comment period
to either of the following addresses: a. For delivery in Washington,
DC--Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Room 445-G, Hubert H. Humphrey Building, 200
Independence Avenue, SW., Washington, DC 20201.

(Because access to the interior of the Hubert H. Humphrey Building is
not readily available to persons without Federal government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-9994 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
Lisa Hubbard (410) 786-4533, for issues related to ESRD.
Roechel Kujawa, (410) 786-9111, for issues related to ambulance
services.
Heidi Oumarou, (410) 786-7942, for issues related to the ESRD market
basket.
Shannon Kerr, (410) 786-3039, for issues related to the quality
incentive program.
Sandhya Gilkerson, (410) 786-4085, for issues related to the definition
of durable medical equipment (DME).

SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.

Electronic Access

This Federal Register document is also available from the Federal
Register online database through Federal Digital System (FDsys), a
service of the U.S. Government Printing Office. This database can be
accessed via the internet at http://www.gpo.gov/fdsys/

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

In the past, a majority of the Addenda referred to throughout the
preamble of our proposed and final rules appeared in the Federal
Register. However, beginning with this CY 2012 proposed rule, the
Addenda of the annual proposed and final rules will no longer appear in
the Federal Register. Instead, these Addenda to the annual proposed and
final rules will be available only through the Internet on the CMS Web
site. The Addenda to the End-Stage Renal Disease (ESRD) Prospective
Payment System (PPS) rules are available at: http://www.cms.gov/ESRDPayment/PAY/list.asp. Readers who experience any problems accessing
any of the Addenda to the proposed and final rules that are posted on
the CMS Web site identified above should contact Lisa Hubbard at 410-
786-4533.

Table of Contents

To assist readers in referencing sections contained in this
preamble, we are providing a Table of Contents. Some of the issues
discussed in this preamble affect the payment policies, but do not
require changes to the regulations in the Code of Federal Regulations
(CFR).

I. Calendar Year (CY) 2012 End-Stage Renal Disease (ESRD)
Prospective Payment System (PPS)

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A. Background for the End-Stage Renal Disease Prospective
Payment System (ESRD PPS) for Calendar Year (CY) 2012
B. Routine Updates and Proposed Policy Changes for CY 2012 ESRD
PPS
1. Proposals Related to the Composite Rate Portion of the ESRD
PPS Blended Payment
2. Proposals Related to the ESRD PPS
3. Clarifications and Proposals Regarding the Low-Volume
Adjustment Policy Under the ESRD PPS
4. Technical Corrections to the CY 2011 ESRD PPS Final Rule
5. Clarifications Regarding the ESRD PPS
C. Provisions of the Proposed Regulations for the ESRD PPS
1. Proposed Updates to the Composite Rate and ESRD PPS Base Rate
for CY 2012
a. Proposed Composite Rate
b. ESRD PPS Base Rate
2. ESRD Bundled Market Basket
a. Overview and Background
b. Proposed Market Basket Update Increase Factor and Labor-
Related Share for ESRD Facilities for CY 2012
c. Proposed Productivity Adjustment
d. Multifactor Productivity-Adjusted Market Basket Update
3. Transition Budget-Neutrality Adjustment for CY 2011
4. Proposed Transition Budget-Neutrality Adjustment for CY 2012
5. Proposed Low-Volume Facility Provisions
6. Proposed Update to the Drug Add-on to the Composite Rate
Portion of the ESRD Blended Payment Rate
a. Estimating Growth in Expenditures for Drugs and Biologicals
b. Estimating Per Patient Growth
c. Applying the Proposed Growth Update to the Drug Add-on
Adjustment
d. Proposed Update to the Drug Add-on Adjustment for CY 2012
7. Updates to the Wage Index Values and Wage Index Floor For the
Composite Portion of the ESRD PPS Blended Payment and Under the ESRD
PPS Payment
a. Proposed Reduction to the ESRD Wage Index Floor
b. Proposed Policies for Areas With No Hospital Data
c. Proposed Wage Index Budget-Neutrality Adjustment
d. ESRD PPS Wage Index Tables
8. Drugs
a. Vancomycin
b. Drug Overfill
9. Proposed Revisions to Patient-Level Adjustment for Body
Surface Area (BSA)
10. Proposed Revisions to the Outlier Policy
a. Proposed Revisions Related to Outlier ESRD Drugs and
Biologicals
b. Proposed Exclusion of Automated Multi-Channel Chemistry
(AMCC) Laboratory Tests From the Outlier Calculation
c. Impact of Proposed Changes to the Outlier Policy
D. Technical Corrections
1. Training Add-on
2. ESRD-Related Laboratory Test
E. Clarifications Regarding the ESRD PPS
1. ICD-9-CM Diagnosis Codes
2. Emergency Services to ESRD Beneficiaries
II. End-Stage Renal Disease Quality Incentive Program for Payment
Year (PY) 2013 and 2014
A. Background for the End-Stage Renal Disease Quality Incentive
Program for PY 2013 and PY 2014
1. Overview of Quality Monitoring Initiatives
2. Statutory Authority for the ESRD QIP
3. Payment Year (PY) 2012 ESRD QIP
B. Provisions of the Proposed Regulations for End-Stage Renal
Disease (ESRD) Quality Incentive Program (QIP) for PY 2013 and PY
2014
1. Proposed PY 2013 ESRD QIP Requirements
a. Overview of the Proposed PY 2013 ESRD QIP
b. Proposed Performance Performance Measures for the PY 2013
ESRD QIP
c. Proposed Performance Period for the PY 2013 ESRD QIP
d. Performance Standards for the PY 2013 ESRD QIP
e. Methodology for Calculating the Total Performance Score for
the PY 2013 ESRD QIP
f. Proposed Payment Reductions for the PY 2013 ESRD QIP
2. Proposed PY 2014 ESRD QIP
a. Overview of the Proposed PY 2014 ESRD QIP
b. Proposed Performance Measures for the PY 2014 ESRD QIP
i. Proposed Anemia Management Measure (Hemoglobin Greater Than
12g/dL)
ii. Proposed Kt/V Dialysis Adequacy Measure
iii. Proposed Vascular Access Type Measure
iv. Proposed Vascular Access Infections Measure
v. Proposed Standardized Hospitalization Ratio--Admissions
Measure
vi. Proposed National Healthcare Safety Network (NHSN) Dialysis
Event Reporting Measure
vii. Proposed Patient Experience of Care Survey Usage Measure
viii. Proposed Mineral Metabolism Reporting Measure
c. Proposed Performance Period for the PY 2014 ESRD QIP
d. Proposed Performance Standards for the PY 2014 ESRD QIP
e. Proposed Methodology for Calculating the Total Performance
Score for the PY 2014 ESRD QIP
i. Setting Performance Benchmarks and Thresholds
ii. Scoring Provider and Facility Performance on Clinical
Measures Based on Achievement
iii. Scoring Provider/Facility Performance on Clinical Measures
Based on Improvement
iv. Calculating the Proposed Vascular Access Type Measure Score
v. Calculating the Proposed NHSN Dialysis Event Reporting
Measure, Patient Experience Survey Usage Reporting Measure and
Mineral Metabolism Reporting Measure Scores
vi. Examples to Illustrate Proposed 2014 ESRD QIP Performance
Scoring Model as Applied to Clinical Measures
vii. Proposed Weighting of the PY 2014 ESRD QIP Measures and
Calculation of the PY 2014 ESRD QIP Total Performance Score
viii. Example of Applying the Proposed PY 2014 ESRD QIP
Performance Scoring Model and Calculating the Total Performance
Score
f. Proposed Payment Reductions for the 2014 ESRD QIP
3. Proposed Public Reporting Requirements
4. Future QIP Measures
5. Proposed Process of Updating Measures
III. Ambulance Fee Schedule
A. Section 106 of the Medicare and Medicaid Extenders Act of
2010 (MMEA)
1. Amendment to section 1834(l)(13) of the Act
2. Amendment to section 146(b)(1) of MIPPA
3. Amendment to section 1834(l)(12) of the Act
B. Technical Correction
IV. Durable Medical Equipment and Supplies
A. Background for Durable Medical Equipment and Supplies
B. Current Issues
C. Provisions of the Proposed Regulations
1. Application of the 3-year lifetime standard to items
currently covered as DME and to supplies and accessories of covered
DME
2. Application of the 3-year minimum lifetime criteria to multi-
component devices
V. Collection of Information Requirements
A. Legislative Requirement for Solicitation of Comments
B. Requirements in Regulation Text
C. Additional Information Collection Requirements
1. Proposed Display of Certificates for PY 2013 and PY 2014 ESRD
QIP
2. Proposed NHSN Reporting Requirement for the PY 2014 ESRD QIP
3. Proposed Patient Experience Survey Usage Requirement for the
PY 2014 ESRD QIP
4. Proposed Mineral Metabolism Reporting Requirement for the
2014 ESRD QIP
VI. Response to Comments
VII. Economic Analysis
A. Regulatory Impact Analysis
1. Introduction
2. Statement of Need
3. Overall Impact
B. Detailed Economic Analysis
1. CY 2012 End-Stage Renal Disease Prospective Payment System
a. Effects on ESRD Facilities
b. Effects on Other Providers
c. Effects on the Medicare Program
d. Effects on Medicare Beneficiaries
e. Alternatives Considered
2. End-Stage Renal Disease Quality Incentive Program (QIP)
a. Effects of the Proposed 2013 and 2014 ESRD QIP
b. Alternatives Considered for 2013 and 2014 ESRD QIP
3. Ambulance Fee Schedule
C. Accounting Statement
VIII. Regulatory Flexibility Act Analysis

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IX. Unfunded Mandates Reform Act Analysis
X. Federalism Analysis
XI. Files Available to the Public via the Internet Regulations Text

Acronyms

In addition, because of the many terms to which we refer by acronym
in this proposed rule, we are listing the acronyms used and their
corresponding meanings in alphabetical order below:

AMCC Automated Multi-Channel Chemistry
ASP Average Sales Price
AV Arteriovenous
BLS Bureau of Labor Statistics
BMI Body Mass Index
BSA Body Surface Area
CBSA Core Based Statistical Area
CDC Centers for Disease Control and Prevention
CLABSI Central Line Access Bloodstream Infections
CFR Code of Federal Regulations
CIP Core Indicators Project
CMS Centers for Medicare & Medicaid Services
CPM Clinical Performance Measure
CPT Current Procedural Terminology
CROWNWeb Consolidated Renal Operations in a Web-Enabled Network
DFC Dialysis Facility Compare
DFR Dialysis Facility Report
DME Durable Medical Equipment
ESA Erythropoiesis stimulating agent
ESRD End-Stage Renal Disease
ESRDB End-Stage Renal Disease Bundled
FDA Food and Drug Administration
FI/MAC Fiscal Intermediary Medicare Administrative Contractor
FY Fiscal Year
GDP Gross Domestic Product
HAI Healthcare-associated Infections
HCPCS Healthcare Common Procedure Coding System
HD Hemodialysis
HHD Home Hemodialysis
ICD-9-CM International Classification of Diseases, 9th
ICH CAHPS In-Center Hemodialysis Consumer Assessment of Healthcare
Advisors
IGI IHS Global Insight
IPPS Inpatient Prospetive Payment System
KDIGO Kidney Disease: Improving Global Outcomes
KDOQI Kidney Disease Outcome Quality Initiative
Kt/V A measure of dialysis adequacy where K is dialyzer clearance, t
is dialysis time, and V is total body water volume
LDO Large dialysis organization
MAP Medicare Allowable Payment
MCP Monthly Capitation Payment
MIPPA Medicare Improvements for Patients and Providers Act of 2008
(Pub. L. 110-275)
MMA Medicare Prescription Drug, Improvement and Modernization Act of
2003
MMEA Medicare and Medicaid Extenders Act of 2010 Pub. L. 111-309
MFP Multifactor Productivity
NHSN National Healthcare Safety Network
NQF National Quality Forum
PD Peritoneal Dialysis
PFS Physician Fee Schedule
PPS Prospective payment system
PY Payment Year
QIP Quality incentive program
REMIS Renal management information system
RFA Regulatory Flexibility Act
RUL Reasonable Useful Lifetime
SBA Small Business Administration
SIMS Standard information management system
SHR Standardized Hospitalization Ratio
SSA Social Security Administration
the Act Social Security Act
the Affordable Care Act The Patient Protections and Affordable Care
Act
URR Urea reduction ratio
VBP Value Based Purchasing

I. Calendar Year (CY) 2011 End-Stage Renal Disease (ESRD) Prospective
Payment System (PPS)

A. Background for the End-Stage Renal Disease Prospective Payment
System (ESRD PPS) for Calendar Year (CY) 2012

On August 12, 2010, we published in the Federal Register, a final
rule (75 FR 49030 through 49214), entitled, ``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
patients beginning January 1, 2011, in accordance with section
1881(b)(14) of the Social Security Act (the Act), as added by section
153(b) of the Medicare Improvements for Patients and Providers Act of
2008 (MIPPA). The ESRD PPS replaced the prior basic case-mix adjusted
composite payment system and the methodologies for the reimbursement of
separately billable outpatient ESRD services.
Section 1881(b)(14)(F) of the Act, as added by section 153(b) of
MIPPA and amended by section 3401(h) of Public Law 111-148, the
Affordable Care Act, for 2012 and each subsequent year, the Secretary
shall reduce the market basket increase factor by a productivity
adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act.
In the CY 2011 ESRD PPS final rule (75 FR 49030), the Centers for
Medicare & Medicaid Services (CMS) finalized the following:
A base rate of $229.63 per treatment for renal dialysis
services (but postponed payment for oral-only renal dialysis drugs
under the ESRD PPS until January 1, 2014) that applies to both adult
and pediatric dialysis patients prior to the application of any case-
mix adjustments. This amount included the 2 percent reduction for
budget-neutrality required by MIPPA, a one percent reduction for
estimated outlier payments, and a reduction to account for estimated
payments for case-mix and the low-volume payment adjustments.
A 4-year transition (for those ESRD facilities that
elected to receive blended payments during the transition) period
during which ESRD facilities receive a blend of payments under the
prior basic case-mix adjusted composite payment system and the new ESRD
PPS. Although the statute uses the term ``phase-in'', we are using the
term ``transition'' to be consistent with other Medicare payment
systems.
A -3.1 percent transition budget-neutrality adjustment to
ensure that overall spending under the ESRD PPS did not increase as a
result of the provision that permits ESRD facilities to be excluded
from the 4-year transition.
A payment adjustments for dialysis treatments furnished to
adults for patient age, body surface area (BSA), low body mass index
(BMI), onset of dialysis, and six specified co-morbidities.
A home or self-care dialysis training payment adjustment
of $33.44 per treatment which is wage adjusted and applies to claims
for patients trained by ESRD facilities certified to provide home
dialysis training.
Payment adjustments for dialysis treatments furnished to
pediatric patients for patient age and dialysis modality.
A low-volume payment adjustment for adult patients of 18.9
percent that applies to the otherwise applicable case-mix adjusted
payment rate for facilities that qualifies as low-volume ESRD
facilities.
An outlier payment policy that provides an additional
payment to ESRD facilities treating high cost, resource-intensive
patients.
The wage index adjustment that is applied when calculating
the ESRD PPS payment rates in order to account for geographic
differences in area wage levels.
An ESRDB market basket index used to project prices in the
costs of goods and services used to furnish outpatient maintenance
dialysis.
In addition, on April 6, 2011, we published an interim final rule
with comment period in the Federal Register (76 FR 18930), entitled
``Changes in the End-Stage Renal Disease Prospective Payment System
Transition Budget-Neutrality Adjustment'', which revised the ESRD
transition budget-neutrality adjustment for CY 2011. In the interim
final rule, we revised the 3.1 percent transition budget-neutrality
adjustment reduction to a zero percent transition

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budget-neutrality adjustment for renal dialysis services furnished on
April 1, 2011 through December 31, 2011.

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

In this proposed rule, we propose to (1) Make a number of routine
updates for CY 2012, (2) implement the second year of the transition,
and (3) make several policy changes under the ESRD PPS, as well as
technical changes to the CY 2011 ESRD PPS final rule.
1. Proposals Related to the Composite Rate Portion of the ESRD PPS
Blended Payment
This proposed rule would implement the second year of the
transition period for those ESRD facilities that elected to go through
the transition rather than electing to receive payment based on 100
percent of the payment amount under the ESRD PPS. Specifically, we
would implement in CY 2012 the second year of the transition where 50
percent of payment is based on the basic case-mix adjusted composite
payment system and the remaining 50 percent of payment is based on the
payment amount under the ESRD PPS.
As a result of the transition period under the ESRD PPS, we must
continue to update the composite rate portion of the blended payment,
which would include updates to the drug add-on adjustment required by
section 1881(b)(12(F) of the Act, as well as the wage index values
(which include a budget-neutrality factor) used to adjust the labor
component of the composite rate. The proposed updates to the drug add-
on adjustment under the composite rate portion of the blended rate can
be found in section I.C.6.d of this proposed rule and the wage index is
discussed in section I.C.d.7 of this proposed rule.
Also, the ESRD bundled (ESRDB) market basket increase factor (which
is further reduced, beginning in 2012, by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II) of the Act) is used to
update the composite rate portion of the blended payment in accordance
with section 1881(b)(14)(F)(ii) of the Act. A discussion of the
proposed market basket increase factor for CY 2012 can be found in
section I.C.2 of this proposed rule. A discussion of the proposed
productivity adjustment can be found in section I.C.2.c of this
proposed rule. We are also proposing to update the second part of the
transition budget-neutrality adjustment for CY 2012 that is applied to
both the blended payments under the transition and payments under the
ESRD PPS. The discussion regarding the proposed transition budget-
neutrality adjustment can be found in section I.C.4 of this proposed
rule.
In this proposed rule, we also are proposing to add the $.49 for
the Part D drugs to the composite rate portion of the blended payment
during the transition, which represents the first part of the
transition budget-neutrality adjustment, and update it using the ESRDB
market basket minus productivity adjustment. We discuss this proposal
in the update to the composite rate and the proposed CY 2012 transition
budget-neutrality adjustment in I.C.1.a and I.B.4, respectively, of
this proposed rule.
Finally, we are proposing to revise the national average used in
calculating the BSA adjustment under the basic case-mix adjusted
composite payment system. This change is discussed in detail in section
I.C.9 of this proposed rule.
2. Proposals Related to the ESRD PPS
As discussed above in section I.A, section 1881(b)(14)(F)(i) of the
Act, as added by section 153(b) of MIPPA and amended by section 3401(h)
of the Affordable Care Act, beginning in 2012, requires the ESRD
bundled payment amounts to be annually increased by an ESRD market
basket increase factor that is reduced by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II) of the Act. Therefore, in CY
2012, an ESRD market basket increase factor that is reduced by a
productivity adjustment would be applied to the ESRD PPS payment rate
portion of the blended payment under the transition and under the full
ESRD PPS. A discussion of the proposed market basket increase factor
for CY 2012 can be found in section I.C.2 of this proposed rule. A
discussion of the proposed productivity adjustment can be found in
section I.C.2.c of this proposed rule.
We are also proposing to update the transition budget-neutrality
adjustment for CY 2012 which is applied to both the blended payments
under the transition and payments under the full ESRD PPS. The
discussion regarding the proposed transition budget-neutrality
adjustment can be found in section I.C.4 of this proposed rule.
This proposed rule would also update the wage index which is
applied to both the ESRD PPS portion of the blended payments under the
transition and payments under the full ESRD PPS. We are proposing to
apply a wage index budget-neutrality adjustment factor to the ESRD PPS
base rate. The discussion regarding the wage index can be found in
section I.C.7 of this proposed rule.
Also, for CY 2012, we are proposing the following revisions to the
ESRD PPS outlier policy: (1) Eliminate the drug-specific list of
eligible outlier services; (2) make modifications to the computation of
the separately billable Medicare Allowable Payment (MAP) amounts to
exclude access management drugs that are composite rate drugs and
include certain anemia management drugs; and (3) stop using the 50
percent rule and eliminate the Automated Multi-Channel Chemistry (AMCC)
laboratory tests from the definition of outlier services. In addition,
we are proposing to consider anti-infective drugs when used at home by
a patient to treat an infection of the catheter site or peritonitis
associated with peritoneal dialysis as non-composite rate ESRD-related
drugs, and reiterating that under the current regulation, all non-
composite rate ESRD-related drugs are considered outlier services. That
is, all non-composite rate ESRD-related drugs are considered outlier
services for purposes of determining outlier payments. The discussion
regarding the proposed changes to the outlier policy can be found in
section I.C.10 of this proposed rule.
3. Clarifications and Proposals Regarding the Low-Volume Adjustment
Policy Under the ESRD PPS
In this proposed rule, we are clarifying that the term ``payment
year'' is the period of time that we use for determining payment to
ESRD facilities, which is a calendar year. We propose to establish a
process for CY 2012 and each year thereafter that facilities would need
to follow, when submitting its attestation to notify its FI/MAC that it
is eligible for the low-volume adjustment. We are clarifying the term
``year'' that is used for purposes of establishing the treatment
threshold for low-volume eligibility. A discussion of the low-volume
payment adjustment can be found in section I.c.5 of this proposed rule.
4. Technical Corrections to the CY 2011 ESRD PPS Final Rule
In the CY 2011 ESRD PPS final rule, we inadvertently made two
technical errors: (1) The training add-on amount was listed incorrectly
as $33.38 instead of $33.44; and (2) the composite rate laboratory
test, ``Assay of protein by other source,'' which is identified by the
Current Procedural Terminology code 84157, was inadvertently omitted
from the list of ESRD-related laboratory tests. For more information
regarding these technical corrections please see section I.B.4 of this
proposed rule.

[[Page 40502]]

5. Clarifications Regarding the ESRD PPS
In this proposed rule, we are clarifying the method for updating
ICD-9-CM codes in accordance with ICD-9-CM annual updates and
clarifying whether certain renal dialysis service furnished in an
emergency room or department are considered renal dialysis services
covered under the ESRD PPS.

C. Provisions of the Proposed Regulations for the ESRD PPS

1. Proposed Updates to the Composite Rate and ESRD PPS Base Rate
a. Proposed Composite Rate
Under section 1881(b)(14)(E)(i) of the Act, we are required to
provide a 4-year transition under the new ESRD PPS. For CY 2012, under
42 CFR Sec. 413.239(a)(2), facilities that go through the transition
will receive a blended rate equal to the sum of 50 percent of the full
ESRD PPS amount and 50 percent of the basic case-mix adjusted payment
amount. Accordingly, we continue to need to update the composite rate
portion of the blended payment during the 4-year transition (that is,
CYs 2011 through 2013). For a historical perspective of the basic case-
mix adjusted composite payment system for ESRD facilities, including
the CY 2011 update to the composite rate portion of the ESRD PPS
blended rate, please see the CY 2011 Physician Fee Schedule (PFS) final
rule (75 FR 40164) and the CY 2011 PFS proposed rule (75 FR 40164
through 40168). In addition, we discuss the proposed CY 2012 drug add-
on and the updated wage index values for the composite rate portion of
the blended payment in sections I.C.6 and I.C.7, respectively.
As discussed in section i.B.2 of this proposed rule, section
1881(b)(14)(F)(ii) of the Act, as added by section 153(b) of MIPPA and
amended by section 3401(h) of the Affordable Care Act, provides that,
for years during which the transition applies, the composite rate
portion of the blend shall be annually increased by the ESRDB market
basket for CY 2012 and each subsequent year shall be reduced by the
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of
the Act. In sections I.C.2.b and I.C.2.c of this proposed rule, we
describe the basis for the proposed CY 2012 ESRDB market basket
increase of 3.0 percent, and the productivity offset of 1.2 percent,
yielding a proposed forecasted rate of increase in the base rate of 1.8
percent. In addition, as discussed in the transition budget-neutrality
adjustment in section I.C.a of this proposed rule, we are proposing to
add the CY 2011 Part D per treatment amount (that is, $0.49) to the CY
2011 composite rate in order to update the Part D amount for CY 2012
using the ESRDB market basket minus the productivity adjustment. The
basis for the first part of the transition budget-neutrality adjustment
(that is, the calculation of the $0.49 Part D add-on) was set forth in
the CY 2011 ESRD PPS final rule at 75 FR 49082.
Consequently, for CY 2012, the composite rate portion of the ESRD
PPS blended payment would be $141.52. The $141.52 reflects the addition
of the CY 2011 Part D per treatment amount ($0.49) to the CY 2011
composite rate of $138.53, and application of the ESRD market basket
minus productivity ($138.53 + 0.49 = $139.02; $139.02 x 1.018 =
$141.52).
b. ESRD PPS Base Rate
We described the development of the ESRD PPS per-treatment base
rate in the CY 2011 ESRD PPS final rule (75 FR 49071) under Medicare
regulations at 42 CFR Sec. Sec. 413.220 and 413.230. The CY 2011 ESRD
PPS final rule has a detailed discussion of the methodology used to
calculate the ESRD PPS base rate and the computation of reduction
factors used to adjust the ESRD PPS base rate for projected outlier
payments and budget-neutrality in accordance with sections
1881(b)(14)(D)(ii) and 1881(b)(14)(A)(ii) of the Act, respectively (75
FR 49071 through 49082). Specifically, the ESRD PPS base rate was
developed from CY 2007 claims (that is, the lowest per patient
utilization year), updated to CY 2011, and represented the average per
treatment Medicare allowable payment (MAP) for composite rate and
separately billable services. In addition, in accordance with Sec.
413.230, the per treatment base rate is adjusted for the patient-
specific case-mix adjustments, any applicable facility adjustments,
wages to reflect ESRD facility differences in area wage levels using an
area wage index, as well as any outlier payment or training add-on. For
CY 2011, the ESRD PPS base rate was $229.63 (75 FR 49082).
As discussed previously, section 1881(b)(14)(F)(i) of the Act, as
added by section 153(b) of MIPPA and amended by section 3401(h) of the
Affordable Care Act, provides that, beginning in 2012, the ESRD PPS
payment amounts are required to be annually increased by the rate of
increase in the ESRD market basket, reduced by the productivity
adjustment. Accordingly, we applied the 1.8 percent increase to the CY
2011 ESRD PPS base rate of $229.63, which results in a CY 2012 ESRD PPS
base rate of $233.76 ($229.63 x 1.018 = $233.76). The proposed CY 2012
ESRD PPS Base Rate applies to the ESRD PPS portion of the blend.
In addition, as discussed in section I.C.7.c of this proposed rule,
we are proposing to apply the wage index budget-neutrality adjustment
factor of 1.001126 to the CY 2012 ESRD PPS base rate (that is,
$233.76), yielding a proposed CY 2012 ESRD PPS wage-index budget-
neutrality adjusted base rate of $234.02 ($233.76 x 1.001126 =
$234.02).
2. ESRD Bundled Market Basket
a. Overview and Background
Under section 1881(b)(14)(F)(i) of the Act, as added by section
153(b) of MIPPA and amended by section 3401(h) of the Affordable Care
Act, beginning in 2012, the ESRD bundled payment amounts are required
to be annually increased by an ESRD market basket increase factor that
is reduced by the productivity adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act. The statute further provides that the
market basket increase factor should reflect the changes over time in
the prices of an appropriate mix of goods and services used to furnish
renal dialysis services. Under section 1881(b)(14)(F)(ii) of the Act,
as added by section 153(b) of MIPPA and amended by section 3401(h) of
the Affordable Care Act, the ESRD bundled (ESRDB) rate market basket
increase factor will also be used to update the composite rate portion
of ESRD payments during the ESRD PPS transition period from 2011
through 2013; though beginning in 2012, such market basket increase
factor will be reduced by the productivity adjustment. As a result of
amendments by section 3401(h) of the Affordable Care Act, a full market
basket was applied to the composite rate portion of the blended payment
in CY 2011 during the first year of the transition.
b. Proposed Market Basket Update Increase Factor and Labor-Related
Share for ESRD Facilities for CY 2012
As required under section 1881(b)(14)(F) of the Act, effective
beginning CY 2012 (and for purposes of the transition, effective
beginning CY 2011), CMS developed an all-inclusive ESRDB input price
index (75 FR 49151 through 49162). Although ``market basket''
technically describes the mix of goods and services used to produce
ESRD care, this term is also commonly used to denote the input price
index (that is, cost categories, their respective weights, and price
proxies combined)

[[Page 40503]]

derived from that market basket. Accordingly, the term ``ESRDB market
basket'', as used in this document, refers to the ESRDB input price
index.
For this proposed rule, we have used the same methodology described
in the CY 2011 ESRD PPS final rule (75 FR 49151 through 49162) to
compute the CY 2012 ESRDB market basket increase factor and labor-
related share. Using this method and the IHS Global Insight, Inc. (IGI)
forecast for the first quarter of 2011 of the CY 2008-based ESRDB
market basket, the proposed CY 2012 ESRDB market basket increase factor
is 3.0 percent. IGI is an economic and financial forecasting firm that
contracts with CMS to forecast the components of providers' market
baskets.
The labor-related share of a market basket is determined by
identifying the national average proportion of its operating costs that
are related to, influenced by, or vary with the local labor market. In
the CY 2011 ESRD PPS final rule, we finalized a labor-related share for
CY 2011 of 41.737 percent using the base year cost weights for the CY
2008-based ESRDB market basket (75 FR 49161 through 49162). Table 1
below contains the calculation of the labor-related share. This labor-
related share represented the sum of Wages and Salaries, Benefits,
Housekeeping and Operations, All Other Labor-related Services, 87
percent of the cost weight for Professional Fees, and 46 percent of the
cost weight for Capital-related Building and Equipment expenses. The 87
percent of Professional fees was determined based on a survey that CMS
conducted of ESRD facilities. Based on the survey results, we
determined that, on average, 87 percent of professional services are
purchased from local firms and 13 percent are purchased from businesses
located outside of the ESRD's local labor market. The 46 percent of
Capital-related Building and Equipment expenses is based on regressions
run for the inpatient hospital capital PPS (56 FR 43375). We use a
similar methodology to calculate capital-related expenses for the
labor-related shares for rehabilitation facilities (70 FR 30233),
psychiatric facilities, long-term care facilities, and skilled nursing
facilities (66 FR 39585).

Table 1--ESRDB Market Basket Labor-Related Share
------------------------------------------------------------------------
2008-based
ESRDB labor-
Cost category related share
(percent)
------------------------------------------------------------------------
Wages and Salaries..................................... 26.755
Benefits............................................... 6.754
Housekeeping and Operations............................ 2.029
All Other Labor-related Services....................... 1.219
Professional Fees, Labor-related....................... 1.549
Capital, Labor-related................................. 3.431
----------------
Total.............................................. 41.737
------------------------------------------------------------------------

In this proposed rule, we are not proposing to make any further
changes to the labor-related share since we have not proposed to update
the cost weights of the ESRDB market basket. Therefore, we are
proposing to continue to use a labor-related share of 41.737 percent
for CY 2012 for the ESRDB PPS.
If an ESRD facility elected to transition to the bundled PPS
system, then the CY 2012 payment to these providers will be based on a
50/50 blended payment of the composite rate and the ESRD PPS bundled
rate. The labor-related share under the composite portion of the
blended payment is 53.711 percent. This labor-related share was
developed from the labor-related components of the 1997 ESRD composite
rate market basket that was finalized in the 2005 PFS final rule (70 FR
70168). We propose to continue to use the labor-related share of 53.711
for the ESRD composite rate portion of the ESRD payment for all years
of the transition. This labor-related share is consistent with the mix
of labor-related services paid under the composite rate and is
consistent with the method finalized in the CY 2011 ESRD PPS final rule
(75 FR 49116).
c. Proposed Productivity Adjustment
Section 3401(h) of the Affordable Care Act requires that, in CY
2012 (and in subsequent calendar years), the market basket percentage
under the ESRD prospective payment system as described in section
1881(b)(14)(F) of the Act be annually adjusted by changes in economy-
wide productivity. Specifically, section 3401(h) of the Affordable Care
Act amends section 1881(b)(14)(F)(i) of the Act to add clause (II)
which sets forth the application of this productivity adjustment, which
is defined in section 1886(b)(3)(B)(xi)(II) of the Act. The statute
defines the productivity adjustment to be equal to the 10-year moving
average of changes in annual economy-wide private nonfarm business
multifactor productivity (MFP) (as projected by the Secretary for the
10-year period ending with the applicable fiscal year, year, cost
reporting period, or other annual period) (the ``MFP adjustment''). The
Bureau of Labor Statistics (BLS) is the agency that publishes the
official measure of private nonfarm business MFP. Please see http://www.bls.gov/mfp to obtain the BLS historical published MFP data.
CMS notes that the proposed methodology for calculating and
applying the MFP adjustment to the ESRD payment update is similar to
the methodology used in other payment systems as required by section
3401 of the Affordable Care Act.
The projection of MFP is currently produced by IGI, an economic
forecasting firm. In order to generate a forecast of MFP, IGI
replicated the MFP measure calculated by the BLS using a series of
proxy variables derived from IGI's U.S. macroeconomic models. These
models take into account a very broad range of factors that influence
the total U.S. economy. IGI forecasts the underlying proxy components
such as gross domestic product (GDP), capital, and labor inputs
required to estimate MFP and then combines those projections according
to the BLS methodology. In Table 2 below, we identify each of the major
MFP component series employed by the BLS to measure MFP. We also
provide the corresponding concepts forecasted by IGI and determined to
be the best available proxies for the BLS series.

Table 2--Multifactor Productivity Component Series Employed by the
Bureau of Labor Statistics and IHS Global Insight
------------------------------------------------------------------------
BLS series IGI series
------------------------------------------------------------------------
Real value-added output, Non-housing non-government non-farm real
constant 2005 dollars. GDP, Billions of chained 2005 dollars--
annual rate.
Private non-farm business Hours of all persons in private nonfarm
sector labor input; 2005 = establishments, 2005 = 100.00, adjusted
100.00. for labor composition effects.

[[Page 40504]]

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

IGI found that the historical growth rates of the BLS components
used to calculate MFP and the IGI components identified are consistent
across all series and therefore suitable proxies for calculating MFP.
We have included below a more detailed description of the methodology
used by IGI to construct a forecast of MFP, which is aligned closely
with the methodology employed by the BLS. For more information
regarding the BLS method for estimating productivity, please see the
following link: http://www.bls.gov/mfp/mprtech.pdf.
During the development of this proposed rule, the BLS published a
historical time series of private nonfarm business MFP for 1987 through
2009, with 2009 being a preliminary value. Using this historical MFP
series and the IGI forecasted series, IGI has developed a forecast of
MFP for 2010 through 2021, as described below.
To create a forecast of BLS' MFP index, the forecasted annual
growth rates of the ``non-housing, nongovernment, non-farm, real GDP,''
``hours of all persons in private nonfarm establishments adjusted for
labor composition,'' and ``real effective capital stock'' series
(ranging from 2010 to 2021) are used to ``grow'' the levels of the
``real value-added output,'' ``private non-farm business sector labor
input,'' and ``aggregate capital input'' series published by the BLS.
Projections of the ``hours of all persons'' measure are calculated
using the difference between the projected growth rates of real output
per hour and real GDP. This difference is then adjusted to account for
changes in labor composition in the forecast interval. Using these
three key concepts, MFP is derived by subtracting the contribution of
labor and capital inputs from output growth. However, in order to
estimate MFP, we need to understand the relative contributions of labor
and capital to total output growth. Therefore, two additional measures
are needed to operationalize the estimation of the IGI MFP projection:
Labor compensation and capital income. The sum of labor compensation
and capital income represents total income. The BLS calculates labor
compensation and capital income (in current dollar terms) to derive the
nominal values of labor and capital inputs. IGI uses the
``nongovernment total compensation'' and ``flow of capital services
from the total private non-residential capital stock'' series as
proxies for the BLS' income measures. These two proxy measures for
income are divided by total income to obtain the shares of labor
compensation and capital income to total income. In order to estimate
labor's contribution and capital's contribution to the growth in total
output, the growth rates of the proxy variables for labor and capital
inputs are multiplied by their respective shares of total income. These
contributions of labor and capital to output growth is subtracted from
total output growth to calculate the ``change in the growth rates of
multifactor productivity:''

MFP = Total output growth - ((labor input growth * labor compensation
share) + (capital input growth * capital income share))

The change in the growth rates (also referred to as the compound
growth rates) of the IGI MFP are multiplied by 100 in order to
calculate the percent change in growth rates (the percent change in
growth rates are published by the BLS for its historical MFP measure).
Finally, the growth rates of the IGI MFP are converted to index levels
based to 2005 to be consistent with the BLS' methodology. For
benchmarking purposes, the historical growth rates of IGI's proxy
variables were used to estimate a historical measure of MFP, which was
compared to the historical MFP estimate published by the BLS. The
comparison revealed that the growth rates of the components were
consistent across all series, and therefore validated the use of the
proxy variables in generating the IGI MFP projections. The resulting
MFP index was then interpolated to a quarterly frequency using the
Bassie method for temporal disaggregation. The Bassie technique
utilizes an indicator (pattern) series for its calculations. IGI uses
the index of output per hour (published by the BLS) as an indicator
when interpolating the MFP index.
d. Multifactor Productivity-Adjusted Market Basket Update
Under section 1881(b)(14)(F)(i) of the Act, as amended by section
3401(h) of the Affordable Care Act, the Secretary ``shall annually
increase payment amounts established under this paragraph by an ESRD
market basket percentage increase factor for a bundled payment system
for renal dialysis services that reflects changes over time in the
prices of an appropriate mix of goods and services included in renal
dialysis services''. Also, under section 1881(b)(14)(F)(ii)(II), as
amended by section 3401(h) of the Affordable Care Act, for years in
which the transition of the payment system is applicable, the
Affordable Care Act states that the Secretary ``shall annually increase
such composite rate by the ESRD market basket percentage increase
factor described in clause (i)(I)'' subject to this factor being
reduced by a productivity adjustment beginning in 2012.
As described in section I.C.2.b of this proposed rule, we are
proposing to estimate the ESRDB market basket percentage for CY 2012
based on the CY 2008-based ESRDB market basket. Section 3401(h) of the
Affordable Care Act amends section 1881(b)(14)(F)(i) of the Act by
adding a new clause (II), which requires that after establishing the
percentage for a calendar year 2012 (and each subsequent year), ``the
Secretary shall reduce such percentage by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II)'' (which we refer to as the
multifactor productivity adjustment or MFP adjustment).
In order to calculate the MFP-adjusted update for the ESRDB market
basket during the transition period, we propose that the MFP percentage
adjustment be subtracted from the CY 2012 market basket update
calculated using the CY 2008-based ESRDB market basket. We propose that
the end of the 10-year moving average of changes in the MFP should
coincide with the end of the appropriate CY update period. Since the
market basket update is reduced by the MFP adjustment to determine the
annual update for the ESRDB PPS and the ESRD composite rate during the
transition, we believe it is appropriate for the numbers associated
with both components of the calculation (the market basket and the
productivity adjustment) to coincide so that changes in market
conditions are aligned.

[[Page 40505]]

Therefore, for the CY 2012 update, we propose that the MFP adjustment
be calculated as the 10-year moving average of changes in MFP for the
period ending December 31, 2012. We propose to round the final annual
adjustment to the one-tenth of one percentage point level up or down as
applicable according to conventional rounding rules (that is, if the
number we are rounding is followed by 5, 6, 7, 8, or 9, we will round
the number up; if the number we are rounding is followed by 1, 2, 3, or
4, we will round the number down).
The market basket percentage we are proposing for CY 2012 for the
ESRDB market basket is based on the 1st quarter 2011 forecast of the CY
2008-based ESRDB market basket update, which is estimated to be 3.0
percent. This market basket percentage would then be reduced by the MFP
adjustment (the 10-year moving average of MFP for the period ending CY
2012) of 1.2 percent, which is calculated as described above and based
on IGI's 1st quarter 2011 forecast. The resulting MFP-adjusted ESRDB
market basket update is equal to 1.8 percent, or 3.0 percent less 1.2
percent. We propose that if more recent data are subsequently available
(for example, a more recent estimate of the market basket and MFP
adjustment), we would use such data, if appropriate, to determine the
CY 2012 market basket update and MFP adjustment in the CY 2012 ESRD PPS
final rule.
3. Transition Budget-Neutrality Adjustment for CY 2011
Section 1881(b)(14)(E)(iii) of the Act requires that an adjustment
to payments be made for renal dialysis services provided by ESRD
facilities during the transition so that the estimated total payments
under the ESRD PPS, including payments under the transition, equal the
estimated total amount of payments that would otherwise occur under the
ESRD PPS without such a transition. In the CY 2011 ESRD PPS final rule,
we explained that because we would not know the actual number of ESRD
facilities that would elect to opt out of the transition prior to
publishing the final rule, we would simulate payments under the
existing basic case-mix adjusted composite payment system and under the
ESRD PPS to determine the number of ESRD facilities that we believed
would elect to receive payment under 100 percent ESRD PPS. We explained
that based on our simulations using 2007 data, we estimated that 43
percent of ESRD facilities would financially benefit from receiving
full payment under the ESRD PPS. We also indicated that based on the
simulation of estimated payments, a 3.1 percent reduction would be
applied to all payment made to ESRD facilities for renal dialysis
services furnished on January 1, 2011 through December 31, 2011 (75 FR
49082 through 49083).
On April 6, 2011, we published an interim final rule with comment
period in the Federal Register (76 FR 18930), entitled ``Changes to the
End-Stage Renal Disease Prospective Payment System Transition Budget-
Neutrality Adjustment'', which revised the ESRD transition budget-
neutrality adjustment finalized for CY 2011. In the interim final rule,
we indicated that based on the election data submitted by ESRD
facilities, 87 percent of ESRD facilities elected to opt out of the
transition. When we applied the actual number of ESRD facilities
electing to receive payment under the ESRD PPS, the transition budget-
neutrality adjustment was determined to be zero rather than a 3.1
reduction in payments. We revised the 3.1 percent transition budget-
neutrality adjustment reduction to a zero percent transition budget-
neutrality adjustment for renal dialysis services furnished on April 1,
2011 through December 31, 2011. We will respond to comments submitted
on the interim final rule in the CY 2012 ESRD PPS final rule.
4. Proposed Transition Budget-Neutrality Adjustment for CY 2012
As we discussed in the background section of this proposed rule,
section 1881(b)(14)(E)(i) of the Act requires the Secretary to provide
``a four year phase-in'' of the payments under the ESRD PPS for renal
dialysis services furnished on or after January 1, 2011, with payments
under the ESRD PPS ``fully implemented for renal dialysis services
furnished on or after January 1, 2014.'' Also, we indicated that
instead of using the term ``phase-in'', we are using the term
``transition'' to be consistent with other Medicare payment systems.
Section 1881(b)(14)(E)(ii) of the Act permits ESRD facilities to
make a one-time election to be excluded from the transition. An ESRD
facility that elected to be excluded from the transition would receive
payment for renal dialysis services provided on or after January 1,
2011, based on 100 percent of the payment rate under the ESRD PPS
rather than a blended payment based in part on the payment rate under
the basic case-mix adjusted composite payment system and in part on the
payment rate under the ESRD PPS.
Section 1881(b)(14)(E)(iii) of the Act also requires that we make
an adjustment to payments for renal dialysis services provided by ESRD
facilities during the transition so that the estimated total amount of
payments under the ESRD PPS, including payments under the transition,
equals the estimated total amount of payments that would otherwise
occur under the ESRD PPS without such a transition. We refer to this
provision as the transition budget-neutrality adjustment.
As described in the CY 2011 ESRD PPS final rule (75 FR 49082), the
transition budget-neutrality adjustment is comprised of two parts. For
the first part, we created a payment adjustment under the basic case-
mix adjusted composite payment system portion of the blended rate
during the transition to account for the per treatment costs of drugs
that are currently paid under Part D. For the second part, we computed
a factor that would make the estimated total amount of payments under
the ESRD PPS, including payments under the transition, equal the
estimated total amount of payments that would otherwise occur without
such a transition. In this proposed rule, we are addressing both parts
of the transition budget-neutrality adjustment.
For the first part of the transition budget-neutrality adjustment,
for CY 2012, we propose to add the $0.49, which represents the CY 2011
Part D payment amount, to the composite rate portion of the ESRD PPS
blended payment. We then propose to apply the ESRDB market basket minus
productivity adjustment to the updated composite rate (which includes
the $0.49). Since the composite rate is updated by the ESRDB market
basket minus productivity and we are proposing to add the $0.49 to the
composite rate, it would be consistent to use the same update. We
believe that this approach is preferable to applying a growth factor to
the $0.49 that is based on the rates for overall prescription drug
prices that were used in the National Health Expenditure Projections,
as we did for the establishment of the CY 2011 ESRD PPS base rate,
because it is consistent with the update applied to the ESRD PPS base
rate, which includes a per treatment amount for former Part D drugs
(that is, $0.49). We discuss the addition of the $0.49 to the composite
portion of the ESRD PPS payment in section I.c.1.a of this proposed
rule. For the first part of the transition budget-neutrality
adjustment, we are seeking comment on our proposal to add the CY 2011
Part D payment amount (that is, $0.49) to the composite rate portion of
the blended payment and update it using the ESRDB market basket minus
productivity adjustment.

[[Page 40506]]

For the second part, as described in the CY 2011 ESRD PPS proposed
rule (74 FR 49946), to calculate the transition budget-neutrality
adjustment, we first determined the estimated increases in payments
under the transition and then determined an offset factor, based on
estimates of which facilities would choose to opt out of the
transition. We estimated the number of facilities that would choose to
opt out of the transition by comparing payment under the transition to
payment under the PPS and choosing the option that was financially
beneficial to each facility. Using that approach, we estimated that 43
percent of facilities would choose to opt out of the transition and
determined the transition budget-neutrality adjustment to be a
reduction of 3.1 percent. In the April 6, 2011 interim final rule with
comment (76 FR 18930 through 18934) published in the Federal Register,
however, we revised the number of facilities that chose to opt out of
the transition to 87 percent, based on actual election data that we
received, and recalculated a transition budget-neutrality adjustment of
0 percent.
Given that the transition budget-neutrality adjustment required
under section 1881(b)(14)(A)(ii) of the Act applies in each year of the
transition, we must update the transition budget-neutrality adjustment
for CY 2012, the second year of the transition. As discussed in detail
below, and in accordance with section 1881(b)(14)(E)(iii) of the Act,
that requires an adjustment to be made to payments so that total
payments under the transition equal total payment amounts without such
a transition, that results in the reduction of all payments to ESRD
facilities in CY 2012 by a factor that is equal to 1 minus the ratio of
estimated payments under the ESRD PPS if there were no transition to
the total estimated payments under the transition. In this proposed
rule, we are not proposing for CY 2012 to change the methodology used
to calculate the second part of the budget-neutrality adjustment. We
are, however, proposing to use more updated data.
For CY 2012, we started with 2009 utilization data from claims, as
2009 is the latest complete year of claims data available. We updated
the CY 2009 utilization data to CY 2011 and CY 2012 payments by using
the price growth factors for CY 2011 and CY 2012, as discussed in the
impact analysis in section VII of this proposed rule. We then took the
estimated payments under the full CY 2012 ESRD PPS and the blended
payments under the transition based on actual facility election data
and compared these estimated payments to the total estimated payments
in CY 2012 as if all facilities had elected to receive payment under
the ESRD PPS. We then calculated the transition budget-neutrality
factor to be 1 minus the ratio of estimated payments under the ESRD PPS
if there were no transition to the total estimated payments under the
transition, which results in 0 percent. Therefore, for CY 2012, we are
proposing a 0 percent reduction to all payments made to ESRD facilities
(that is, the 0 percent adjustment would be applied to both the blended
payments made under the transition and payments made under the 100
percent ESRD PPS) for renal dialysis items and services furnished
January 1, 2012 through December 31, 2012. We solicit comments on the
proposed second part of CY 2012 transition budget-neutrality
adjustment.
5. Proposed Low-Volume Facility Provisions
In the CY 2011 ESRD PPS final rule, we established a low-volume
payment adjustment as required by section 1881(b)(14)(D)(iii) of the
Act, that ``reflects the extent to which costs incurred by low-volume
facilities (as defined by the Secretary) in furnishing renal dialysis
services exceed the costs incurred by other facilities in furnishing
such services, and for payment for renal dialysis services furnished on
or after January 1, 2011, and before January 1, 2014, such payment
adjustment shall not be less than 10 percent'' (75 FR 49117).
We explained in the CY 2011 ESRD PPS final rule (75 FR 49120) that
we analyzed the effect of facility size on cost by analyzing the total
treatment counts from ESRD facility cost reports for 2006, 2007, and
2008. We used all treatments including non-Medicare treatments from the
cost reports because we believe that inclusion of all treatments
regardless of payer type represents the true volume of treatments that
an ESRD facility furnishes (75 FR 49122). Because the analysis included
data that spanned a 3-year period, we defined a low-volume ESRD
facility as a facility that is able to maintain its low-volume status
each year of the 3-year period because we believed that this timeframe
provided us with a sufficient span of time to view consistency in
business operations through the data (75 FR 49123).
Our analysis showed that when compared to larger facilities,
facilities that would be eligible for the low-volume adjustment are
more likely to be located in a rural area, less likely to be part of a
large dialysis organization (LDO), more likely to be hospital-based,
likely to have a somewhat higher percentage of Medicare patients, more
likely to be a pediatric facility, more likely to have previously
received an isolated essential facility composite rate payment
exception, and more likely to concentrate on home dialysis (75 FR
49120).
Under 42 CFR Sec. 413.232(b), a low-volume facility is as an ESRD
facility that: (1) Furnished less than 4,000 dialysis treatments in
each of the 3 years preceding the payment year and (2) has not opened,
closed, or received a new provider number due to a change in ownership
during the 3 years preceding the payment year. Under Sec. 413.232(c),
for purposes of determining the number of treatments furnished by the
ESRD facility, the number of treatments shall be equal to the aggregate
number of treatments furnished by the other ESRD facilities that are
both under common ownership, and 25 road miles or less from the ESRD
facility in question. This geographic proximity criterion is only
applicable to ESRD facilities that are Medicare certified on or after
January 1, 2011. Section 413.232(f) requires an ESRD facility to
provide an attestation statement to their respective fiscal
intermediary medicare administrative contractor (FI/MAC) that the
facility has met all the criteria in order to receive the low-volume
adjustment. We note that furnishing 4,000 treatments in a year equates
to approximately 25 patients per year receiving three dialysis
treatments a week (or hemo-equivalent treatments). The regulation at
Sec. 413.232 provides the criteria that an ESRD facility must meet to
be eligible for the low-volume adjustment and uses the term ``payment
year.'' Although we believe the meaning of this term is clear, in
response to questions that we received subsequent to the publication of
the CY 2011 ESRD PPS final rule demonstrating confusion between the
payment year and eligibility year, we are clarifying that the term
``payment year'' is the period of time that we use for determining
payment to ESRD facilities, which is a calendar year. We are also
clarifying that the eligibility years means the 3 years preceding the
payment year and that the eligibility years are based on cost reporting
years. We are making this clarification to ensure that ESRD facilities
and their respective FI/MACs understand the distinction between
eligibility (which is based on cost reporting years) and the payment
year (when ESRD facilities can begin to receive the low-volume payment
adjustment).
In this proposed rule, we also are proposing to establish the
process, for CY 2012 and each year thereafter that an

[[Page 40507]]

ESRD facility would be required to follow when submitting its
attestation to notify its FI/MAC that it is eligible for the low-volume
payment adjustment. The attestation is required because: (1) The ESRD
facility's cost reporting periods vary and may not be based on the
calendar year; and (2) the cost reports are due 5 months after the
close of the cost reporting period (that is, there is a lag in the cost
reporting submission). Thus, the FI/MACS may not have the cost report
for the third year to determine eligibility and will need to rely on
the attestation for that year. If an ESRD facility believes that it is
eligible for the low-volume adjustment, we are proposing that the ESRD
facility would be required to submit an attestation to its respective
FI/MAC no later than November 1st of each year. This timeframe provides
60 days for a FI/MAC to verify the cost report information and update
the systems. For example, for payment year 2012 (January 1, 2012
through December 31, 2012), ESRD facilities that believe they are
eligible for the low-volume adjustment must submit an attestation to
their respective FI/MAC no later than November 1, 2011 (with regard to
its low-volume status based on services furnished in its cost reporting
period ending in 2009, 2010, and 2011).
ESRD facilities that are receiving the low-volume adjustment for
the CY 2011 payment year should submit another attestation to their
respective FI/MAC no later than November 1, 2011, to qualify for the
low-volume adjustment for the CY 2012 payment year. Thus, for an
attestation applicable to the 2012 payment year, the ESRD facility
would attest that it meets the low-volume facility requirements based
on its cost reporting periods ending in 2009, 2010, and 2011. The ESRD
facility would continue to attest that it is a low-volume facility for
each subsequent payment year it believes it is eligible for the low-
volume facility adjustment.
As we indicated above, we propose that attestations be submitted to
the FI/MAC no later than November 1 preceding each payment year to
allow the FI/MACs time to review the attestation and ensure that
accurate payment is made for renal dialysis services provided on or
after January 1. We suggest that ESRD facilities submitting a low-
volume attestation verify that the attestation has been received by the
appropriate FI/MAC prior to the November 1 deadline. In the event that
a dialysis organization submits the low-volume attestation on behalf of
its ESRD facilities, the dialysis organization will be required to
identify each ESRD facility by name and provider number and submit them
by the November 1 deadline.
If the FI/MAC does not receive an ESRD facility's attestation
stating that the ESRD facility is eligible for the low-volume
adjustment on or before November 1 prior to the payment year, the ESRD
facility would not receive the low-volume adjustment for that payment
year.
In this proposed rule, with regard to the deadline for attestation
submission, we are proposing to amend the regulation text at Sec.
413.232(f) to require an ESRD facility to submit its attestation no
later than November 1. This requirement would provide FI/MACs time to
review and verify ESRD facilities low-volume eligibility. We are
soliciting comment on the proposed regulation text changes at Sec.
413.232(f).
Under Sec. 413.232(b)(1) and (b)(2), a low-volume facility is
defined as an ESRD facility that ``furnished less than 4,000 treatments
in each of the 3 years preceding the payment year'' and ``has not
opened, closed, or had a change in ownership in the 3 years preceding
the payment year'' (emphasis added). In response to comments we
received subsequent to the CY 2011 ESRD PPS final rule, we are
clarifying the meaning of the term ``years'' in this regulation, with
regard to the treatment threshold that determines low-volume
eligibility, and how it relates to the ``payment year.'' We are
providing this additional clarification to emphasize because there are
ESRD facilities that do not have cost reporting periods that fall on a
calendar year period (January 1 through December 31), and there may be
confusion about how the eligibility year relates to the payment year.
Specifically, we emphasize again that for the purpose of low-volume
eligibility, the term ``years'' refers to cost reporting periods
because low-volume eligibility is determined based on the ESRD
facility's cost report. For example, an ESRD facility's cost reporting
period could span a fiscal year rather than a calendar year. However,
the low-volume payment adjustment is paid according to the ESRD PPS
payment year (that is, the calendar year). Accordingly, FI/MACs are
reviewing the ESRD facility's cost reporting periods ending in the 3
years preceding the payment year for low-volume eligibility, and those
cost reporting periods may not necessarily be calendar years (January 1
to December 31).
We believe that it is also important to reiterate that the ESRD
facility's cost reports for the cost reporting periods ending in the 3
years immediately preceding the payment year, as discussed above, must
report costs for 12-consecutive months. For example, an FI/MAC would
not consider a short period cost report (that is, reporting costs for
less than 12 months which may occur for new facilities or facilities
under new ownership), for low-volume eligibility. Specifically, when an
ESRD facility is assessing its eligibility for the low-volume
adjustment and preparing its attestation, the ESRD facility would look
at its 12-consecutive month cost reports for the cost reporting periods
that end in the 3 years immediately preceding the payment year.
We acknowledge that the FI/MAC may not have a final-settled cost
report for all 3 years needed to complete the ESRD facility's
verification. For example, using a June 30th cost reporting period year
end, for purposes of determining low-volume eligibility, the ESRD
facility would need to have met the low-volume criteria for their cost
reporting periods ending on June 30, 2009, June 30, 2010, and June 30,
2011, to begin to receive the low-volume adjustment January 1, 2012.
The FI/MAC should have the ESRD facility's cost reports for 2009 and
2010 and both years should be either final-settled or as-filed (that
is, submitted to and accepted by the FI/MAC) and such cost reports
should be for 12-consecutive months in each of the 2 years. The
facility would be required to submit an attestation for all 3 years,
including the third eligibility year because the cost report for that
year is not available and no cost report has been submitted.
Therefore, in this rule, we propose to amend the regulations text
at Sec. 413.232(b)(1) and (b)(2) to clarify the type of year that is
used for determining low-volume eligibility. This change in the
regulations text also provides clarification to the ESRD facilities and
the FI/MACs that in the absence of an ESRD facility's final settled
cost report, an FI/MAC can review the ESRD facility's as-filed cost
report when determining if an ESRD facility meets the low-volume
criteria. We believe that it is appropriate for the FI/MAC to determine
eligibility based upon an as-filed cost report because the number of
total treatments should not change between submission of the as-filed
cost report and the final settled cost report. We are soliciting
comment on the proposed changes at Sec. 413.232(b)(1) and (b)(2).
Continuing with the example discussed above in which we address an
ESRD facility with a cost reporting year that ends on June 30, the ESRD
facility attests to its FI/MAC that it met the low-volume criteria for
its cost reporting periods ending in 2009 and 2010 and that it expects
to meet the low-volume

[[Page 40508]]

criteria for its cost reporting period ending in 2011. The ESRD
facility's cost report for its cost reporting period ending in 2011 is
the third year that is needed to meet the criteria specified at Sec.
413.232 for purposes of the 2012 payment year. If the FI/MAC receives
the ESRD facility's cost report for 2011 and finds that the ESRD
facility did not meet the low-volume criteria in its cost reporting
period ending on June 30, 2011 (that is, the third eligibility year),
the FI/MAC will discontinue application of the low-volume adjustment to
the facility's payments for CY 2012 because the facility was not
eligible for the adjustment. If the ESRD facility does not remain low-
volume for each of the 3 years (12-consecutive month cost reporting
periods) immediately preceding the payment year, the ESRD facility will
not be eligible for the low-volume adjustment until it can demonstrate
again that for 3 years (12-consecutive month cost reporting periods) it
met the low-volume criteria.
6. Proposed Update to the Drug Add-On to the Composite Rate Portion of
the ESRD Blended Payment Rate
Section 1881(b)(14)(E)(i) of the Act requires a four-year
transition under the ESRD PPS. Under Sec. 413.239, ESRD facilities
were permitted to make a one-time election by November 1, 2011, to be
excluded from the transition and receive full payment under the ESRD
PPS. Under Sec. 413.239, in CY 2012, ESRD facilities that elected to
receive payment under the transition will be paid a blended amount that
will consist of 50 percent of the basic case-mix adjusted composite
payment system and 50 percent on the ESRD PPS payment. Thus, we must
continue to update the composite rate portion of the blended payment
amount during the ESRD PPS 4-year transition (CYs 2011 through 2013),
which includes an update to the drug add-on, the application of the
wage index, and an update to the composite rate portion of the ESRD PPS
blended payment amount for the second year (CY 2012) of the ESRD PPS.
The proposed wage index and composite rate portion of the ESRD PPS
blended payment are discussed in sections I.C.7 and I.C.1.a of this
proposed rule.
As required under section 1881(b)(12) of the Act, the basic case-
mix adjusted composite payment system includes services comprising the
composite rate and an add-on to the composite rate component to account
for the difference between pre-MMA payments for separately billed drugs
and the revised drug pricing specified in the statute. For the drug
add-on for CY 2012, in this proposed rule, we are not proposing any
changes to the methodology but are merely updating the data used in
computing the drug add-on as described below.
a. Estimating Growth in Expenditures for Drugs and Biologicals in CY
2012
Section 1881(b)(12)(F) of the Act specifies that the drug add-on
increase must reflect ``the estimated growth in expenditures for drugs
and biologicals (including erythropoietin) that are separately billable
* * *''. By referring to ``expenditures'', we believe the statute
contemplates that the update would account for both increases in drug
prices, as well as increases in utilization of those drugs.
In order to account for increases in drug prices and utilization,
since we now have 5 years of drug expenditure data based on ASP
pricing, for CY 2012, we continue estimating growth in drug
expenditures based on the trends in available data. We then removed
growth in enrollment for the same time period from the expenditure
growth so that the residual reflects the per patient expenditure growth
(which includes price and utilization combined).
To estimate drug expenditure growth using trend analysis, for CY
2012, we looked at the average annual growth in total drug expenditures
between 2006 and 2010. First, we estimated the total drug expenditures
for all ESRD facilities in CY 2010. We used the final CY 2006 through
CY 2009 ESRD claims data and the latest available CY 2010 ESRD facility
claims, updated through December 31, 2010 (that is, claims with dates
of service from January 1 through December 31, 2010, that were
received, processed, paid, and passed to the National Claims History
File as of December 31, 2010). For the CY 2012 PPS final rule, we
intend to use additional updated CY 2010 claims with dates of service
for the same timeframe. This updated CY 2010 data file will include
claims received, processed, paid, and passed to the National Claims
History File as of June 30, 2011. While the CY 2010 claims file used in
this proposed rule is the most current available, we recognize that it
does not reflect a complete year, as claims with dates of service
towards the end of the year have not all been processed. To more
accurately estimate the update to the drug add-on, completed aggregate
drug expenditures are required.
Next, for CY 2012, based on an analysis of the 2009 claims data, we
inflated the CY 2010 drug expenditures to estimate the June 30, 2011
update of the 2010 claims file. We used the relationship between the
December 2009 and the June 2010 versions of 2009 claims to estimate the
more complete 2010 claims that will be available in June 2011 and
applied that ratio to the 2010 claims data from the December 2010
claims file. The net adjustment to the CY 2010 claims data is an
increase of 11.62 percent to the 2010 expenditure data. This adjustment
allows us to more accurately compare the 2009 and 2010 drug expenditure
data to estimate per patient growth.
Using the completed full-year 2010 drug expenditure figure, we
calculated the average annual change in drug expenditures from 2006
through 2010. This average annual change showed an increase of 1.4
percent in drug expenditures from 2006 through 2010. We used this 1.4
percent increase to project drug expenditures for both 2011 and 2012.
b. Estimating Per Patient Growth
Once we had the projected growth in drug expenditures from 2011 to
2012, we calculated per patient growth between CYs 2011 and 2012 by
removing the estimated growth in enrollment data between CY 2011 and CY
2012. We estimate a 4.2 percent estimated growth in enrollment between
CY 2011 and CY 2012. To obtain the per-patient estimated growth in
expenditures, we divided the total drug expenditure change between 2011
and 2012 (1.014) by enrollment growth of 4.2 percent (1.042) for the
same timeframe. The result is a per-patient growth factor equal to
0.973 (1.014/1.042 = 0.973). Thus, we are projecting a 2.7 percent
decrease (2.7% = .027 = 0.973 - 1) in per patient growth in drug
expenditures between 2011 and 2012.
c. Applying the Proposed Growth Update to the Drug Add-On Adjustment
In the CY 2006 PFS final rule (71 FR 69683), we applied the
projected growth update percentage to the total amount of drug add-on
dollars established for CY 2005 to establish a dollar amount for the CY
2006 growth update. In addition, we projected the growth in dialysis
treatments for CY 2006 based on the projected growth in ESRD
enrollment. We divided the projected total dollar amount of the CY 2006
growth by the projected growth in total dialysis treatments to develop
the per treatment growth update amount. This growth update amount,
combined with the CY 2005 per treatment drug add-on amount, resulted in
an average drug add-on amount per treatment of $18.88 (or a 14.5
percent adjustment to the composite rate) for CY 2006.
In the CY 2007 PFS final rule with comment period (71 FR 69684), as
a

[[Page 40509]]

result of public comments, we revised our update methodology by
applying the growth update to the per treatment drug add-on amount.
That is, for CY 2007, we applied the growth update factor of 4.03
percent to the $18.88 per treatment drug add-on amount resulting in an
updated per treatment drug add-on amount of $19.64 per treatment (71 FR
69684). For CY 2008, the per treatment drug add-on amount was updated
to $20.33. In the CY 2009, 2010 and 2011 PFS final rule with comment
period (73 FR 69755 through 69757, 74 FR 61923, and 75 FR 73485,
respectively), we applied a zero update to the per treatment drug add-
on amount resulting in a per treatment drug add-on amount of $20.33. As
discussed in detail below, for CY 2012, we are again proposing no
update to the per treatment drug add-on amount of $20.33 established in
CY 2008.
d. Proposed Update to the Drug Add-On Adjustment for CY 2012
As discussed above, we estimate a 1.4 percent increase in drug
expenditures between CY 2011 and CY 2012. Combining this increase with
a 4.2 percent increase in enrollment, as described above, we are
projecting a 2.7 percent decrease in per patient growth of drug
expenditures between CY 2011 and CY 2012. Therefore, we are projecting
that the combined growth in per patient utilization and pricing for CY
2012 would result in a decrease to the drug add-on equal to 0.4
percentage points. This figure is derived by applying the 2.7 percent
decrease to the CY 2011 drug add-on of $20.33. This would result in a
revised drug add-on of $19.78, which is 14.0 percent of the proposed CY
2012 base composite rate of $141.52. If we were to apply no decrease to
the drug add-on of $20.33, this would result in 14.4 percent drug add-
on. However, similar to last year and as indicated above, we are
proposing a zero update to the drug add-on adjustment. We believe this
approach is consistent with the language under section 1881(b)(12)(F)
of the Act which states in part that ``the Secretary shall annually
increase'' the drug add-on amount based on the growth in expenditures
for separately billed ESRD drugs. Our understanding of the statute
contemplates ``annually increase'' to mean a positive or zero update to
the drug add-on. Therefore, we propose to apply a zero update and
maintain the $20.33 per treatment drug add-on amount for CY 2012. We
are seeking comment on our proposed zero update to the drug add-on.
The current $20.33 per treatment drug add-on reflected a 14.7
percent drug add-on adjustment to the composite rate in effect for CY
2011. As discussed in section I.c.2.b of this proposed rule, section
1881(b)(14)(F) of the Act requires that an ESRDB market basket minus
productivity adjustment be used to update the composite rate portion of
the ESRD PPS payment (forecast of 1.8 percent in 2012 effective January
1, 2012), resulting in a decrease to the CY 2012 drug add-on adjustment
from 14.7 to 14.4 percent to maintain the drug add-on at $20.33. This
decrease occurs because the drug add-on adjustment is a percentage of
the composite rate. Since the proposed CY 2012 composite rate is higher
than the CY 2011 composite rate, and since the drug add-on remains at
$20.33, the percentage decreases. Therefore, we are proposing a drug
add-on adjustment to the composite rate for CY 2012 of 14.4 percent.
7. Updates to the Wage Index Values and Wage Index Floor for the
Composite Portion of the ESRD PPS Blended Payment and Under the ESRD
PPS Payment
Section 1881(b)(14)(D)(iv)(II) of the Act provides that the ESRD
PPS may include such other payment adjustments as the Secretary
determines appropriate, such as a payment adjustment by a geographic
wage index, such as in the index referred to in section 1881(b)(12)(D),
as the Secretary determines appropriate. In the CY 2011 ESRD PPS final
rule (75 FR 49117 through 49117) and CY 2011 PFS final rule (75 FR
73486), we finalized the wage index policy under the ESRD PPS.
Specifically, under the ESRD PPS, we have adopted the same method and
source of wage index values used previously for the basic case-mix
adjusted composite payment system.
We use Office of Management and Budget's (OMB's) Core Based
Statistical Area (CBSA)-based geographic area designations to define
urban/rural areas and corresponding wage index values. In addition, the
wage index values used under the ESRD PPS are the inpatient prospective
payment system (IPPS) wage index values calculated without regard to
geographic reclassifications authorized under sections 1881(d)(8) and
(d)(10) of the Act, and utilize pre-floor hospital data that are
unadjusted for occupational case mix. The CBSA-based geographic area
designations are described in OMB Bulletin 03-04, originally issued
June 6, 2003, and available online at http://www.whitehouse.gov/omb/bulletins/b03-04.html. In addition, OMB has published subsequent
bulletins regarding CBSA changes, including changes in CBSA numbers and
titles. We wish to point out that this and all subsequent ESRD rules
and notices are considered to incorporate the CBSA changes published in
the most recent OMB bulletin that applies to the hospital wage index
used to determine the current ESRD wage index. The OMB bulletins may be
accessed online at http://www.whitehouse.gov/omb/bulletins/index.html.
Under the ESRD PPS, we have adopted a wage index floor during the
transition, though as we previously noted, we intend to gradually
reduce the ESRD wage index floor (75 FR 49117, 75 FR 73486). We also
use the labor-related share for both the ESRD PPS and the composite
rate portion of the blend, as measured by the ESRDB market basket (see
section I.c.2.b of this proposed rule). Finally, the wage data used to
construct the wage index under the ESRD PPS is updated annually, based
on the most current data available and based on OMB's rural definitions
and corresponding wage index values.
With regard to the transition, as we noted in the CY 2011 PFS final
rule (75 FR 40163), because ESRD facilities could elect to receive a
blended payment during the transition, we would continue to update the
composite rate portion of the ESRD PPS blended payment, including
adjusting payments for geographic differences in area wage levels, as
noted above. We also discussed the application of the wage index
budget-neutrality adjustment factor to the area wage index values for
the composite rate portion of the ESRD PPS blended payment. In this
proposed rule, we are not proposing any changes to the methodology for
the wage index used to adjust the composite rate portion of the ESRD
PPS blended payment. However, we are proposing to update the wage index
values and the wage index budget-neutrality adjustment factor for CY
2012 for the composite rate portion of the blended payment under the
transition.
In addition, in this proposed rule, we are not proposing to make
any changes to the methodology for updating the CY 2012 wage index
under the ESRD PPS (that is, for full ESRD PPS payments and the ESRD
PPS portion of the blended payment under the transition). However, we
are proposing a wage index budget-neutrality adjustment factor to be
applied in CY 2012 and in subsequent years for the ESRD PPS which is
discussed in detail below.
a. Proposed Reduction to the ESRD Wage Index Floor
In the CY 2011 ESRD PPS final rule, we stated our intention to
continue to

[[Page 40510]]

reassess the need for a wage index floor (75 FR 49117). The wage index
floor for CY 2011 is 0.600. For CY 2012 and CY 2013, we propose to
continue to reduce the wage index floor by 0.05 for each of the
remaining years of the transition (that is, for CY 2012, the wage index
value would be reduced from 0.600 to 0.550, and further reduced to
0.500 for CY 2013). The ESRD wage index floor value of 0.550 would be
applied to areas that are below the proposed wage index floor of 0.550.
Beginning January 1, 2014, we propose that the wage index floor would
no longer be applied because the wage index floor would be equal to or
lower than areas with low wage index values. We continue to believe
that a gradual reduction in the floor is needed to support continuing
patient access to dialysis in areas that have low wage index values,
especially in areas where the wage index values are below the current
wage index floor--specifically, ESRD facilities located in Puerto Rico.
b. Proposed Policies for Areas With No Hospital Data
In the CY 2011 ESRD PPS final rule (75 FR 49117), we finalized the
same methodology we have used for areas with no hospital data in the
past, that is, we compute the average wage index value of all urban
areas within the State and use that value as the wage index. In this
proposed rule, we are not proposing to change the methodology that we
have used in the past to compute a wage index value for areas with no
hospital data.
We are for CY 2012 and for future years, proposing to continue to
use the methodology we adopted for identifying the small number of ESRD
facilities in both urban and rural geographic areas where there are no
hospital wage data from which to calculate ESRD wage index values that
we have used for CYs 2006 through 2010 under the composite payment
system and for CY 2011 and which we described in the ESRD PPS final
rule (75 FR 49116). Thus far, we note the following affected areas:
Rural Puerto Rico, Yuba, CA (CBSA 49700) and the urban area Hinesville-
Fort Stewart, GA (CBSA 25980).
For rural Puerto Rico, because all wage index values in Puerto Rico
are below the wage index floor, we previously used the wage index floor
as the wage index value for Puerto Rico. For CY 2012 and CY 2013, we
propose to continue to use the methodology we have previously used for
computing the wage index for Puerto Rico, that is, use the ESRD wage
index floor.
c. Proposed Wage Index Budget-Neutrality Adjustment
As noted above, we have broad discretion under section
1881(b)(14)(D)(iv)(II) of the Act to develop a geographic wage index.
In addition, that section cites the wage index under the basic case-mix
adjustment payment system as an example. We have previously interpreted
the statute for the prior basic case-mix adjusted composite payment
system (section 1881(b)(12)(D) of the Act) as requiring that the
geographic adjustment be made in a budget-neutral manner. In CY 2011,
we did not apply a wage index budget-neutrality adjustment factor under
the ESRD PPS because budget-neutrality was achieved through the overall
98 percent budget-neutrality requirement in section 1881(b)(14)(A)(ii)
of the Act.
Given our authority to develop a wage index under section
1881(b)(14)(D)(iv)(II) of the Act, as well as the authority to use the
geographic index under section 1881(b)(12)(D) of the Act (for purposes
of the ESRD PPS geographic payment adjustment under section
1881(b)(14)(D)(iv)(II) of the Act), we propose to apply the wage index
in a budget-neutral manner under the ESRD PPS using a wage budget-
neutrality adjustment factor. However, as we discuss in greater detail
below, with regard to the application of the wage index budget-
neutrality adjustment factor, we are proposing that under the ESRD PPS,
we would apply a wage index budget-neutrality adjustment factor to the
ESRD PPS base rate.
Under the basic case-mix adjustment composite payment system, we
began applying the wage index budget-neutrality adjustment factor in CY
2006 (70 FR 70171). During the transition, we are not proposing to
change the application of the wage index budget-neutrality adjustment
to the wage index of the composite rate portion of the ESRD PPS blended
payment, because we do not believe that we should make changes to the
methodology for updating the composite rate portion of the ESRD PPS
blended payment as the composite rate portion of the blended payment
will no longer apply after the transition ends in CY 2014. We believe
that continuing to apply the budget-neutrality adjustment to the wage
index for the composite rate portion of the ESRD PPS blended payment
allows ESRD facilities going through the transition to continue to use
a methodology that they are accustomed to and one that may have been
the basis for facilities electing to receive a blended payment during
the transition. However, under the ESRD PPS, we believe by applying the
wage index budget-neutrality adjustment factor to the ESRD PPS base
rate, we would be consistent with the application of the wage index
budget-neutrality adjustment factor in other prospective payment
systems. We also believe that applying the wage index budget-neutrality
adjustment factor to the ESRD PPS base rate is simpler and more
straightforward in application and calculation. Applying the wage index
budget-neutrality adjustment factor to the ESRD PPS base rate produces
results that are not measurably different from applying the adjustment
factor to the wage index, as is done for the composite rate portion of
the blended payment during the transition.
We are seeking comment on our proposal to apply the wage index
budget-neutrality adjustment factor to the ESRD PPS base rate for
purposes of the ESRD PPS payments and the ESRD PPS component of the
ESRD PPS payments during the transition.
As discussed above, we are not proposing any changes to the wage
index budget-neutrality adjustment factor application for the composite
rate portion of the ESRD PPS payment. We would continue to apply the
wage-index budget-neutrality adjustment factor directly to the ESRD
wage index values for the composite rate portion of the ESRD PPS
blended payment for CY 2012 and CY 2013. Because the ESRD wage index is
only applied to the labor-related portion of the composite rate, we
computed the wage index budget-neutrality adjustment factor based on
that portion. That is, the labor portion of the composite rate portion
of the ESRD PPS blended payment of 53.711 percent. This labor-related
share was developed from the labor-related components of the 1997 ESRD
composite rate market basket that was finalized in the 2005 PFS final
rule (70 FR 70168).
As we discussed above, in CY 2012, we are proposing to apply the
wage index budget-neutrality adjustment factor to the ESRD PPS base
rate. That is, the wage index budget-neutrality adjustment factor,
which includes 41.737 percent labor portion of the ESRD PPS payment
rate.
To compute the proposed CY 2012 wage index budget-neutrality
adjustment factors, we used the fiscal year (FY) 2012 pre-floor, pre-
reclassified, non-occupational mix-adjusted hospital data to compute
the wage index values, 2010 outpatient claims (paid and processed as of
December 31, 2010), and geographic

[[Page 40511]]

location information for each facility which may be found through
Dialysis Facility Compare Web page on the CMS Web site at http://www.cms.hhs.gov/DialysisFacilityCompare/. The FY 2012 hospital wage
index data for each urban and rural locale by CBSA may also be accessed
on the CMS Web site at http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp. The wage index data are located in the section entitled, ''FY
2012 Proposed Rule Occupational Mix Adjusted and Unadjusted Average
Hourly Wage and Pre-Reclassified Wage Index by CBSA.''
For this proposed rule, using treatment counts from the 2009 claims
and facility-specific CY 2011 payment rates, we computed the estimated
total dollar amount each ESRD provider would have received in CY 2011.
The total of these payments became the target amount of expenditures
for all ESRD facilities for CY 2012. Next, we computed the estimated
dollar amount that would have been paid for the same ESRD facilities
using the proposed ESRD wage index for CY 2012. The total of these
payments becomes the new CY 2012 amount of wage-adjusted payment rate
expenditures for all ESRD facilities.
After comparing these two dollar amounts (target amount divided by
the new CY 2012 amount), we calculated two wage index budget-neutrality
adjustment factors that when multiplied by the applicable CY 2012
estimated payments would result in aggregate payments to ESRD
facilities that would remain budget-neutral when compared against the
target amount of payment rate expenditures. One factor would be applied
to the ESRD PPS base rate. The second factor would be applied to the
wage index value for the composite rate portion of the ESRD PPS
payment. Therefore, in this proposed rule, for CY 2012, we are
proposing a wage index budget-neutrality adjustment factor for the
composite portion of the ESRD PPS blended payment of 1.002096, which
would be applied directly to the ESRD wage index values. For the ESRD
PPS (that is, for the full ESRD PPS payments and the ESRD PPS portion
of the blended payments during the transition), we are proposing to
apply a wage index budget-neutrality adjustment factor of 1.001126 to
the ESRD PPS base rate.
Because we are proposing to apply the wage index budget-neutrality
adjustment factor to the wage index values to ensure budget-neutrality
under the composite rate portion of the ESRD PPS blended payment, we
also applied the wage index budget-neutrality adjustment factor to the
wage index floor of 0.550 which results in an adjusted wage index floor
of 0.551 (0.550 x 1.002096) for CY 2012.
d. ESRD PPS Wage Index Tables
The CY 2012 ESRD proposed wage index tables, referred to as
Addendum A (ESRD facilities located in urban areas), and Addendum B
(ESRD facilities located in rural areas) are posted on the CMS Web site
at: http://www.cms.gov/ESRDPayment/PAY/list.asp. The wage index tables
list two separate columns of wage index values. One column represents
the wage index values for the composite portion of the blended payment
to which the wage index budget-neutrality adjustment factor has been
applied. Another column lists the wage index values for the ESRD PPS,
which does not reflect the application of the wage index budget-
neutrality adjustment factor, because as we discussed above, we are
proposing to apply the wage index budget-neutrality adjustment factor
to the ESRD PPS base rate.
8. Drugs
a. Vancomycin
In the CY 2011 ESRD PPS final rule (75 FR 49050 through 49052), we
stated that antibiotics used for the treatment of venous access
infections and peritonitis, are renal dialysis services under the ESRD
PPS. Payments for anti-infective drugs in injectable forms (covered
under Part B) and oral or other forms of administration (formerly
covered under Part D) used in the treatment of ESRD, were included in
computing the final ESRD PPS base rate and, therefore, would not be
separately paid under the ESRD PPS. We also noted that the oral
versions of Vancomycin are not used for ESRD-related conditions and,
therefore, would not be considered a renal dialysis service. We further
stated that any anti-infective drugs or biologicals used for the
treatment ESRD-related conditions would be considered a renal dialysis
service and, therefore, not eligible for separate payment. This policy
also applies to any drug or biological that may be developed in the
future.
Since the publication of the CY 2011 ESRD PPS final rule, we
received numerous comments indicating that Vancomycin is indicated for
both ESRD and non-ESRD conditions, such as skin infections. After
consultation with our medical experts, we concur with our commenters.
Therefore, in this proposed rule, we are proposing to eliminate the
restriction on Vancomycin to allow ESRD facilities to receive separate
payment by placing the AY modifier on the claim for Vancomycin when
furnished to treat non-ESRD related conditions. In accordance with ICD-
9 guidelines as described in the ESRD PPS final rule (75 FR 49107), the
ESRD facility would also be required to indicate the diagnosis code for
which the Vancomycin is indicated. We note that treatment of any skin
infection that is related to renal dialysis access management would be
considered a renal dialysis service and would continue to be paid under
the ESRD PPS, and no separate payment would be made. We are soliciting
public comments on our proposal to eliminate the restriction on
Vancomycin to allow ESRD facilities to receive separate payment for
these drugs when furnished to treat non-ESRD related conditions.
b. Drug Overfill
In the CY 2011 PFS final rule (75 FR 73466), we explained the
methodology for Part B payment for drugs and biologicals which includes
intentional overfill, and that the Medicare average sales price (ASP)
payment limit is based on the amount of drug conspicuously indicated on
the labeling approved by the Food and Drug Administration (FDA). We
indicated that we have become aware of situations where manufacturers
intentionally included a small amount of overfill in drug containers,
and that this overfill is provided at no extra charge to the provider.
We also noted that the intent of the intentional overfill was to
compensate for product loss during the proper preparation and
administration of a drug. We explained that ASP calculations are based
on data reported by manufacturers, including ``volume per item''.
Therefore, providers may only bill for the amount of drug product
actually purchased and the cost that the product represents (75 FR
73467).
This Part B provision applies under the ESRD PPS. ESRD facilities
receiving blended payments under the ESRD PPS transition will receive
payments based on ASP for separately billable ESRD drugs and
biologicals for the composite rate portion of the blend. In addition,
under the ESRD PPS outlier policy, the ESRD-related drugs that ESRD
facilities report on claims are priced for the outlier policy based on
ASP. Therefore, ESRD facilities may only report units and charges for
drugs or biologicals actually purchased.
9. Proposed Revisions to Patient-Level Adjustment for Body Surface Area
(BSA)
Section 1881(b)(14)(D)(i)of the Act requires that the bundled ESRD
PPS must include a payment adjustment based on case-mix that may take
into

[[Page 40512]]

account patient weight, body mass index (BMI), body surface area (BSA),
and other appropriate factors. In the CY 2077 ESRD PPS final rule, we
explained that we evaluated height and weight because the combination
of these two characteristics allows us to analyze two measures of body
size: BSA and BMI. We further explained that both body size measures
are strong predictors of variation in payment for ESRD patients (75 FR
49089 through 49090). As a result, in developing the ESRD PPS, we
established a case-mix patient level adjustment for BSA that would be
applied to each 0.1 m2 change in BSA compared to the national average
(1.02).
In this proposed rule, we are proposing to make one change related
to the use of the national BSA average value used in the calculation of
the BSA adjustment applied to the composite rate portion of the blended
payment for those dialysis facilities that undergo the transition. We
believe this change is necessary because we believe that the BSA
national average used to compute payment under the composite portion of
the ESRD PPS blended rate and under the ESRD PPS should be both the
most recent and consistent measurement available. For CY 2011, the BSA
adjustment we calculated for the composite rate portion of the ESRD PPS
blended rate used the BSA national average of 1.84, which reflected the
average among Medicare dialysis patients in 2002. However, the BSA
national average we used for computing the BSA under the ESRD PPS was
1.87, which reflects the average among Medicare dialysis patients in
2007. We did not realize that we had used 2 different national averages
in CY 2011, nor was it brought to our attention during the comment
period. We are proposing that for CY 2012 and in subsequent years, to
use one national average for computing the BSA under the composite
portion of the blended payment during the transition and under the ESRD
PPS.
In the CY 2004 PFS final rule (69 FR 66329), we explained that the
BSA factor was defined as an exponent equal to the value of the
patient's BSA minus the reference. If, for example, a beneficiary with
a BSA of 1.94 using the CY 2011 national average of 1.84 under the
composite rate would yield a BSA adjustment factor of 1.0370. For the
same patient using the national average used for the CY 2011 ESRD PPS
BSA computation using 1.87 would yield a BSA adjustment factor of
1.0258, or a ratio or proportional difference of 1.0258 divided by
1.0370 equals .9892 difference the between the two BSA adjustment
factors. This corresponds to a reduction of 1.08 percent (1-0.9892 =
0.0108) in the composite rate payment for ages 18 and older by
increasing the BSA reference value from 1.84 to 1.87.
The impact on facility payments of increasing the composite rate
BSA reference value from 1.84 to 1.87 is shown in Table 3 for each year
from 2011 to 2014. These results apply only to dialysis facilities that
go through the transition. The impact on facility payments would have
been greatest in 2011, where the blended payment during the transition
period was weighted more heavily towards the composite rate/separately
billable system, and declines through 2014 when there is no impact on
facility payments under a fully implemented expanded PPS.
The impact on the average payment in 2012 was calculated as -0.0108
* 0.9979 * 0.6498 * 0.50 = -0.350 percent. That is, the average
facility payment for those facilities electing the ESRD PPS transition
would be reduced by approximately 0.35 percent in 2012. We derived the
-0.350 percent reduction from the following factors: the estimated
reduction in BSA multipliers due to the increase in the BSA reference
value (-0.0108); the proportion of patients 18 and older (0.9979); the
percentage of composite rate and separately billable payments that are
composite rate payments (0.6498); and the percentage of composite rate
payments in CY 2012 (0.50). This reduction only applies to those ESRD
facilities that elected to receive blended payments during the
transition.
[GRAPHIC] [TIFF OMITTED] TP08JY11.000

Therefore, we are proposing for CY 2012, to use the latest national
average (that is, 1.87) as the reference point for the computation of
the BSA adjustment for both the composite rate portion of the ESRD PPS
blended payment and for the ESRD PPS. We are also proposing that we
will review the BSAs on CY 2012 claims (and every 5 years thereafter)
to determine if any adjustments to the national average will be
required in the future. We are seeking comments on the proposal to use
one national BSA average to compute the BSA under the composite portion
of the ESRD PPS blended payment and under the ESRD PPS. We are also
seeking comment on the proposal to review CY 2012 ESRD claims and every
5 years thereafter, to determine if a change to the BSA national
average is warranted.
10. Proposed Revisions to the Outlier Policy
Section 1881(b)(14)(D)(ii) of the Act requires that the ESRD PPS
include a payment adjustment for high cost outliers due to unusual
variations in the type or amount of medically necessary care, including
variability in the amount of erythropoiesis stimulating agents (ESAs)
necessary for anemia management. In the CY 2011 ESRD PPS

[[Page 40513]]

final rule, we stated that for purposes of determining whether an ESRD
facility would be eligible for an outlier payment, it would be
necessary for the facility to identify the actual ESRD outlier services
furnished to the patient by line item on the monthly claim (75 FR
49142).
Medicare regulation Sec. 413.237(a)(1) provides that ESRD outlier
services include: (1) ESRD-related drugs and biologicals that were or
would have been, prior to January 1, 2011, separately billable under
Medicare Part B; (2) ESRD-related laboratory tests that were or would
have been, prior to January 1, 2011, separately billable under Medicare
Part B; (3) medical/surgical supplies, including syringes used to
administer ESRD-related drugs, that were or would have been, prior to
January 1, 2011, separately billable under Medicare Part B; and (4)
renal dialysis service drugs that were or would have been, prior to
January 1, 2011, covered under Medicare Part D, excluding ESRD-related
oral-only drugs. Drugs, laboratory tests, and medical/surgical supplies
that we would recognize as outlier services were specified in
Attachment 3 of Change Request 7064, issued August 20, 2010 under
Transmittal 2033. Transmittal 2033 was rescinded and replaced by
Transmittal 2094, dated November 17, 2010. The replacement document
involved the (1) Deletion of several drugs; (2) identified drugs that
may be eligible for ESRD outlier payment; (3) provided a list of
laboratory tests that comprise the AMCC tests; (4) deleted several
laboratory tests; and (5) included the latest version of the ESRD
PRICER layout file.
Transmittal 2094 was subsequently rescinded and was replaced by
Transmittal 2134 issued January 14, 2011. That transmittal was issued
to correct the subject on the transmittal page and made no other
changes.
Medicare regulations at Sec. 413.237(a)(2) through (a)(6), and (b)
specify the methodology used to calculate outlier payments. An ESRD
facility is eligible for an outlier payment if its actual or imputed
Medicare Allowable Payment (MAP) amount per treatment for ESRD outlier
services exceeds a threshold. The MAP amount represents the average
incurred amount per treatment for services that were or would have been
considered separately billable services prior to January 1, 2011. The
threshold is equal to the ESRD facility's predicted ESRD outlier
services MAP amount per treatment (which is case-mix adjusted) MAP plus
the fixed dollar loss amount. In accordance with Sec. 413.237(c) of
the regulation, facilities are paid 80 percent of the per treatment
amount by which the imputed MAP amount for outlier services (that is,
the actual incurred amount) exceeds this threshold. ESRD facilities are
eligible to receive outlier payments for treating both adult and
pediatric dialysis patients.
In the CY 2011 ESRD PPS final rule, using 2007 data, we established
the outlier percentage at 1.0 percent of total payments (75 FR 49142
through 49143). We also established the fixed dollar loss amounts that
are added to the predicted outlier services MAP amounts. The outlier
services MAP amounts and fixed dollar loss amounts are different for
adult and pediatric patients due to differences in the utilization of
separately billable services among adult and pediatric patients (75 FR
49140).
a. Proposed Revisions Related to Outlier ESRD Drugs and Biologicals
Attachment 3 of Change Request 7064 issued August 20, 2010 under
Transmittal 2033, as modified by Transmittal 2094 issued November 17,
2010 and Transmittal 2134 issued January 14, 2011, specified the former
separately billable Part B drugs that are recognized as ESRD-related
eligible outlier services. These drugs are classified under the
categories of anemia management, antiemetics, anxiolytics, bone and
mineral metabolism, cellular management, pain management, and anti-
infectives (see Pub. 100-04, Chapter 8, section 60.2.1.1). Attachment 3
also identified the former Part D drugs by National Drug Code (NDC) for
the three vitamin D analogues (calcitriol, paracalcitol, and
doxercalciferol) and levocarnitine that are recognized as eligible
outlier service drugs.
We had intended to update both the lists of former Part B drugs and
biologicals and former Part D drugs that are outlier services (75 FR
49138). However, we have since concluded that any CMS prepared lists of
drugs and biologicals recognized as outlier services may be difficult
to keep up-to-date. This is attributed to the lag in the receipt of
claims data; changes in ESRD practice patterns; and inadvertent
omissions and oversights. Because of the number of Part B drugs and
biologicals that may be considered ESRD outlier services, we are
proposing to eliminate the issuance of a list of former separately
payable Part B drugs and biologicals that would be eligible for outlier
payments.
Medicare regulations at Sec. 413.237(a)(1)(i) and (iv) specify
that any ESRD-related drug or biological furnished by an ESRD facility
that was or would have been considered separately billable under Part B
or formerly covered under Part D prior to January 1, 2011, is an ESRD
outlier service, excluding ESRD-related oral-only drugs. Because the
regulation defines eligible outlier service drugs, we believe there is
no need for CMS to issue a list of former separately payable Part B
ESRD outlier services drugs. In addition, because the list of drugs is
derived from paid ESRD claims, it would not be comprehensive,
completely represent drugs and biologicals furnished to ESRD patients,
accurate, or up-to-date. We note that, consistent with current policy,
all composite rate drugs, as defined in the Medicare Benefit Policy
Manual, Pub. 100-02, chapter 11, section 30.4.1, would not be eligible
for an outlier payment, as these drugs would not have been separately
paid under Part B or Part D prior to January 1, 2011, and do not meet
the definition for ESRD outlier services.
Under current policy, antibiotics furnished in the home are
considered to be composite rate drugs and therefore, not eligible for
outlier payment. As discussed above, Pub. 100-02, chapter 11, section
30.4.1 lists the drugs covered under the composite rate. The list
includes a statement that antibiotics when used at home by a patient to
treat an infection of the catheter site or peritonitis associated with
peritoneal dialysis are considered composite rate drugs. Because
composite rate drugs and their administration (both the staff time and
the supplies) are covered under the composite rate, antibiotics
furnished in the patient's home used for the reasons noted above may
not be billed and paid separately. However, antibiotics furnished in an
ESRD facility were considered separately payable in accordance the
Medicare Claims Processing Manual, Pub. 100-04, chapter 8, section
60.2.1.1.
In addition, Pub. 100-02, chapter 11, section 50.9 states that an
antibiotic used at home by a patient to treat an infection of the
catheter site or peritonitis associated with peritoneal dialysis is
covered as home dialysis supplies included in the Method II (Direct
Dealing) payment cap for home dialysis supplies administered by the
Durable Medical Equipment (DME) Supplier. Prior to January 1, 2011,
under Method II, durable medical equipment suppliers received direct
payment from Medicare for furnishing dialysis services to home dialysis
patients. Effective January 1, 2011, as indicated in Sec. 413.210(b)
of the regulations, CMS will not pay any entity or supplier other than
ESRD facilities for covered items and services furnished to a Medicare

[[Page 40514]]

beneficiary. Therefore, payment to medical equipment suppliers for
antibiotics under Method II could no longer be made. Additionally,
under the ESRD PPS, the dialysis facility is responsible for furnishing
all renal dialysis services, regardless of the site of service. Under
the ESRD PPS, there is no payment distinction made as to the site where
a renal dialysis service is provided (that is, in the home or in a
facility). Therefore, we do not believe that it is appropriate to have
a distinction in which antibiotics administered in an ESRD facility,
used to treat an infection of the catheter or other access site, or
peritonitis associated with peritoneal dialysis, would be considered as
separately billable under the composite rate portion of the ESRD PPS
and eligible for outlier payments under the ESRD PPS, while antibiotics
used at home by home patients for the same purpose would be considered
to be included in the composite rate and not eligible for outlier
payments. Consequently, we are proposing to eliminate the inclusion of
antibiotics when used in the home to treat an infection of the catheter
site or peritonitis associated with peritoneal dialysis as part of the
composite rate drugs, and allow them to be separately paid under the
composite portion of the ESRD PPS blended payment for ESRD facilities
receiving payment during the transition. We are also proposing that
antibiotic drugs used at home to treat catheter site infections or
peritonitis associated with peritoneal dialysis will qualify as
separately billable and eligible as ESRD outlier services. Antibiotics
furnished in facility would continue to be recognized as separately
billable for ESRD outlier payment purposes.
We are soliciting comments on our proposal to recognize antibiotics
furnished in the home for catheter infections or peritonitis as ESRD
outlier services and eligible for outlier payment. As we indicated
above, we would no longer issue a list of ESRD-related drugs and
biologicals eligible for outlier payments. However, under separate
administrative issuances, we plan to continue to identify renal
dialysis service drugs which were or would have been covered under Part
D for outlier eligibility purposes in order to provide unit prices for
calculating imputed outlier services. We believe that the elimination
of a list of certain ESRD outlier services drugs we mentioned above and
the inclusion of antibiotics used by home dialysis patients as outlier
services would reduce confusion over drugs and biologicals that are
eligible outlier services and eliminate the distinction in the
eligibility of a drug for outlier eligibility based on where it is
furnished. Accordingly, we are soliciting public comments on our
proposal to eliminate the issuance of a specific list of eligible
outlier service drugs which were or would have been separately billable
under Medicare Part B prior to January 1, 2011.
As new drugs emerge, we intend to update the HCPCS codes
corresponding to new drugs and biologicals for billing purposes, and to
determine whether any of those drugs are considered to be composite
rate drugs. Drugs and biologicals which were or would have been
considered composite rate drugs are not eligible ESRD outlier services
under Sec. 413.237.
We are also proposing two modifications to the computation of the
separately billable MAP amounts used to calculate outlier payments for
the reasons described below. Subsequent to the publication of the CY
2011 ESRD PPS final rule, our clinical review of the 2007 ESRD claims
used to develop the ESRD PPS revealed that dialysis facilities
routinely used Alteplase and other thrombolytic drugs for access
management purposes. As discussed in the ESRD Benefit Policy Manual,
Pub. 100-02, chapter 11, section 30.4.1, drugs that are used as a
substitute for any of the listed items or are used to accomplish the
same effect, are covered under the composite rate. Because heparin, as
a composite rate drug, could be used for access management, any drug or
biological used for the same purpose may not be separately paid. As
outlier payments are restricted, under Sec. 413.237(a), to those items
or services that were or would have been considered separately billable
prior to January 1, 2011, we have recalculated the average outlier
services MAP amounts to exclude these composite rate drugs.
In developing the outlier service MAP amounts for 2011, we excluded
testosterone and anabolic steroids. We have subsequently learned from
discussions with clinicians and ESRD facilities that these drugs can be
used for anemia management. Because drugs used for anemia management in
ESRD patients were or would have been considered separately billable
under Medicare Part B, these drugs would be outlier eligible drugs
under Sec. 413.237(a)(1). Consequently, we have recomputed the outlier
service MAP amounts for CY 2012 to include these drugs. As shown in
Table 4, when comparing the outlier service MAP amounts based on the
current definition of ESRD outlier services to the revised ESRD outlier
definition, the net effect of these two revisions (the exclusion of
thrombolytic drugs and inclusion of anabolic steroids) results in an
increase to the outlier service MAP amounts by $2.21 for adult patients
and a decrease of $4.58 for pediatric patients.
b. Proposed Exclusion of Automated Multi-Channel Chemistry (AMCC)
Laboratory Tests From the Outlier Calculation
Medicare regulations at Sec. 413.237 provide that ESRD-related
laboratory tests that were or would have been considered separately
billable under Medicare Part B prior to January 1, 2011, are eligible
outlier services. Those laboratory tests were specified in Attachment 3
of Change request 7064 issued under Transmittal 2033, as modified by
Transmittals 2094 and 2134. In the CY 2011 ESRD PPS final rule (75 FR
49135 through 49138), we indicated that in order to compute the outlier
payment for laboratory tests, the 50 percent rule is required. In
addition, because the 50 percent rule is necessary to calculate the
composite rate portion of the blended payment during the 3-year
transition period, we retained the 50 percent rule to determine whether
Automated Multi-Channel Chemistry (AMCC) panel tests would be
considered composite rate or separately billable for the ESRD portion
of the blended payment (75 FR 49137). The AMCC panel tests and an
explanation of the 50 percent rule are identified in Pub. 100-2,
chapter 11, section 30.2.2. ESRD laboratory billing rules can be found
in Pub 100.04, chapter 16, section 40.6.
The 50 percent rule provides that if 50 percent or more of covered
laboratory tests comprising a panel of AMCC tests are included under
the composite payment rate, then all submitted tests are included
within the composite payment and, therefore, no laboratory tests are
considered separately billable. Conversely, if less than 50 percent of
the covered panel tests are composite rate tests, then all AMCC tests
submitted for the date of service for that beneficiary are considered
separately billable. In addition, Pub. 100-2, chapter 8, section 60.1
provides that an AMCC test that is a composite rate test, but is
furnished beyond the normal frequency covered under the composite rate,
is separately billable based on medical necessity.
After publication of the CY 2011 ESRD PPS final rule, we received
numerous requests to eliminate the 50 percent rule due to the
commenters' assertions that they were confused about its application.
Unlike specific drugs which are classified as either composite

[[Page 40515]]

rate or separately billable for purposes of eligibility as an ESRD
outlier service as discussed above, AMCC laboratory tests may be
classified as either composite rate or separately billable depending
upon the application of the 50 percent rule or the frequency at which
the laboratory test is ordered. Therefore, the determination of ESRD-
related laboratory tests as eligible outlier services depends upon the
number of panel tests furnished or their subsequent classification
based on the application of the 50 percent rule.
Because the AMCC laboratory tests included as eligible for an
outlier payment are determined by the 50 percent rule, we believe that
in the interests of administrative simplification and to minimize
confusion, we propose to eliminate use of the 50 percent rule for the
outlier policy and exclude the 23 AMCC laboratory tests, from the
definition of eligible outlier services and from the computation of
outlier payments. The elimination of the 50 percent rule for the ESRD
PPS outlier payment policy with respect to the AMCC panel tests would
result in the de facto treatment of those tests as composite rate
tests. Accordingly, we propose to revise Sec. 413.237(a)(1)(ii) of the
regulations accordingly to exclude these laboratory tests from the
definition of ESRD outlier services. The 50 percent rule would continue
to apply to AMCC laboratory tests for classification as either
composite rate or separately billable for the purpose of computing the
composite rate portion of the blended rate for ESRD facilities which
have elected to receive payments under the ESRD PPS blended rate.
Because the transition period under the ESRD PPS ends on January 1,
2014, this provision would be time limited, and would expire when the
transition period ends. This would occur because all ESRD payments
would be under the ESRD PPS, there would no longer be a need to
maintain the distinction between composite rate and separately billable
laboratory services for application of the 50 percent rule, because the
transition period will have ended. We are seeking comment on our
proposal to exclude the AMCC laboratory tests and the 50 percent rule
from the definition of eligible ESRD outlier services.
c. Impact of Proposed Changes to the Outlier Policy
Table 4 shows the impact of modifying the ESRD PPS outlier payment
policy to: (1) exclude vascular access management drugs and include
anabolic steroids as eligible outlier service drugs; and (2) exclude
the 23 AMCC laboratory tests from the ESRD outlier services definition.
The outlier services MAP amounts and fixed dollar loss amounts were
inflation adjusted to reflect projected 2011 prices for outlier
services for the first three columns (that is, outlier policy based on
the current definition for ESRD outlier services, the revised ESRD
outlier services definition with regard to drugs, and the revised ESRD
outlier services definition plus the exclusion of the AMCC laboratory
tests). The revised ESRD outlier services definitions are described in
the first footnote to Table 4. For the last column, which describes the
impact of the revised ESRD outlier services definition and the
exclusion of the AMCC laboratory tests for CY 2012, the outlier
services MAP amounts and fixed dollar loss amounts were inflation
adjusted to reflect projected 2012 prices for outlier services.

Table 4--Outlier Policy: Impact of Revising the ESRD Outlier Services Definition and Excluding Separately Billable AMCC Laboratory Tests [supcaret]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Outlier policy based Revise ESRD outlier Revise ESRD outlier Revise ESRD outlier
on current definition services definition, services definition services definition
for ESRD outlier price inflated to and exclude AMCC lab and exclude AMCC lab
services, price 2011* tests, price inflated tests, price inflated
inflated to 2011* ------------------------ to 2011* to 2012 **
------------------------ -----------------------------------------------
Age < 18 Age >= 18 Age < 18 Age >= 18 Age < 18 Age >= 18 Age < 18 Age >= 18
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average outlier services MAP amount per treatment \1\... $50.85 $85.62 $45.14 $84.71 $44.67 $84.40 $46.27 $87.83
Adjustments Standardization for outlier services \2\.... 1.0136 0.9728 1.0136 0.9728 1.0136 0.9728 1.0136 0.9728
MIPPA reduction......................................... 0.98 0.98 0.98 0.98 0.98 0.98 0.98 0.98
Adjusted average outlier services MAP amount \3\........ $50.51 $81.62 $44.84 $80.75 $44.37 $80.46 $45.96 $83.73
Fixed dollar loss amount that is added to the predicted $113.99 $139.20 $77.72 $136.93 $77.60 $136.88 $82.58 $145.25
MAP to determine the outlier threshold \4\.............
Patient months qualifying for outlier payment........... 3.9% 5.6% 5.0% 5.6% 5.1% 5.6% 5.0% 5.5%
--------------------------------------------------------------------------------------------------------------------------------------------------------
[supcaret] The revised ESRD outlier services definition excludes vascular access management drugs and includes anabolic steroids. Vascular access
management drugs billed separately include the following: alteplase, reteplase, heparin, lepiridun, and urokinase. Anabolic steroids billed separately
include the following: testosterone and nandrolone. Payments for separately billable automated multi-channel chemistry (AMCC) tests were identified
using modifier codes `CE' and `CF' (where `CE' indicates composite rate tests beyond the frequency covered under the rate but separately billable
based on medical necessity, and `CF' indicates tests that are separately billable).
* The outlier services MAP amounts and fixed dollar loss amounts were inflation adjusted to reflect 2011 prices for outlier services.
** The outlier services MAP amounts and fixed dollar loss amounts were inflation adjusted to reflect projected 2012 prices for outlier services.
\1\ Excludes patients for whom not all data were available to calculate projected payments under an expanded bundle. The outlier services MAP amounts
are based on 2009 data. The medically unbelievable edits of 400,000 units for EPO and 1,200 mcg for Aranesp that are in place under the ESA claims
Monitoring policy were applied.
\2\ Applied to the average outlier MAP per treatment. Standardization for outlier services is based on existing Case Mix Adjusters for adult and
pediatric patient groups.
\3\ This is the amount to which the separately billable (SB) payment multipliers are applied to calculate the predicted outlier services MAP for each
patient.
\4\ The fixed dollar loss amounts were calculated using 2009 data to yield total outlier payments that represent 1% of total projected payments for the
ESRD PPS.

[[Page 40516]]

Based on these proposals, using the average outlier service MAP
amount per treatment which is based on payment amounts reported on 2009
claims and adjusted to reflect projected prices for 2011, in CY 2012,
the average outlier services MAP per treatment amounts would be
increased from $85.62 to $87.83 for adult patients and a reduction from
$50.85 to $46.27 for pediatric patients. The primary reason for the
difference in directionality of the changes is that there are
differences in the types of outlier services that tend to be used by
each age group. In particular, the exclusion of vascular access
management drugs from the ESRD outlier services definition leads to a
much larger decrease in the outlier services MAP amounts for ages <18
(decrease from $50.85 to $45.14) versus ages 18 and older (decrease
from $85.62 to $84.71). This reflects relatively greater use of
separately billable vascular access management drugs among ages <18.
Unlike ages 18 and older, the decrease in the outlier services MAP for
ages <18 when excluding these drugs is large enough to more than offset
the increase that results in the last step when we adjust for 2012
price inflation.
Similarly, the fixed dollar loss amounts which were added to the
predicted MAP amounts per treatment to determine the outlier thresholds
would be revised from $139.20 to $145.25 for adult patients and from
$113.99 to $82.58 for pediatric patients. We estimate that the patient
months qualifying for outlier payments under the current policy (5.6
percent of those adult patient facility months and 3.9 percent of the
pediatric patient facility months previously estimated to be eligible
for outlier payments), would remain approximately the same for adult
patients (5.5 percent), but would increase for pediatric patients (5.0
percent) in CY 2012 under our proposed revised outlier payment policy.
The variation seen in the pediatric fixed dollar loss amounts tend
to be lower based on the 2009 data used for this proposed rule as
compared with the 2007 data used in CY 2011. There is generally greater
sensitivity in pediatric results due to the relatively small number of
pediatric patients. This is even more true with the pediatric fixed
dollar loss amounts, since the magnitude of the pediatric fixed dollar
loss amounts is basically determined by a relatively small number of
the highest cost pediatric patients. The much lower pediatric fixed
dollar loss amounts based on data from 2009 (as compared with 2007),
reflect the tendency to have less extreme high cost cases for pediatric
patients in the 2009 claims. The expected result based on this update
is that more pediatric claims will qualify for outlier payments based
on 2009 data, but the average outlier payment among the pediatric
outlier cases will be lower.
With the exception of the proposed revisions to the average outlier
services MAP amounts per treatment and changes in the fixed dollar loss
amounts, as set forth in Table 4, we are not proposing to make any
other changes to the methodology for the calculation of outlier
payments. These proposed revisions would only affect the ESRD PPS
portion of the blended payment, not the basic case-mix adjusted
portion. Because of the limited 3-year period in which the basic case-
mix adjusted portion of the blended payment amount will apply, the 50
percent rule would automatically expire when the fully implemented ESRD
PPS applies to all facilities. We believe the proposed changes to our
outlier payment policy would simplify the identification and reporting
of eligible outlier services.

D. Technical Corrections

1. Training Add-On
In the CY 2011 ESRD PPS final rule (75 FR 49062 through 49063), we
explained the rationale for costs associated with self-dialysis
training. We inadvertently listed an incorrect training add-on amount
of $33.38. The correct training add-on amount is $33.44. Therefore, in
this proposed rule, we are correcting the training add-on amount to
$33.44 for costs associated with self-dialysis training on or after
January 1, 2011. The geographic wage index will be applied to the
$33.44. As described in the CY 2011 ESRD PPS final rule (75 FR 49063),
the training add-on amounts after application of the wage index would
range from $20.03 to $45.84.
2. ESRD-Related Laboratory Test
In the CY 2011 ESRD PPS final rule (Table F: ESRD-Related
Laboratory Tests of the Appendix), we finalized a specific list of
routine ESRD-related laboratory tests included as part of consolidated
billing (75 FR 49213). However, we inadvertently omitted an ESRD-
related laboratory test from Table F of the CY 2011 ESRD PPS final
rule. In this proposed rule, we are correcting Table F by adding the
``Assay of protein by other source,'' which is identified by the
Current Procedural Terminology code 84157. This laboratory test was a
composite rate service under the basic case-mix adjusted composite
payment system and, consequently, is considered a renal dialysis
service under the ESRD PPS effective January 1, 2011. Therefore, the
``Assay of protein by other source'' should be furnished by the ESRD
facility, either directly or under arrangement by another entity, to
the ESRD patient and paid for through the ESRD PPS payment rate.

E. Clarifications to the CY 2011 ESRD PPS

1. ICD-9-CM Diagnosis Codes
In the CY 2011 ESRD PPS final rule, we discussed the ICD-9-CM
diagnosis codes that are eligible for the co-morbidity payment
adjustments (75 FR 49094 through 49107). We explained that it is
important for ESRD facilities to report all patient co-morbidities
accurately, regardless of whether or not these codes are or are not
eligible for an ESRD PPS adjustment. We stated that the ICD-9-CM
diagnosis codes should be reported in compliance with coding
requirements on the ESRD 72x claim as well as the official ICD-9-CM
Coding Guidelines (75 FR 49095).
In the CY 2011 ESRD PPS final rule, we provided the list of ICD-9-
CM codes that are recognized for purposes of the co-morbidity payment
adjustments in Table E: ICD-9-CM Codes Recognized for a Co-Morbidity
Payment Adjustment of the Appendix (75 FR 49211). Although we discussed
ICD-9-CM coding to be used to identify co-morbidity conditions on ESRD
claims, we did not indicate that we would update the existing
diagnostic categories and ICD-9-CM codes on an annual basis.
In this proposed rule, we are clarifying that the ICD-9-CM codes
are subject to the annual ICD-9-CM coding changes that occur in the
hospital inpatient PPS final rule and effective October 1st of every
year. Any changes that affect the categories of co-morbidities and the
diagnoses within the co-morbidity categories that are eligible for the
co-morbidity payment adjustments, will be communicated to ESRD
facilities through sub-regulatory guidance. In response to comments we
have received, we believe that it is important to reiterate the
discussion of co-morbidities that was detailed in the CY 2011 ESRD PPS
final rule. ESRD facilities should continue to provide documentation in
the patient's medical/clinical record to support any diagnosis
recognized for a payment adjustment as this is a requirement to receive
the co-morbidity payment adjustment (75 FR 49097). As we discussed in
the CY 2011 ESRD PPS final rule, we have been and will continue to
monitor the prevalence

[[Page 40517]]

of any co-morbidity diagnoses recognized for the co-morbidity payment
adjustment under the ESRD PPS as compared to the prevalence of these
categories over the past several years. Therefore, we would be able to
identify any changes in the prevalence of any of the co-morbidity
diagnoses recognized for purposes of the co-morbidity payment
adjustment as compared to previous trends (75 FR 49099). We are
monitoring the co-morbidities eligible for payment adjustment to
determine if the co-morbidity adjustments need to be refined in future
rulemaking.
2. Emergency Services to ESRD Beneficiaries
As we explained in the CY 2011 ESRD PPS final rule (75 FR 49056),
inpatient services, emergency services, and outpatient services
furnished in a hospital or in an ambulatory surgical center furnished
to ESRD beneficiaries were not included in the ESRD PPS base rate, and
none of these services are considered renal dialysis services for
inclusion in the ESRD PPS payment bundle. These services are reimbursed
under other Medicare payment systems. We also explained that certain
outpatient procedures necessary to maintain vascular access (that is,
those which cannot be addressed by the ESRD facilities using procedures
that are considered part of routine vascular access), are excluded from
the definition of renal dialysis services and are not included in the
ESRD PPS payment. However, we consider the furnishing of certain
medications, such as those used to flush a vascular access site of an
ESRD patient, to fall within the definition of renal dialysis services.
As we discussed in the section on consolidated billing rules and
edits in the CY 2011 ESRD PPS final rule (75 FR 49168), the ESRD PPS
payment is an all-inclusive payment for renal dialysis services and the
ESRD facility is responsible for all of the ESRD-related services that
a patient receives. Payment for renal dialysis services under the ESRD
PPS, including those that were formerly paid separately under the basic
case-mix adjusted composite rate payment system, is no longer made to
entities (such as laboratories and DME suppliers) other than the ESRD
facility.
Subsequent to the publication of the CY 2011 ESRD PPS final rule,
we have received requests that we further clarify whether certain renal
dialysis services furnished in an emergency room or emergency
department are considered renal dialysis services covered under the
ESRD PPS. Accordingly, we are providing additional clarification below.
Renal dialysis services defined at Sec. 413.171 of the regulations
include diagnostic laboratory tests. In developing the ESRD PPS base
rate, we included payments for outpatient laboratory tests billed on
ESRD facility claims, as well as laboratory tests ordered by monthly
capitation payment (MCP) physicians and billed on carrier claims (75 FR
49055), because we believe that these diagnostic laboratory tests
furnished by ESRD facilities and MCPs meet the definition of renal
dialysis services. We did not include laboratory tests ordered for
Medicare ESRD patients undergoing treatment in hospital emergency
departments or emergency rooms, because these tests are usually
administered as part of a patient's clinical assessment of the
condition requiring emergency room admission, which we believe are not
generally related to the treatment of ESRD. Therefore, laboratory tests
that are performed for Medicare ESRD beneficiaries in an emergency
situation in an emergency room or emergency department as part of the
general work-up of the patient, were excluded from the ESRD PPS payment
bundle, and would not be considered renal dialysis services under the
ESRD PPS.
We recognize that laboratory tests that could be used during
dialysis and ordered for the treatment of ESRD also may be ordered for
ESRD patients in an emergency department or emergency room for reasons
other than ESRD (that is, as part of the assessment of the patient to
obtain a diagnosis of the underlying condition which required emergency
intervention). For example, an ESRD beneficiary in an emergency
department because the beneficiary is unconscious or otherwise in
crisis may have a CBC and other laboratory tests ordered to arrive at a
diagnosis. Although such tests also may be used in dialysis treatment
and in the treatment of ESRD, because laboratory tests ordered for ESRD
patients treated in emergency departments or emergency rooms are needed
to arrive at a diagnosis of the condition requiring emergency
treatment, we do not consider the laboratory tests as renal dialysis
services under the ESRD PPS. Accordingly, these laboratory tests were
not used to develop the ESRD base rate. We would not expect that the
laboratory tests provided in that circumstance to be subject to
consolidated billing edits, resulting in denial of payment. That is, we
would not consider such tests to be renal dialysis services in this
emergency situation because they were not ordered for the treatment of
ESRD, but instead, furnished as part of the general work-up of the
patient necessary for diagnosis.
The exclusion of laboratory tests ordered in hospital emergency
rooms or emergency departments from the consolidated billing edits does
not mean that renal dialysis facilities should attempt to circumvent
the application of the bundled ESRD PPS rate by directing patients to
emergency rooms or emergency departments for obtaining ESRD-related
laboratory tests, or the provision of other renal dialysis services.
Because ESRD facilities are financially responsible for all ESRD-
related laboratory tests, referring ESRD patients to the emergency room
or emergency department for ESRD-related laboratory tests would be
inappropriate. We note that it would also be inappropriate for ESRD
facilities to refer its patients to the emergency room or emergency
department for maintenance of access sites (including treatment for
access infections) or the administration of ESRD-related drugs that are
considered renal dialysis services under the ESRD PPS. We are
monitoring the provision of renal dialysis services to ESRD patients in
an emergency room or emergency department.

II. End-Stage Renal Disease Quality Incentive Program for Payment Years
(PYs) 2013 and 2014

A. Background for the End-Stage Renal Disease Quality Incentive Program
for PYs 2013 and PY 2014

1. Overview of Quality Monitoring Initiatives
For over 30 years, monitoring the quality of care provided to end-
stage renal disease (ESRD) patients and provider/facility
accountability have been important components of the Medicare ESRD
payment system. We view the ESRD Quality Incentive Program (QIP),
required by section 1881(h) of the Social Security Act (the Act), as
the next step in the evolution of the ESRD quality program that began
more than three decades ago. Our vision is to continue to implement a
robust, comprehensive ESRD QIP that builds on the foundation that has
already been established. The payment year (PY) 2012 ESRD QIP was
finalized in two regulations: One that finalized the three measures (75
FR 49030, 49182 (August 12, 2010) (hereinafter referred to as the ``CY
2011 ESRD PPS final rule'')); and one that finalized other aspects of
the 2012 ESRD QIP, including the scoring methodology and payment
reduction scale (76 FR 628 through 646) (hereinafter referred to as the
``2012 ESRD QIP final rule'').

[[Page 40518]]

2. Statutory Authority for the ESRD QIP
Section 1881(h) of the Act, as added by section 153(c) of MIPPA,
requires the Secretary to develop a QIP that will result in payment
reductions to providers of services and dialysis facilities that do not
meet or exceed a total performance score with respect to performance
standards established for certain specified measures. As provided under
this section, payment reductions of up to 2.0 percent of the payments
otherwise made to providers and facilities under section 1881(b)(14) of
the Act will apply to payment for renal dialysis services furnished on
or after January 1, 2012. Under section 1881(h)(1)(C) of the Act,
payment reductions will only apply with respect to the year involved
for a provider/facility and will not be taken into account when
computing future payment rates for the impacted provider/facility.
For the ESRD QIP, section 1881(h) of the Act generally requires the
Secretary to: (1) Select measures; (2) establish the performance
standards that apply to the individual measures; (3) specify a
performance period with respect to a year; (4) develop a methodology
for assessing the total performance of each provider and facility based
on the performance standards with respect to the measures for a
performance period; and (5) apply an appropriate payment reduction to
providers and facilities that do not meet or exceed the established
total performance score.
3. Payment Year (PY) 2012 ESRD QIP
As required by section 1881(h)(2)(A)(i) of the Act, we selected
three measures for the payment year (PY) 2012 QIP. We finalized two
anemia management measures that reflect the labeling approved by the
Food and Drug Administration (FDA) for the administration of
erythropoiesis stimulating agents (ESAs) and one hemodialysis adequacy
measure. The following are the three measures (finalized in the CY 2011
ESRD PPS final rule) for the PY 2012 ESRD QIP:
Percentage of Medicare patients with an average Hemoglobin
< 10.0g/dL (Hemoglobin Less Than 10g/dL Measure)
Percentage of Medicare patients with an average Hemoglobin
> 12.0g/dL (Hemoglobin Greater Than 12g/dL Measure)
Percentage of Medicare patients with an average Urea
Reduction Ratio (URR) = 65 percent (URR Hemodialysis
Adequacy Measure).
A full description of the methodologies used for the calculation of
the measures can be reviewed at: http://www.dialysisreports.org/pdf/esrd/public/DFRGuide.pdf (see the ``Facility Modality, Hemoglobin, and
Urea Reduction Ratio'' section of the document).
Other aspects of the PY 2012 ESRD QIP finalized in the PY 2012 ESRD
QIP final rule included the establishment of performance standards for
these measures (including applying the special rule under section
1881(h)(4)(E) of the Act) and establishing a scoring methodology for
calculating individual total performance scores ranging from 0-30
points based on the three finalized measures. As part of our
methodology for calculating the provider/facility total performance
score, we weighted the Hemoglobin Less Than 10g/dL Measure at 50
percent of the score, while the other hemoglobin measure and the URR
Hemodialysis Adequacy Measure were weighted at 25 percent of the score.
We also finalized a policy under which providers/facilities that did
not meet or exceed a total performance score of 26 points would receive
a payment reduction ranging from 0.5 percent to 2.0 percent.

B. Provisions of the Proposed Regulations for End-Stage Renal Disease
(ESRD) Quality Incentive Program (QIP) for PY 2013 and PY 2014

This proposed rule proposes to adopt new ESRD QIP requirements for
payment years (PYs) 2013 and 2014. We believe that this approach is the
most efficient way to make improvements to the program, adopt
additional measures for the program in a timely fashion, and provide
sufficient notice to ESRD providers and facilities so that they can
most effectively and efficiently implement any changes needed to meet
the requirements of the ESRD QIP.
1. Proposed PY 2013 ESRD QIP Requirements
a. Overview of the Proposed PY 2013 ESRD QIP
This section summarizes the requirements that we are proposing
implement for the PY 2013 ESRD QIP. We are proposing that ESRD
providers and facilities that do not meet these requirements would
receive a reduction to the payments otherwise made under section
1881(b)(14) with respect to PY 2013 services, in accordance with
section 1881(h)(1)(A) of the Act. In general, for the PY 2013 ESRD QIP,
we propose to calculate individual total performance scores ranging
from 0-30 points for providers and facilities based on two of the three
measures that we adopted for the PY 2012 ESRD QIP. We propose to weight
the total performance score for each provider/facility such that the
proposed Hemoglobin Greater Than 12g/dL measure makes up 50 percent of
the total performance score and the proposed URR Hemodialysis Adequacy
measure makes up 50 percent of the total performance score. We are
proposing that a provider/facility that does not meet or exceed a total
performance score of 30 would receive a payment reduction in PY 2013
ranging from 0.5 percent to 2.0 percent, depending upon how far below
this minimum total performance score its performance falls. Our
specific proposals are discussed below.
b. Proposed Performance Measures for the PY 2013 ESRD QIP
Section 1881(h)(2)(A) of the Act requires that the measures
specified for the ESRD QIP include measures on anemia management that
reflect the labeling approved by the FDA for such management; measures
on dialysis adequacy; to the extent feasible, a measure or measures on
patient satisfaction; and such other measures that the Secretary
specifies, including (to the extent feasible) measures on iron
management, bone mineral metabolism, and vascular access, including for
maximizing the placement of arterial venous fistula. As explained in
detail below, we are proposing to adopt a number of new measures for
the PY 2014 ESRD QIP, including a Kt/V measure, a vascular access
infections measure, a vascular access type measure, a Standardized
Hospitalization Ratio (SHR) Admissions measure, a patient experience of
care reporting measure, a bone mineral metabolism reporting measure,
and a NHSN dialysis event blood stream infection reporting measure. We
are also continuing to develop additional measures on topics such as
fluid weight management and pediatric ESRD treatment. However, in
selecting measures for the PY 2013 ESRD QIP, we examined whether it
would be feasible to propose to adopt any new measures for the program.
In light of our proposal to select CY 2011 as the performance period
(discussed more fully below), and that it is not feasible to adopt any
of the measures mentioned above until the PY 2014 ESRD QIP, we have
determined that there are no new measures available for adoption at
this time.
We also carefully reexamined the three measures that we adopted for
the 2012 ESRD QIP, and for the reasons discussed below, we are
proposing to continue including only two of them, the Hemoglobin
Greater Than 12g/dL measure and the URR Hemodialysis

[[Page 40519]]

Adequacy measure, in the PY 2013 ESRD QIP measure set. We are proposing
to retire the Hemoglobin Less Than 10g/dL measure beginning with the PY
2013 ESRD QIP.
We have recently reassessed the evidence for the use of ESAs in
patients with kidney disease through a National Coverage Analysis (CAG-
00413N) and, while we did not seek to limit the coverage of these
agents at this time, we could not identify a specific hemoglobin lower
bound level that has been proven safe for all patients treated with
ESAs. We found that randomized, controlled trials targeting patients to
higher, rather than lower hemoglobin levels, or comparing the effect of
ESAs against a placebo have indicated an increased risk of myocardial
infarction, stroke, venous thromboembolism, thrombosis of vascular
access, and overall mortality, and, in patients with a history of
cancer, tumor progression or recurrence. The mechanism underlying this
increased risk is not yet fully understood but could result from the
actual hemoglobin level itself, the rate at which the hemoglobin level
rises, the variability in hemoglobin levels achieved as a result of ESA
use, or the ESA dose required. Regardless of the reason(s) for these
risks, such findings indicate that safety is a valid concern for a
subset of patients treated with ESAs. Because we cannot yet identify
which patients would be included in this subset, and accordingly
exclude them from the specifications for the Hemoglobin Less Than 10g/
dL measure, we have concluded that it would not be appropriate to
continue to incentivize ESRD providers and facilities to achieve
hemoglobin levels above 10g/dL in all patients. In addition we believe
that this change is reflective of the FDA modified dosing
recommendation for erythropoiesis stimulating agents (http://www.fda.gov/Drugs/DrugSafety/ucm259639.htm). We have discussed with the
FDA our proposal to retire the Hemoglobin Greater Than 10 g/dL measure
starting in PY 2013. Since this measure encourages providers to keep
hemoglobin above 10 g/dL in all patients, the FDA agrees that removing
this measure is consistent with the new labeling for erythropoeisis
stimulating agents approved by the FDA. The previous labeling
recommendations to maintain hemoglobin levels between 10 and 12 g/dL
are no longer appropriate and have been removed from the drug label.
We, therefore, propose to retire the Hemoglobin Less Than 10g/dL
measure from the ESRD QIP measure set, beginning with the PY 2013
program.
We propose to maintain the Hemoglobin Greater Than 12g/dL measure
as a measure of anemia management because studies have been unable to
establish that higher hemoglobin levels are clinically beneficial. In
addition, the studies continue to show that targeting hemoglobin levels
above this level through the use of ESAs can contribute to adverse
patient outcomes.\1\ This measure, consistent with the requirement
under section 1881(h)(2)(A)(i) of the Act, also continues to reflect
the labeling approved by the FDA for anemia management. The FDA has
stated that using ESAs to target a hemoglobin level of greater than
11g/dL increases the risk of serious adverse cardiovascular events and
has not been shown to provide additional patient benefit. The
Hemoglobin Greater Than 12g/dL measure focuses on achieved hemoglobin
levels, not simply hemoglobin level targets, and these levels also
reflect patient factors such as underlying causes of anemia and
sensitivity to treatment. Since these factors can vary over time in an
unpredictable fashion, even within an individual patient, we believe
that the current anemia measure allows for these unanticipated
excursions of the achieved hemoglobin while continuing to highlight
that higher hemoglobin targets can result in adverse patient outcomes.
We plan to revisit this measure with the input of stakeholders and will
replace or update the measure for future years of the ESRD QIP if
deemed appropriate. We seek public input on the continued inclusion of
the Hemoglobin Greater Than 12g/dL measure in the PY 2013 ESRD QIP.
---------------------------------------------------------------------------

\1\ KDOQI Clinical Practice Guideline and Clinical Practice
Recommendations for Anemia in Chronic Kidney Disease: 2007 Update of
Hemoglobin Target, American Journal of Kidney Diseases, 50(3): Pages
471-530 (September 2007).
---------------------------------------------------------------------------

We are also proposing to retain the URR Hemodialysis Adequacy
measure, which assesses the percentage of Medicare patients with an
average URR >= 65 percent for PY 2013. Section 1881(h)(2)(A)(i) states
that the measures specified under the ESRD QIP for a payment year shall
include measures on dialysis adequacy. For the reasons stated in the CY
2011 ESRD PPS final rule (75 FR 49182) we believe that URR hemodialysis
adequacy continues to be an appropriate and accurate measure of
hemodialysis adequacy, although we note that we are proposing below to
adopt an alternative measure of dialysis adequacy for the PY 2014 ESRD
QIP.
Therefore, for the PY 2013 ESRD QIP, we propose to continue to use
the following two measures previously adopted for the PY 2012 ESRD QIP:
Hemoglobin Greater Than 12g/dL Measure.
URR Hemodialysis Adequacy Measure.
We also propose to continue to use the specifications for these
measures that we finalized for the PY 2012 ESRD QIP. Consistent with
the PY 2012 ESRD, we are also proposing to require providers/facilities
to have at least 11 cases that meet the reporting criteria for a
measure in order to be scored on the measure. As we noted in the 2012
ESRD QIP final rule (76 FR 639), we believe that this minimum case
threshold will help prevent the possibility that a small number of poor
outcomes artificially, and for reasons unrelated to the quality of
care, skews a small provider/facility's performance score.
Additionally, eleven cases is a statistically valid threshold that will
give us confidence that a provider or facility's total performance
score is an accurate reflection of the quality of care it furnishes.
We seek public comments on our proposed selection of these two
measures for the PY 2013 ESRD QIP.
c. Proposed Performance Period for the PY 2013 ESRD QIP
Section 1881(h)(4)(D) of the Act requires the Secretary to
establish a performance period with respect to a year, and for that
performance period to occur prior to the beginning of such year. We
selected all of CY 2010 as the performance period for the PY 2012 ESRD
QIP because we believe that it best balanced the need to collect and
analyze sufficient data, allowed sufficient time to calculate total
performance scores and prepare the pricing files needed to implement
applicable payment reductions beginning on January 1, 2012, and allowed
providers and facilities time to preview their performance scores and
inquire about their scores prior to finalizing their scores and making
performance data public (76 FR 631).
In determining what performance period to propose to select for the
PY 2013 ESRD QIP, we carefully considered the impact of selecting all
or part of CY 2011 as well as including part of CY 2012. We determined
that using less than a 12-month period could reduce the validity of
provider/facility performance data and that using data from multiple
calendar years (and still making payments on time) would necessitate
using data from multiple data sets collected over two different payment
periods, and, therefore, would not provide sufficient time to compile
the data files to make accurate provider/

[[Page 40520]]

facility payments beginning with January 1, 2013 services. In light of
the new ESRD PPS, we believe that it is important to assess the quality
of care being furnished to ESRD patients, and that a year's worth of
data will provide us with enough data to accurately and fairly
determine whether a provider/facility has met or exceeded the proposed
performance standards with respect to the proposed measures. For these
reasons, we propose to select all of CY 2011 as the performance period
for the PY 2013 ESRD QIP. We seek public comments on this proposal.
d. Proposed Performance Standards for the PY 2013 ESRD QIP
For the PY 2012 ERSD QIP, we established the performance standard
for the measures using the special rule under section 1881(h)(4)(E) of
the Act (76 FR 629). We selected as the performance standard for PY
2012 the lesser of (1) the performance of a provider or facility on
each measure during 2007 (the year selected by the Secretary under the
second sentence of section 1881(b)(14)(A)(ii) of the Act, referred to
as the base utilization year), or (2) the national performance rate
(calculated at the national aggregate level as the number of Medicare
patients for whom the measure was achieved divided by the total number
of Medicare patients eligible for inclusion in the measure) for each
measure in a period determined by the Secretary. With respect to the
second prong of this standard, the period we selected for the PY 2012
ESRD QIP was calendar year 2008 because data from that year was, at
that time, the most recent publicly available data prior to the
beginning of the performance period. As reported on the Dialysis
Facility Compare Web site in November 2009, the 2008 national
performance rates for the anemia management measures and the URR
hemodialysis adequacy measure were:
For the Hemoglobin Less Than 10g/dL measure (which is
based on the national performance percentage of Medicare patients who
have an average hemoglobin value less than 10g/dL): 2 percent.
For the Hemoglobin More Than 12g/dL measure (which is
based on the national performance percentage of Medicare patients who
have an average hemoglobin value greater than 12g/dL): 26 percent.
For the URR Hemodialysis Adequacy Measure (which is based
on the national percentage of Medicare patients who have an average URR
level of at least 65 percent): 96 percent.
In considering what performance standards to select for the PY 2013
ESRD QIP, we took into account the fact that we had selected a one year
period for the PY 2012 ESRD QIP and that for the reasons discussed
above, we would be proposing to select the next one year performance
period for the PY 2013 ESRD QIP. We determined that comparing provider/
facility performance over time based on data from successive years
would be beneficial as this method would allow the public to most
accurately gauge provider/facility improvement. We also noted that due
to operational issues, it was not feasible for us to establish
performance standards prior to the beginning of the proposed
performance period, as required in order to establish performance
standards under section 1881(h)(4)(A) of the Act. For these reasons, we
propose to continue using the performance standard under section
1881(h)(4)(E) of the Act for the PY 2013 QIP. Under this proposed
standard, providers/facilities would be evaluated based on the lesser
of (1) the performance of the provider/facility in 2007, which is the
year selected by the Secretary under the second section of section
1881(b)(14)(A)(ii), or (2) a performance standard based on the national
performance rates for the measures in a period determined by the
Secretary. With respect to the second prong, we propose to select CY
2009 because that is the most recent year-long period for which data is
publicly available prior to the beginning of the proposed performance
period. As reported on the Dialysis Facility Compare Web site, the 2009
national performance rates for the Hemoglobin Greater Than 12g/dL
measure and the URR Hemodialysis Adequacy measure are:
For the Hemoglobin Greater Than 12g/dL measure: 16
percent.
For the URR Hemodialysis Adequacy Measure: 96 percent.
We seek public comments about the proposed selection of this
performance standard for the PY 2013 ESRD QIP.
e. Proposed Methodology for Calculating the Total Performance Score for
the PY 2013 ESRD QIP
Section 1881(h)(3)(A)(i) of the Act requires the Secretary to
develop a methodology for assessing the total performance of each
provider and facility based on performance standards with respect to
the measures selected for a performance period. Section
1881(h)(3)(A)(iii) of the Act states that the scoring methodology must
include a process to weight the performance scores with respect to
individual measures to reflect priorities for quality improvement, such
as weighting scores to ensure that providers/facilities have strong
incentives to meet or exceed anemia management and dialysis adequacy
performance standards, as determined appropriate by the Secretary.
For the PY 2012 ESRD QIP, we finalized a scoring methodology under
which we will calculate the performance of each provider and facility
on each of the three measures by assigning 0-10 points based on how
well the provider/facility performed on the measure during the CY 2010
performance period. For example, if a provider or facility meets or
exceeds the performance standard for one measure, then it will receive
10 points for that measure. Providers or facilities that do not meet or
exceed the performance standard for a measure will receive fewer than
10 points for that measure, with the exact number of points
corresponding to how far below the performance standard the provider/
facility's actual performance falls. Two points will be subtracted for
every one percentage point the provider's/facility's performance falls
below the performance standard (76 FR 632). The full rationale for this
scoring methodology is presented in detail in the PY 2012 ESRD QIP
final rule (76 FR 629 through 634).
For the PY 2013 ESRD QIP, we propose to adopt the same methodology
for scoring provider/facility performance on each of the proposed
measures that we adopted for the PY 2012 ESRD QIP. As discussed in the
2012 ESRD QIP final rule (76 FR 633), we believe that it is important
to provide a clear-cut method for calculating scores initially while
providers and facilities are becoming familiar with the program. Under
this methodology, we would calculate the performance of each provider/
facility on each measure by assigning points based on how well it
performed on the measure in CY 2011 relative to the proposed
performance standard (discussed above). If a provider or facility meets
or exceeds the performance standard for a measure, then it would
receive 10 points for that measure. We would award points for each
measure based on a 0 to 10 point scale and would subtract 2 points for
every 1 percentage point the provider or facility's performance during
2011, the proposed performance period, falls below the performance
standard.
For the PY 2012 ESRD QIP, we also finalized a weighting methodology
that weighted the Hemoglobin Less Than 10g/dL measure at 50 percent of
the total performance score, with the remaining 50 percent of the total

[[Page 40521]]

performance score divided equally between the Hemoglobin Greater Than
12g/dL measure (25 percent) and the URR Hemodialysis Adequacy Measure
(25 percent) (76 FR 633).
For the PY 2013 ESRD QIP, we are proposing to weight the total
performance score for each provider/facility such that the proposed
Hemoglobin Greater Than 12g/dL measure makes up 50 percent of the score
and the proposed URR Hemodialysis Adequacy measure makes up 50 percent
of the score. To be consistent with the scoring methodology that we
finalized for the PY 2012 ESRD QIP, we propose award up to 30 points to
a provider/facility based on its performance on the proposed measures.
However, because we are only proposing to adopt two measures for the PY
2013 ESRD QIP measure set, we propose to calculate a provider's/
facility's total performance score by multiplying each measure score
(0-10 points) by 1.5, and adding both measure scores together to result
in a 0-30 point range.
We seek public comments about the proposed scoring and weighting
methodologies for the PY 2013 ESRD QIP.
f. Proposed Payment Reductions for the PY 2013 ESRD QIP
Section 1881(h)(3)(A)(ii) of the Act requires the Secretary to
ensure that the application of the scoring methodology results in an
appropriate distribution of reductions in payments among providers and
facilities achieving different levels of total performance scores, with
providers and facilities achieving the lowest total performance scores
receiving the largest reductions.
We implemented a sliding scale of payment reductions for the PY
2012 ESRD QIP, setting the minimum total performance score that
providers/facilities will need to achieve in order to avoid a payment
reduction at 26 points (76 FR 634). Providers/facilities that score
between 21-25 points will receive a 0.5 percent payment reduction;
between 16-20 points, a 1.0 percent payment reduction; between 11-15
points, a 1.5 percent payment reduction; and between 0-10 points,
providers/facilities will receive the full 2.0 percent payment
reduction (76 FR 634).
To ensure that providers/facilities are properly incentivized to
provide quality care, we propose to implement a more rigorous sliding
scale of payment reductions for the PY 2013 ESRD QIP and raise the
minimum total performance score that providers/facilities would need to
achieve in order to avoid a payment reduction from 26 to 30 points.
Providers/facilities that score between 26-29 points would receive a
1.0 percent payment reduction; between 21-25 points, a 1.5 percent
payment reduction; and between 0-20 points, providers/facilities would
receive the full 2.0 percent payment reduction (see Table 5 below). We
believe that applying a payment reduction of 2.0 percent to providers/
facilities whose performance falls significantly below the performance
standards, coupled with applying two intermediate payment reduction
levels to providers/facilities based on lesser degrees of performance
deficiencies, will provide proper incentives for all providers/
facilities to improve the quality of their care.

Table 5--Proposed PY 2013 Payment Reduction Scale
------------------------------------------------------------------------
2013 Percent
Total performance score of payment
reduction
------------------------------------------------------------------------
30 Points............................................... 0.0
26-29................................................... 1.0
21-25................................................... 1.5
0-20.................................................... 2.0
------------------------------------------------------------------------

Table 6--Finalized PY 2012 Payment Reduction Scale
------------------------------------------------------------------------
2012 Percent
Total performance score of payment
reduction
------------------------------------------------------------------------
30-26 Points............................................ 0.0
21-25................................................... 0.5
16-20................................................... 1.0
11-15................................................... 1.5
0-10.................................................... 2.0
------------------------------------------------------------------------

We seek public comments on this proposal.
2. Proposed PY 2014 ESRD QIP
a. Overview of the Proposed PY 2014 ESRD QIP
This proposed rule also proposes to implement requirements that
will apply to the PY 2014 ESRD QIP. In general, we propose to calculate
individual total performance scores ranging from 0-100 points for
providers and facilities based on eight measures that we propose to
adopt for the PY 2014 ESRD QIP. We propose to continue using the
Hemoglobin Greater Than 12g/dL measure that we are proposing to use for
the PY 2013 ESRD QIP, and to adopt four additional clinical measures:
Kt/V Dialysis Adequacy measure; Vascular Access Type measure; Vascular
Access Infections measure; and Standardized Hospitalization Ratio (SHR)
Admissions measure. We also propose to adopt three additional measures
that would be scored differently from the proposed clinical measures.
These proposed measures are the National Health Safety Network (NHSN)
Dialysis Event reporting measure, the Patient Experience of Care
reporting measure (using the In-Center Hemodialysis Consumer Assessment
of Healthcare Advisors (ICH CAHPS) survey tool), and the Mineral
Metabolism reporting measure. Providers/facilities that do not meet or
exceed a certain total performance score would receive a payment
reduction ranging from 0.5 percent to 2.0 percent.
b. Proposed Performance Measures for the PY 2014 ESRD QIP
For the PY 2014 ESRD QIP, we propose to continue using the
Hemoglobin Greater Than 12g/dL measure, adopt seven new measures (Kt/V
Dialysis Adequacy, Vascular Access Type, Vascular Access Infections,
SHR Admissions, NHSN Dialysis Event reporting, Patient Experience of
Care reporting, and Mineral Metabolism reporting) and to retire the URR
Hemodialysis Adequacy measure. We strongly believe that the eight
proposed measures individually and collectively provide information
useful for assessing provider/facility quality, for informing patient
decision-making, and for furthering CMS and HHS priorities for quality
improvement activities.
We note that we are proposing for the first time to adopt measures
under section 1881(h)(2)(A)(iii) of the Act. In specifying such
measures, we recognize that section 1881(h)(2)(B)(i) of the Act
requires that they must have been endorsed by the entity with a
contract under section 1890(a) of the Act (that entity is currently the
National Quality Forum (NQF)) unless the exception in clause (ii)
applies. That provision provides that in the case of a specified area
or medical topic determined appropriate by the Secretary for which a
feasible and practicable measure has not been endorsed by the entity
with a contract under section 1890(a) of the Act, the Secretary may
specify a measure that is not so endorsed as long as due consideration
is given to measures that have been endorsed or adopted by consensus
organizations identified by the Secretary.
i. Proposed Anemia Management Measure (Hemoglobin Greater Than 12g/dL)
Section 1881(h)(2)(A)(i) of the Act requires that the measures
specified for the ESRD QIP include measures on anemia management that
reflect the

[[Page 40522]]

labeling approved by the FDA for such management. For the PY 2014 ESRD
QIP, we propose to retain the Hemoglobin Greater Than 12g/dL measure
that we adopted for the PY 2012 ESRD QIP and that we are proposing to
retain for the PY 2013 ESRD QIP. We are making this proposal for the
same reasons (discussed above) we proposed to retain this measure for
the PY 2013 ESRD QIP measure set.
We also propose to continue to use the specifications for this
measure that we finalized for the PY 2012 ESRD QIP and which we have
proposed for the PY 2013 ESRD QIP. We also propose to continue
requiring that providers/facilities have at least 11 cases that meet
the reporting criteria in order to be scored on the measure. As noted
above, we believe that this minimum case threshold will help prevent
the possibility that a small number of poor outcomes artificially, and
for reasons unrelated to the quality of care, skew a small provider/
facility's performance score. Also, eleven cases is a statistically
valid threshold that will give us confidence that a provider or
facility's total performance score is an accurate reflection of the
quality of care it furnishes. As a result, this threshold will help
preserve beneficiary access to care at much needed small providers/
facilities in rural and/or underserved areas.
Technical details on the methodology used to calculate the
Hemoglobin Greater Than 12g/dL measure are available on the Arbor
Research Collaborative for Health and University of Michigan Kidney
Epidemiology and Cost Center Web site: http://www.dialysisreports.org/pdf/esrd/public/DFRGuide.pdf.
We seek public comment on the use of the Hemoglobin Greater Than
12g/dl measure in the PY 2014 ESRD QIP.
ii. Proposed Kt/V Dialysis Adequacy Measure
For the PY 2014 ESRD QIP, we are proposing to retire the URR
Hemodialysis Adequacy measure we adopted for the PY 2012 ESRD QIP and
proposed to retain for the PY 2013 ESRD QIP. In its place, we are
proposing to adopt a Kt/V measure of dialysis adequacy (K = dialyzer
clearance, t = dialysis time, and V = volume of distribution) for the
PY 2014 ESRD QIP. We note that we have asked all providers/facilities
to report the Kt/V value and the date of the value on all ESRD claims
since July 1, 2010 (see Change Request (CR) 6782).
Kt/V has been advocated by the renal community as a more widely
accepted measure of dialysis adequacy. Specifically, Kt/V more
accurately measures how much urea is removed during dialysis, primarily
because the Kt/V calculation also takes into account the amount of urea
removed with excess fluid. Further, this proposed measure assesses Kt/V
levels in both hemodialysis (HD) patients (in-center and home (HHD))
and peritoneal dialysis (PD) patients, and is based on two Kt/V
measures of dialysis adequacy that have been endorsed by the National
Quality Forum (0250 and 0321). Specifically, the
proposed measure assesses the percent of Medicare dialysis patients
(PD, HD and HHD) meeting the modality specific Kt/V threshold. For
hemodialysis patients (home and in-center patients), we would measure
the percentage of adult (>= 18 years old) Medicare patients who have
been on hemodialysis for 6 months or more and dialyzing thrice weekly
whose average delivered dose of hemodialysis (calculated from the last
measurements of the month using the UKM or Daugirdas II formula) was a
Kt/V of at least 1.2 during the proposed performance period. For
peritoneal dialysis patients, we would measure the percentage of adult
(>= 18 years old) Medicare patients whose average delivered peritoneal
dialysis dose was a weekly Kt/V urea of at least 1.7 (dialytic +
residual) during the proposed performance period. At this time, the
measure specifications exclude pediatric patients because there is not
a consensus on what an adequate Kt/V level should be in this patient
population.
In light of the fact that the renal community has advocated the use
of this measure, it is based on two NQF endorsed measures of Kt/V
dialysis adequacy, and our belief that Kt/V is an accurate measure of
dialysis adequacy, we propose to adopt the Kt/V Dialysis Adequacy
measure for the PY 2014 ESRD QIP. We also propose to require that
providers/facilities have at least 11 cases that can be reported under
the measure specifications to be scored on this measure. As stated
above, we believe that this minimum case threshold will help prevent
the possibility that a small number of poor outcomes artificially, and
for reasons unrelated to the quality of care, skew a small provider/
facility's performance score. Technical details on the proposed
methodology we would use to calculate this measure are available at:
http://www.arborresearch.org/ESRD_QMS.aspx.
We seek public comments on the retirement of the URR Hemodialysis
Adequacy measure and the proposed adoption of the Kt/V Dialysis
Adequacy measure for the PY 2014 ESRD QIP. We also seek public comments
on the exclusion of pediatric patients from this proposed measure.
iii. Proposed Vascular Access Type Measure
Section 1881(h)(2)(A)(iii) of the Act states, in part, that the
measures specified for the ESRD QIP shall include other measures as the
Secretary specifies, including, to the extent feasible, measures on
vascular access, including for maximizing the placement of arterial
venous fistula.
Arteriovenous fistulas (AV fistulas) are the preferred type of
vascular access for patients on maintenance hemodialysis. Because of
the lower complication rates (including reduced infections), decreased
risk of patient mortality, and greater cost efficiency associated with
this type of vascular access for eligible patients,^{2, 3} we
propose to adopt a Vascular Access Type measure, which is based on two
measures that are endorsed by the NQF. These measures assess 1. the
percentage of a provider's/facility's patients on hemodialysis using an
autogenous AV fistula with two needles during the last HD treatment of
the month (NQF 0257); and 2. the percentage of provider's/
facility's hemodialysis patients who have an intravenous catheter in
place for 90 days or longer prior to the last hemodialysis session (NQF
0256).
---------------------------------------------------------------------------

\2\ http://www.kidney.org/professionals/kdoqi/guideline_uphd_pd_va/va_guide2.htm.
\3\ http://www.fistulafirst.org/AboutAVFistulaFirst/History.aspx.
---------------------------------------------------------------------------

While catheter reduction and increased use of arteriovenous fistula
are both important steps to improve patient care, we recognize that
these two events are tightly interrelated and do not want to penalize
providers/facilities twice for related outcomes. We are therefore
proposing to combine these two separate measures into one measure to
contribute jointly to the Total Performance Score. Because the rates
and goals for each subcomponent measure are very different, we are
proposing to calculate two measure rates for the measure, based on a
provider/facility's performance on each subcomponent measure, and to
adopt a different methodology (discussed below) for purposes of setting
performance standards and scoring providers/facilities on this measure.
We seek public comment on the proposed combination of these two
measures into one overall score for the Vascular Access Type measure
versus separating the measures into two separate

[[Page 40523]]

measures which would then contribute separate scores to the overall
Total Performance Score equally weighted with the other clinical
measures.
As explained above, section 1881(h)(2)(B)(i) of the Act requires
that unless the exception set forth in section 1881(h)(2)(B)(ii) of the
Act applies, the measures specified for the ESRD QIP under section
1881(h)(2)(A)(iii) of the Act must have been endorsed by the entity
with a contract under section 1890(a) of the Act (which is currently
the NQF). Under the exception set forth in section 1881(h)(2)(B)(ii),
in the case of a specified area or medical topic determined appropriate
by the Secretary for which a feasible and practical measure has not
been endorsed by the entity with a contract under section 1890(a) of
the Act, the Secretary may specify a measure that is not so endorsed as
long as due consideration is given to measures that have been endorsed
or adopted by a consensus organization identified by the Secretary. We
believe that assessing the type of vascular access used in hemodialysis
patients is important because clinical evidence, as noted previously,
has shown that proper vascular access reduces the risk of adverse
outcomes such as infections. In determining how to best measure
vascular access type for purposes of the ESRD QIP, we considered
proposing to adopt the two NQF-endorsed measures noted above
(0256 and 0257). However, under the NQF-endorsed
specifications for each of these measures, data must be collected from
all hemodialysis patients. We currently collect this data via claims
forms for Medicare patients only. We believe that expanding this data
collection to all patients would be overly burdensome for ESRD
providers/facilities and would not allow us to collect this data in
time for the PY 2014 program. For these reasons, we are proposing to
limit the patient population to which this proposed measure applies to
the Medicare hemodialysis patient population, and to collect the data
via Medicare claims. Accordingly, we are proposing to adopt this
measure under section 1881(h)(2)(B)(ii) of the Act.
We note that since July 1, 2010, we have asked dialysis providers/
facilities to submit vascular access type data on ESRD claims (Change
Request 6782). We also note that hemodialysis patients with acute renal
failure, peritoneal dialysis patients, and patients under 18 years of
age would be excluded from this proposed measure. Medicare patients
with acute renal failure receive treatment for a relatively short
period of time as kidney function is usually restored after an acute
episode, thus making a fistula unnecessary; those on peritoneal
dialysis require access through the peritoneal cavity; and the access
considerations are different for those in the pediatric population. We
also believe that adoption of this measure would be consistent with the
efforts of the Fistula First initiative, which advances the use of
fistulas proven to reduce the risk of infection/morbidity and
mortality.\4\
---------------------------------------------------------------------------

\4\ See http://www.fistulafirst.org/ for further information
regarding this initiative.
---------------------------------------------------------------------------

Finally, we propose to require that providers/facilities have at
least 11 cases that meet the reporting criteria for this proposed
measure to be scored on it. As stated above, we believe that this
minimum threshold will help prevent the possibility that a small number
of poor outcomes artificially, and for reasons unrelated to the quality
of care, skew a small provider/facility's performance score. Technical
details on the methodology we propose to use to calculate this measure
are available at: http://www.arborresearch.org/ESRD_QMS.aspx.
We seek public comment on the proposed adoption of this measure for
the PY 2014 ESRD QIP.
iv. Proposed Vascular Access Infections Measure
Infections are one of the leading causes of hospitalizations and
death among hemodialysis patients.\5\ The reduction of healthcare-
associated infections (HAI), which are infections that may have been
contracted in process of receiving care, is a key priority area for the
Department of Health and Human Services. We have engaged in national
efforts such as the National Patient Safety Initiative and the
Partnership for Patients to reduce the number of preventable infections
across healthcare settings, and have worked with dialysis providers/
facilities as part of this effort. Use of effective infection control
measures have proven successful in reducing the risk of life-
threatening infections.
---------------------------------------------------------------------------

\5\ http://www.cdc.gov/media/releases/2011/p0301_vitalsigns.html.
---------------------------------------------------------------------------

We propose to measure dialysis access-related infection rates by
assessing the number of months in which a monthly hemodialysis claim
reports a dialysis access-related infection using HCPCS modifier V8,
and we note that since July 1, 2010, we have asked dialysis providers/
facilities to code all Medicare claims for dialysis access-related
infections using this modifier (Change Request 6782). Pediatric
patients (patients < 18 years of age) would be excluded from this
measure because pediatric access considerations are greatly different
than those of the adult patient population. Peritoneal dialysis
patients would also be excluded from the calculation of the measure
because there is no consensus on how to best measure dialysis access-
related infection rates from catheters in these patients. We plan,
however, to convene an expert panel for the purpose of trying to
determine how to best address this issue in the pediatric and
peritoneal dialysis patient populations.
Section 1881(h)(2)(B)(i) of the Act requires that unless the
exception set forth in section 1881(h)(2)(B)(ii) of the Act applies,
the measures specified for the ESRD QIP under section
1881(h)(2)(A)(iii) of the Act must have been endorsed by the entity
with a contract under section 1890(a) of the Act (which is currently
the NQF). Under the exception set forth in section 1881(h)(2)(B)(ii),
in the case of a specified area or medical topic determined appropriate
by the Secretary for which a feasible and practical measure has not
been endorsed by the entity with a contract under section 1890(a) of
the Act, the Secretary may specify a measure that is not so endorsed as
long as due consideration is given to measures that have been endorsed
or adopted by a consensus organization identified by the Secretary.
While the proposed Vascular Access Infections measure is not NQF
endorsed, we believe that the incidence of dialysis access-related
infections is a significant patient safety concern. We are not aware of
any measures endorsed by a consensus entity for vascular access
infections for the ESRD population, and, at this time, the proposed
Vascular Access Infections measure is also the only measure for which
we have the necessary data to measure provider/facility performance.
Thus, we are proposing to adopt this measure in order to promote
patient safety in this area.
Technical details on the methodology used to calculate this measure
are available at: http://www.arborresearch.org/ESRD_QMS.aspx.
We seek public comments on our proposal to adopt this measure in
the PY 2014 ESRD QIP.
v. Proposed Standardized Hospitalization Ratio--Admissions Measure
Hospitalizations are an important indicator of patient quality of
life and morbidity. According to 2009 data provided by the United
States Renal Disease Data System, dialysis patients

[[Page 40524]]

are hospitalized, on average, twice a year. The proposed Standardized
Hospitalization Ratio-Admissions (SHR-Admissions) measure is a risk-
adjusted measure of hospitalizations for Medicare dialysis patients.
The data needed to calculate the proposed SHR-Admissions measure has
been regularly reported to Dialysis Facility Reports (DFR) since 1995
(previously known as Unit-Specific Reports) and has been used by
providers/facilities and ESRD Networks for quality improvement
activities. These reports contain critical information on topics such
as patient characteristics, treatment patterns, hospitalizations,
mortality, and provider/facility characteristics.
As explained above, Section 1881(h)(2)(B)(i) of the Act requires
that unless the exception set forth in section 1881(h)(2)(B)(ii) of the
Act applies, the measures specified for the ESRD QIP under section
1881(h)(2)(A)(iii) of the Act must have been endorsed by the entity
with a contract under section 1890(a) of the Act (which is currently
the NQF). Under the exception set forth in section 1881(h)(2)(B)(ii) of
the Act, in the case of a specified area or medical topic determined
appropriate by the Secretary for which a feasible and practical measure
has not been endorsed by the entity with a contract under section
1890(a) of the Act, the Secretary may specify a measure that is not so
endorsed as long as due consideration is given to measures that have
been endorsed or adopted by a consensus organization identified by the
Secretary. We reviewed the NQF's consensus-endorsed measures and were
unable to identify any NQF-endorsed measures for hospital admissions
applicable to the ESRD population. We are unaware of any other measures
for hospital admissions that have been approved by voluntary consensus
standards bodies and/or endorsed by NQF for ESRD patients. Therefore,
we are proposing to adopt this SHR-Admissions measure as it is directly
applicable to the Medicare ESRD population. This measure is undergoing
NQF review for endorsement, and we intend to revisit this measure in
the future if this review results in substantive changes to this
measure.
While we recognize that this is an ``all-cause'' measure, meaning
that hospitalizations related to other medical conditions outside of
ESRD are included in the measure, our review of the data listing the
most frequent 100 in-patient diagnoses for ESRD patients demonstrate
that a clear majority, estimated at 90 percent or greater, of admitting
diagnoses are related to ESRD. The use of a subset of diagnoses was
considered when the measure was reviewed by a Technical Expert Panel in
2007 convened by us, in part, to discuss this issue, but the panel
concluded that use of specific diagnoses were more prone to poor inter-
rater variation and variation in diagnosis coding, and for this reason,
recommended that the measure be calculated using all admissions,
regardless of the cause.
The proposed SHR-Admissions measure is claims-based and describes,
as a ratio, the number of ESRD Medicare patient actual admissions
versus expected hospitalizations adjusted for the provider's/facility's
Medicare patient case mix. For inclusion in this measure, patients must
have received services from the provider/facility for 60 days or more,
and the provider/facility must have at least 5 patient years at risk
(meaning the provider/facility must have at least 5 years of patient
data aggregated across all patients at the facility during the
performance period, for example, 10 patients with 6 months of data
each, or 5 patients with 12 months of data each) to receive an SHR
score. Technical details on the methodology we are proposing to use to
calculate this measure, including the adjustment for patient mix, are
available at: http://www.arborresearch.org/ESRD_QMS.aspx.
We seek public comments on our proposal to adopt this measure for
the PY 2014 ESRD QIP.
vi. Proposed National Healthcare Safety Network (NHSN) Dialysis Event
Reporting Measure
Healthcare-associated infections (HAI) are a leading cause of
preventable mortality and morbidity across different settings in the
healthcare sector, including at dialysis facilities. In a national
effort to reduce this outcome, Department of Health and Human Services
agencies, including CMS, are partnering with the Centers for Disease
Control and Prevention (CDC) to encourage providers to report to the
National Healthcare Safety Network (NHSN) as a way to track and
facilitate action for reducing HAIs.
The NHSN is currently a voluntary, secure, internet-based
surveillance system that integrates patient and healthcare personnel
safety surveillance systems managed by the Division of Healthcare
Quality Promotion at the CDC. NHSN has been operational since 2008 with
acute care hospitals, long term acute care hospitals, psychiatric
hospitals, rehabilitation hospitals, outpatient dialysis centers,
ambulatory surgery centers, and long term care facilities. We believe
that reporting dialysis events to the NHSN by all providers/facilities
would support national goals for patient safety, and particularly goals
for the reduction of healthcare-associated infections. Accordingly, we
have developed a measure that would assess whether providers/facilities
enroll and report dialysis event data to the NHSN.
By measuring only whether providers/facilities report dialysis
event data to the NHSN, we believe that we can allow providers/
facilities time to become familiar with the NHSN reporting process. We
intend in the future to propose to adopt a measure that would score
providers/facilities based on actual dialysis events reported to the
NHSN.
Specifically, we are proposing that providers/facilities: (1)
Enroll in the NHSN and complete any training required by the CDC; and
(2) submit three or more consecutive months of dialysis event data to
the NHSN. Under this proposal, providers/facilities would be able to
submit data to the NHSN until the end of the month following the month
for which it collected data. For example, if a provider/facility chose
to submit data for October 2012, it would have until November 30, 2012
to submit that data. Information regarding NHSN enrollment and training
can be accessed at: http://www.cdc.gov/nhsn/enroll.html. Section
1881(h)(2)(B)(i) of the Act requires that unless the exception set
forth in section 1881(h)(2)(B)(ii) applies of the Act, the measures
specified for the ESRD QIP under section 1881(h)(2)(A)(iii) of the Act
must have been endorsed by the entity with a contract under section
1890(a) of the Act (which is currently the NQF). Under the exception
set forth in section 1881(h)(2)(B)(ii) of the Act, in the case of a
specified area or medical topic determined appropriate by the Secretary
for which a feasible and practical measure has not been endorsed by the
entity with a contract under section 1890(a) of the Act, the Secretary
may specify a measure that is not so endorsed as long as due
consideration is given to measures that have been endorsed or adopted
by a consensus organization identified by the Secretary. Although a
measure calculated using NHSN dialysis event data results is currently
under review by the NQF, we are not aware that any measure similar to
the reporting measure we are proposing to adopt has been endorsed or
adopted by any consensus building entity. As we explained above, we are
proposing to adopt a limited reporting measure because we believe it is
important to incentivize providers/facilities to report so that
providers/facilities will have a process for such

[[Page 40525]]

reporting should we consider measuring providers/facilities on the
incidence of these dialysis events in future years. Accordingly, we are
proposing to adopt this measure under the exception authority in
section 1881(h)(2)(B)(ii) of the Act. We note that because HAIs are a
significant patient safety concern, we intend to propose to adopt one
or more measures that assess actual dialysis event rates in the future.
We seek public comments on our proposal to adopt the NHSN Dialysis
Event reporting measure for the PY 2014 ESRD QIP.
vii. Proposed Patient Experience of Care Survey Usage Measure
Section 1881(h)(2)(A)(ii) of the Act states that the measures
specified for the ESRD QIP shall include, to the extent feasible, a
measure (or measures) of patient satisfaction as the Secretary shall
specify. Information on patient experience with care at a provider/
facility is an important quality indicator to help providers/facilities
improve services to their patients and to assist patients in choosing a
provider/facility at which to seek care. We propose to adopt a measure
for the PY 2014 ESRD QIP that assesses provider/facility usage of the
In-Center Hemodialysis (ICH) Consumer Assessment of Healthcare
Providers and Systems (CAHPS) Survey. The intent of including this
reporting measure is to assess the degree to which providers/facilities
are providing their patients with a voice in their quality of
hemodialysis care.
The ICH CAHPS Survey was developed by the Agency for Healthcare
Research and Quality (AHRQ) to assess the experience of hemodialysis
patients receiving in-center dialysis. The areas evaluated by the ICH
CAHPS Survey include:
Nephrologists' communication and caring.
Quality of dialysis center care and operations.
Providing information to patients.
Rating of kidney doctors.
Rating of dialysis center staff.
Rating of dialysis center.
The results of this survey have been used since January 2006 by
many providers/facilities as well as ESRD Networks for improving the
care and services furnished to beneficiaries receiving hemodialysis. We
have also required that providers/facilities include patient experience
of care or satisfaction as a component of their quality assessment and
performance improvement program as part of the conditions for coverage
since 2008. While we did not specifically require use of the
standardized ICH CAHPS tool, we strongly encouraged providers/
facilities to use it to assess patient experience of care (73 FR
20415).
Section 1881(h)(2)(B)(i) of the Act requires that unless the
exception set forth in section 1881(h)(2)(B)(ii) of the Act applies,
the measures specified for the ESRD QIP under section
1881(h)(2)(A)(iii) of the Act must have been endorsed by the entity
with a contract under section 1890(a) of the Act (which is currently
the NQF). Under the exception set forth in section 1881(h)(2)(B)(ii) of
the Act, in the case of a specified area or medical topic determined
appropriate by the Secretary for which a feasible and practical measure
has not been endorsed by the entity with a contract under section
1890(a) of the Act, the Secretary may specify a measure that is not so
endorsed as long as due consideration is given to measures that have
been endorsed or adopted by a consensus organization identified by the
Secretary. Although the ICH CAHPS Survey itself has been endorsed by
the NQF (0258), the measure we are proposing to adopt, which
assesses the extent to which providers/facilities use the survey, has
not, and we are not aware that such a measure has been endorsed or
adopted by any consensus building organization. However, as explained
above, we believe it is important to incentivize providers/facilities
to administer the survey. Therefore, we are proposing to adopt this
measure under the exception in section 1881(h)(2)(B)(ii) of the Act,
and we note that we intend to propose to adopt in the future a measure
that would be calculated using the actual ICH CAHPS survey results.
Specifically, we propose to measure whether a provider/facility has
attested that it successfully administered the ICH CAHPS survey during
the proposed performance period for the PY 2014 program.
We propose that providers/facilities would be required to submit
this attestation through CROWNWeb, which will be implemented nationally
in 2012, by January 30, 2013 at 11:59 p.m. EST. We seek comments on the
feasibility of this electronic submission through CROWNWeb and further
request comments on whether providers/facilities should be allowed to
elect to submit these attestations in paper format.
As noted above, we are only proposing to measure whether a
provider/facility administers the survey, and are not proposing to
measure a provider's/facility's actual performance based on the survey
results. We expect to adopt the ICH CAHPS survey itself as a measure
for the ESRD QIP in future rulemaking. For purposes of reporting this
proposed measure for the ESRD QIP, we will consider the ICH CAHPS
survey to have been administered if the provider/facility administered
it in accordance with the current specifications endorsed for the
survey. These specifications can be accessed at: https://www.cahps.ahrq.gov/content/products/ICH/PROD_ICH_Intro.asp?p=1022&s=222. We seek public comments on our proposal to
adopt the Patient Experience of Care Survey reporting measure for the
PY 2014 ESRD QIP.
viii. Proposed Mineral Metabolism Reporting Measure
Section 1881(h)(2)(A)(iii) of the Act states that the measures
specified for the ESRD QIP shall include other measures as the
Secretary specifies, including, to the extent feasible, measures of
bone mineral metabolism.
Abnormalities of bone mineral metabolism (calcium and phosphorus)
are exceedingly common and contribute significantly to morbidity and
mortality in patients with advanced chronic kidney disease. Numerous
studies have associated disorders of mineral metabolism with morbidity,
including fractures, cardiovascular disease, and mortality. Overt
symptoms of these abnormalities often manifest in only the most extreme
states of calcium-phosphorus dysregulation, which is why we believe
that routine blood testing of calcium and phosphorus is necessary to
detect abnormalities.\6\
---------------------------------------------------------------------------

\6\ Kidney Disease: Improving Global Outcomes (KDIGO) CKD-MBD
Work Group. KDIGO clinical practice guideline for the diagnosis,
evaluation, prevention, and treatment of chronic kidney disease-
mineral and bone disorder (CKD-MBD). Kidney International 2009; 76
(Suppl 113): S1-S130.)
---------------------------------------------------------------------------

The Kidney Disease: Improving Global Outcomes (KDIGO) 2009
guideline \7\ recommends that the serum phosphorus level in a dialysis
patient generally be lowered toward the normal range, but does not
recommend a specific target level that would apply to all patients. The
guideline also recommends that therapy to correct for abnormal levels
be administered based on the health needs of the individual patient.
Accordingly, we do not feel it is appropriate at this time to propose
to adopt a measure that would penalize providers/facilities if they did
not achieve a specific target serum

[[Page 40526]]

phosphorus level in all patients. We also note that there is currently
no NQF endorsed measure dealing with the achievement of specific target
phosphorus levels.
---------------------------------------------------------------------------

\7\ Kidney Disease: Improving Global Outcomes (KDIGO) CKD-MBD
Work Group. KDIGO clinical practice guideline for the diagnosis,
evaluation, prevention, and treatment of chronic kidney disease-
mineral and bone disorder (CKD-MBD). Kidney International 2009; 76
(Suppl 113): S1-S130.)
---------------------------------------------------------------------------

The KDIGO recommendation regarding serum calcium levels for
dialysis patients is also to maintain serum calcium in the normal
range. We note that the NQF is currently considering whether to endorse
the following mineral metabolism measure:
The percentage of patients in a dialysis facility with a
3-month rolling average of total uncorrected serum calcium greater than
10.2 mg/dL.
Go to http://www.qualityforum.org/Projects/e-g/End_Stage_Renal_Disease_2010/End_Stage_Renal_Disease_2010.aspx to find more
information regarding the National Voluntary Consensus Standards for
ESRD.
Despite the current lack of consensus on specific target ranges for
both phosphorus and calcium levels in dialysis patients, we believe
there is consensus that monthly monitoring of calcium and phosphorus is
important for early detection of abnormalities. We also note that the
NQF has endorsed phosphorus and calcium monitoring measures (NQF
0261 and NQF 0255) and, in 2008, we adopted serum
calcium and serum phosphorus monitoring as CPM measures (http://www.arborresearch.org/ESRD_QMS.aspx).
Section 1881(h)(2)(B)(i) of the Act requires that unless the
exception set forth in section 1881(h)(2)(B)(ii) of the Act applies,
the measures specified for the ESRD QIP under section
1881(h)(2)(A)(iii) of the Act must have been endorsed by the entity
with a contract under section 1890(a) of the Act (which is currently
the NQF). Under the exception set forth in section 1881(h)(2)(B)(ii) of
the Act, in the case of a specified area or medical topic determined
appropriate by the Secretary for which a feasible and practical measure
has not been endorsed by the entity with a contract under section
1890(a) of the Act, the Secretary may specify a measure that is not so
endorsed as long as due consideration is given to measures that have
been endorsed or adopted by a consensus organization identified by the
Secretary.
Although we gave due consideration to the NQF endorsed measures on
phosphorus and calcium level monitoring in dialysis patients, it is not
feasible for us to propose to adopt either of them at this time as we
do not currently collect data on whether these levels are checked for
each patient each month to allow calculation of the measure rates. We
are also not aware that any other consensus building entity has
endorsed or adopted measures on this topic. Therefore, we have
developed a mineral metabolism reporting measure that is based on the
two NQF-endorsed measures but requires providers/facilities to attest
to compliance with monthly monitoring and propose to adopt it under
section 1881(h)(2)(B)(ii) of the Act. This proposed measure will assess
whether providers/facilities monitor a patient's phosphorus and calcium
levels on a monthly basis throughout the portion of the proposed
performance period during which the patient was treated. Although we
will not be collecting actual serum calcium and serum phosphorus level
data, or data regarding how these levels are being managed, we believe
that routine monitoring of these levels is extremely important for the
purpose of detecting abnormal states of calcium and phosphorous levels
in this population, which this proposed measure will help address.
We propose that providers/facilities would be required to submit an
attestation that they have conducted the appropriate monitoring through
CROWNWeb, which will be implemented nationally in 2012. We further
propose that this reporting must be electronically submitted by January
30, 2013 at 11:59 p.m. EST. We seek comments on the feasibility of this
electronic submission through CROWNWeb and further request comments on
whether providers/facilities should be allowed to elect to submit these
attestations in paper format.
We seek public comment on our proposal to adopt the Mineral
Metabolism reporting measure for the PY 2014 ESRD QIP.
We also note that we anticipate adopting for future years of the
ESRD QIP one or more mineral metabolism clinical measures in addition
to or in replacement of the proposed Mineral Metabolism reporting
measure. Those measurement data will be collected via CROWNWeb under
the authority of the Conditions for Coverage ESRD Final Rule (73 FR
20370) published in the Federal Register on April 15, 2008. We seek
public comment on the clinical evidence that would support the
establishment of specific target levels for serum phosphorus for
purposes of developing one or more future ESRD QIP measures. We also
seek public comment on the above calcium measure that has been
submitted to the NQF for endorsement.
c. Proposed Performance Period for the PY 2014 ESRD QIP
Having decided to propose to adopt all of CY 2011 as the
performance period for the PY 2013 QIP, we examined what performance
period would be most appropriate for the PY 2014 ESRD QIP. We believe
that a 12-month performance period is most appropriate for the ESRD QIP
at this point in the program. A period of a year accounts for seasonal
variations, but also provides a timely incentive and feedback for
providers/facilities, as well as timely performance information for
Medicare beneficiaries. We have also determined that CY 2012 is the
first feasible period during which we can collect sufficient
performance period data for all of the proposed measures. Therefore, we
propose to select all of CY 2012 as the performance period for the PY
2014 ESRD QIP.
We seek public comments about the proposed selection of CY 2012 as
the performance period for the PY 2014 QIP. We also seek public
comments on the use of shorter performance periods in future years of
the ESRD QIP.
d. Proposed Performance Standards for the PY 2014 ESRD QIP
For the PY 2014 ESRD QIP, we are proposing to establish performance
standards under section 1881(h)(4)(A) of the Act because it is feasible
to establish them prior to the beginning of CY 2012, the proposed start
of the performance period. This section generally provides that the
Secretary shall establish performance standards with respect to
measures selected for the ESRD QIP for a performance period with
respect to a year. Furthermore, under section 1881(h)(4)(B) of the Act,
these performance standards must include levels of achievement and
improvement, as determined appropriate by the Secretary. To establish
performance standards under section 1881(h)(4)(A) of the Act, the
Secretary must also comply with section 1881(h)(4)(C) of the Act, which
requires the Secretary to establish performance standards prior to the
beginning of the performance period for the year involved.
With respect to three of the proposed clinical measures (Hemoglobin
Greater Than 12g/dL, Kt/V Dialysis Adequacy, and Vascular Access
Infections), we propose to set the achievement performance standard
under section 1881(h)(4)(A) of the Act as the national performance rate
on each measure during a proposed baseline period. We propose that the
national performance rate for each measure would be calculated at the
national aggregate level

[[Page 40527]]

as the number of Medicare patients for whom the measure was achieved
divided by the total number of Medicare patients eligible for inclusion
in the measure. Additionally, we propose to set the improvement
performance standard as the national performance rate on each measure
during the same proposed baseline period because we believe that it is
important to encourage the utmost improvement in quality and care. We
believe that selecting the national performance rate as the performance
standard for both the improvement and achievement performance standards
(collectively, the performance standards) represents a meaningful and
achievable standard of provider/facility performance because it
represents how well providers/facilities are actually performing on
each measure during a previous baseline period while still allowing
significant room for improvement. Our goal is to incentivize providers/
facilities to achieve these national performance rates, whether they do
so by attaining achievement points or improvement points under our
proposed scoring methodology (discussed below). We expect that the
national performance rate on each measure will increase in future years
of the ESRD QIP because it will reflect overall improved levels of
performance.
To ensure that these proposed performance standards are based on a
full calendar year of performance data that is as close as possible to
the proposed performance period, we propose to use a baseline period
from July 1, 2010 to June 30, 2011. This proposed baseline period will
enable us to calculate national performance rate values for these
proposed clinical measures before the beginning of the performance
period, and we intend to specify those values in the final rule.
With respect to the proposed Vascular Access Type measure, we are
proposing to set performance standards using the same methodology and
baseline period that we are proposing to use for the three proposed
clinical measures discussed above, however we would set performance
standards for each of the subcomponent measures rather than for the
overall combined measure. We seek public comment on this methodology
for setting the performance standards for this measure.
With respect to the proposed SHR-Admissions measure, we also
propose to establish the performance standards as the national
performance rate during a proposed baseline period. However, we propose
to establish CY 2010 as the baseline period. Because this measure would
be calculated using hospital claims, we have determined that we need
additional time to calculate and finalize the performance standards in
order to specify the precise values in the final rule.
We specify example performance standards, generally using data from
July 1, 2010 through November 30, 2010 for the proposed Hemoglobin
Greater Than 12g/dL, Kt/V Dialysis Adequacy, Vascular Access Type, and
Vascular Access Infections measures, and CY 2009 for the proposed SHR-
Admissions measure in Table 7, below. We note that because the proposed
Vascular Access Type measure subcomponents would only include patients
who have been on a catheter for 90 days, we are only able to provide
example performance standards from October 1, 2010 through November 30,
2010 for the catheter subcomponent of the Vascular Access Type measure.

Table 7--Example Achievement and Improvement Performance Standards for
the PY 2014 ESRD QIP
------------------------------------------------------------------------
Example
achievement/
improvement
Proposed measure performance
standard
(percent)
------------------------------------------------------------------------
Hemoglobin Greater Than 12 g/dL Measure................... 15
Dialysis Adequacy Measure (Kt/V).......................... 94
Vascular Access Type Measure XX
% Fistula............................................. 55
% Catheter............................................ 12
Vascular Access Infections Measure\1\..................... 0.2
SHR-Admissions Measure\2\................................. 1.0
------------------------------------------------------------------------
\1\ Measured as hemodialysis access-related bacteremia rate per 1000
hemodialysis days.
\2\ Measured as ratio of observed hospitalizations to hospitalizations
expected based on facility patient case mix.

We propose to establish the achievement performance standard for
the proposed NHSN Dialysis Event reporting measure as the successful
completion by providers/facilities of: (1) Enrollment in the NHSN and
completion of the required training during the performance period (as
verified by a digital certificate obtained from CDC), or, in the case
of providers/facilities that have previously enrolled, continued
enrollment throughout the entirety of the performance period; and (2)
submission to the NHSN of at least 3 consecutive months of dialysis
event data gathered during the performance period.
We propose to establish the achievement performance standard for
the proposed Patient Experience of Care reporting measure as an
attestation by the provider/facility at the end of the performance
period that it successfully administered the ICH CHAPS survey during
the proposed performance period.
We propose to establish the achievement performance standard for
the proposed Mineral Metabolism reporting measure as whether the
provider/facility measured the serum calcium and serum phosphorus
levels of Medicare patients treated by the provider/facility at least
once within the month throughout the duration of the proposed
performance period.
As noted above, section 1881(h)(4)(B) of the Act provides that the
performance standards established under section 1881(4)(A) of the Act
must include levels of achievement and improvement, as determined
appropriate by the Secretary. We have determined that an improvement
performance standard is not appropriate for the proposed reporting
measures because it is not feasible to measure improvement on these
measures at this time because we do not have any existing data we can
use to compare provider/facility performance.
We seek public comments on the proposed performance standards for
all of the proposed PY 2014 ESRD QIP measures and the proposed baseline
periods that we would use to establish the performance standards for
the five proposed clinical performance measures.
We also note that we do not interpret section 1881(h)(1)(B) of the
Act to require that providers/facilities meet or exceed the performance
standards we establish with respect to each individual ESRD QIP
measure. Rather, we are proposing to implement a scoring methodology
that enables a provider/facility to avoid a payment reduction as long
as it achieves a minimum total performance score that, as discussed
more fully below, is equal to the total performance score it would have
received, if it had met the performance standards for all of the
proposed measures. We believe that this approach best balances the goal
of incentivizing providers/facilities to provide quality care across
all of the measures with recognizing the higher quality of care
provided by those providers/facilities that exceed the performance
standards on certain measures. We seek comment on this proposed
approach to scoring providers/facilities.
Additionally, beginning in PY 2015, we intend to propose to
establish floors for performance such that performance standards would
never be lower than those set for the previous year, even if

[[Page 40528]]

provider/facility performance fails to improve, or even declines, over
time. Although we would consider continuing to set the national
performance rate as the achievement and/or improvement performance
standard, we would also consider establishing future performance
standards that reflect performance goals widely recognized by the ESRD
medical community as demonstrating high quality care for ESRD patients,
should such a consensus be reached. We welcome comments on this
proposed approach.
e. Proposed Methodology for Calculating the Total Performance Score for
the PY 2014 ESRD QIP
Section 1881(h)(3)(A)(i) of the Act requires the Secretary to
develop a methodology for assessing the total performance of each
provider and facility based on the performance standards with respect
to the measures selected for the performance period. Section
1881(h)(3)(B) of the Act requires the Secretary to calculate separate
performance scores for each measure.
The final rule entitled, ``Medicare Programs; Hospital Inpatient
Value-Based Purchasing Program,'' appeared in the Federal Register on
May 6, 2011 (76 FR 26490). In this final rule, we stated our view that
value-based purchasing represents an important step in revamping how
care and services are paid for, allowing CMS to move increasingly
toward rewarding better value, outcomes, and innovations instead of
merely paying for volume (76 FR 26491). The final rule also set forth
principles guiding the development of performance scoring
methodologies, including:
Providers should be scored on their overall achievement
relative to national or other appropriate benchmarks. In addition,
scoring methodologies should consider improvement as an independent
goal.
Measures or measurement domains need not be given equal
weight, but over time, scoring methodologies should be more weighted
towards outcome, patient experience and functional status measures.
Scoring methodologies should be reliable, as
straightforward as possible, and stable over time and enable consumers,
providers, and payers to make meaningful distinctions among providers'
performance.
For the first year of the ESRD QIP (PY 2012), we finalized a
scoring methodology that provides a straightforward approach for
assessing provider/facility performance intended for use with a very
limited number of measures, and we are proposing to continue using this
methodology for the PY 2013 ESRD QIP. We have recognized that this
straightforward approach might not be appropriate as we adopt for the
program new measures for which there could be wider variability in
performance (75 FR 49222). For the PY 2014 ESRD QIP, we propose to
adopt a new performance scoring methodology to replace the methodology
we are using for the PY 2012 ESRD QIP and that we have proposed to use
for the PY 2013 ESRD QIP. We believe that this scoring methodology will
more accurately reflect a provider's/facility's performance on the
measures proposed for the FY 2014 ESRD QIP because it will enable us to
differentiate between providers/facilities that simply meet the
performance standards, those that exceed the performance standards by
varying amounts, and those that fall short of the performance
standards. We also believe that this scoring methodology more closely
aligns with the scoring methodology we have adopted for the Hospital
Inpatient Value-Based Purchasing Program, and that it can readily
accommodate the adoption of new ESRD QIP measures in the future. We
further believe that the proposed methodology will better incentivize
providers and facilities to both achieve high total performance scores
and improve the quality of care they provide. The proposed performance
scoring methodology is based on the methodology developed for the
Hospital Value-Based Purchasing (VBP) program (76 FR 26513 through
26526). It is important to note that, while we have attempted to align
the two scoring methodologies as much as possible, the ESRD QIP and the
Hospital VBP program present distinct statutory and programmatic
requirements that necessitate differences between the two scoring
methodologies.
i. Setting Performance Benchmarks and Thresholds
Under the proposed scoring methodology for the PY 2014 ESRD QIP, a
provider's/facility's performance on each of the five proposed clinical
measures would be determined based on the higher of (1) an achievement
score or (2) an improvement score. In determining the achievement
score, we propose that providers/facilities would receive points along
an achievement range, defined as a scale that runs from the achievement
threshold to the benchmark. We are proposing to define the achievement
threshold for each of these proposed measures as one standard deviation
below the achievement performance standard for the measure (which we
proposed above to set as the national performance rate on the measure
during the baseline period). We believe that setting the achievement
threshold at one standard deviation below the national performance rate
will enable us to reserve greatest penalty to those providers/
facilities whose performance is substantially below the national
performance rate. Performance at this level represents a significant
deviation in care from the performance standard (performance worse than
about 84% of providers/facilities based on a normal distribution),
while at the same time, accounting for the degree of variance across
provider/facility performance levels. We also believe that it will
provide an incentive for providers/facilities to continuously improve
their performance while not reducing the payments made to providers/
facilities that score at or above the national performance rate. We are
proposing to define the benchmark as provider/facility performance at
the mean of the top decile of provider/facility performance during the
baseline period because it represents a demonstrably high but
achievable standard of excellence that the best performing providers/
facilities reached during the baseline period. This approach is
consistent with the approach adopted in the Hospital Inpatient Value-
Based Purchasing Program (76 FR 26515).
In determining an improvement score for the five proposed clinical
measures, we propose that providers/facilities would receive points
along an improvement range, defined as a scale running between the
provider's/facility's performance on the measure (the improvement
threshold) during the baseline period and the benchmark. The provider/
facility's improvement score would be calculated by comparing its
performance on the measure during the performance period to its
performance on the measure during the baseline period.
Under this proposed methodology, we propose to establish the
benchmarks and achievement thresholds for three of the proposed
clinical measures (Hemoglobin Less Than 12g/dL, Kt/V Dialysis Adequacy,
and Vascular Access Infections), using national data from a one-year
baseline period from July 2010 to June 2011 (discussed above in section
II.B.2.d of this proposed rule). For the proposed Vascular Access Type
measure, we propose to establish a separate benchmark and achievement
threshold for each of the two subcomponent measures using national data
from the proposed July 1, 2010 to June 30, 2011 baseline period. For
the proposed SHR-Admissions measure, we

[[Page 40529]]

propose to establish the benchmark and achievement threshold using
national data from CY 2010 as the baseline period.
In view of our desire to adopt a scoring methodology that will
allow us to distinguish between providers and facilities that do not
meet or exceed the performance standards established with respect to an
individual measure, we are proposing to set the achievement threshold
for the 2014 ESRD QIP at one standard deviation below the national
performance rate of provider/facility performance during the baseline
period. Setting the achievement threshold in this manner complies with
the ESRD QIP statutory requirements, and enables us to provide discrete
scores to providers/facilities based on how far their performance is
below or above the performance standards. This proposed methodology
will incentivize providers/facilities to continuously improve their
performance, and will not penalize a provider/facility whose total
performance score is equal to or above the performance standards for
all measures.
ii. Scoring Provider and Facility Performance on Clinical Measures
Based on Achievement
For four of the proposed clinical measures (Hemogloblin Greater
Than 12g/dL, Kt/V Dialysis Adequacy, Vascular Access Infections, and
SHR-Admissions), we propose to award between 0 and 10 points for
achievement based on where a facility's/provider's performance falls
relative to the proposed achievement threshold (which we propose above
to define as one standard deviation below the national performance rate
on a given proposed measure during the baseline period) and the
proposed benchmark (which we propose to define above as performance at
the mean of the top decile of national facility/provider performance
during the baseline period), according to the following formula:

[9* ((Provider's performance period score--achievement threshold)/
(benchmark--achievement threshold))] +.5, where the provider
performance period score falls in the range from the achievement
threshold to the benchmark.

All achievement points would be rounded to the nearest integer (for
example, an achievement score of 4.5 would be rounded up to 5). If a
provider's/facility's score was:
Equal to or greater than the benchmark, the provider/
facility would receive 10 points for achievement
Equal to or greater than the achievement threshold (but
below the benchmark), the provider/facility would receive a score of 1
to 9 points based on a linear scale established for the achievement
range (which distributes all points proportionately between the
achievement threshold and the benchmark so that the interval in
performance between the score needed to receive a given number of
achievement points and one additional achievement point is the same
throughout the range of performance from the achievement threshold to
the benchmark.)
Less than the achievement threshold (that is, the lower
bound of the achievement range), the provider/facility would receive 0
points for achievement.
iii. Scoring Provider/Facility Performance on Clinical Measures Based
on Improvement
Similar to the performance scoring model finalized in the Hospital
VPB Program final rule (76 FR 26516 through 26526), we propose that
providers/facilities would earn between 0 and 9 points on each of the
four proposed clinical measures (Hemoglobin Greater Than 12/dL, Kt/V
Dialysis Adequacy, Vascular Access Infections, SHR-Admissions) based on
how much their performance on the measure during the performance period
improved from their performance on the measure during the proposed
baseline period. A unique improvement range for each measure would be
established for each provider/facility which we propose to define as
the distance between the provider's/facility's baseline period score
and the benchmark for the measure (the mean of the top decile),
according to the following formula:

[10 * ((Provider performance period score--provider baseline period
score)/(Benchmark--provider baseline period score))] -.5, where the
provider performance score falls in the range from the provider's
baseline period score to the benchmark.

All improvement points would be rounded up to the nearest integer.
If a provider's/facility's score on the measure during the performance
period was:
Greater than its baseline period score but below the
benchmark (within the improvement range), the provider/facility would
receive a score of 0 to 9 points based on the linear scale that defines
the improvement range.
Equal to or lower than its baseline period score on the
measure, the provider/facility would receive 0 points for improvement.
iv. Calculating the Proposed Vascular Access Type Measure Score
We propose to calculate the Vascular Access Type measure score by
first calculating the measure rate according to measure specifications
for each of the two measure subcomponents. Those two rates would then
be converted into separate achievement and improvement scores for each
subcomponent using achievement and improvement ranges specific to each
subcomponent measure as proposed. The higher of the achievement or
improvement score for each measure component would then be averaged to
produce one overall score for the Vascular Access Type measure. We
believe that this method of calculating this measure stresses the
importance of both vascular access sub-measures without penalizing
providers/facilities for two similar measures or unduly weighting a
provider's/facility's total performance score in favor of vascular
access type measures.
v. Calculating the Proposed NHSN Dialysis Event Reporting Measure,
Patient Experience Survey Usage Reporting Measure and Mineral
Metabolism Reporting Measure Scores
We propose to adopt a different scoring methodology for the
proposed NHSN Dialysis Event reporting measure, Patient Experience of
Care Survey Usage reporting measure, and Mineral Metabolism reporting
measure.
With respect to the proposed NHSN Dialysis Event Reporting measure,
we propose to assign providers/facilities a score of 0, 5 or 10 points
as follows:
Providers/facilities that enrolled or were previously
enrolled and continue to be enrolled in the NHSN during the performance
period, completed the required training, and successfully reported at
least 3-consecutive months of dialysis event data to the NHSN before
January 30, 2013 for the period of January 1, 2012-December 31, 2012
would receive 10 points.
Providers/facilities that enrolled in the NHSN and
completed the required training during the performance period, but did
not report at least 3-consecutive months of dialysis event data to the
NHSN before January 30, 2013 for the period January 1, 2012 through
December 31, 2012 would receive 5 points.
Providers/facilities that failed to enroll in the NHSN
and/or complete the required training during the proposed performance
period would receive 0 points.

[[Page 40530]]

We propose to assign providers/facilities a score of 10 points if
they attest that they successfully administered the ICH CAHPS survey
during the performance period according to the specifications
referenced above, while providers/facilities that did not provide such
an attestation would receive 0 points.
We propose to assign providers/facilities that measured the serum
calcium and serum phosphorus levels of all adult Medicare patients
treated by the provider/facility at least once within the month
throughout the duration of the proposed performance period a score of
10 points, while providers/facilities that did not do so would receive
0 points. This will be accomplished by a facility furnished attestation
at the end of the performance period. Those facilities that do not
provide this attestation will receive 0 points.
vi. Examples to Illustrate Proposed 2014 ESRD QIP Performance Scoring
Model As Applied to Clinical Measures
Three examples are presented to illustrate how the proposed
performance scoring model would be applied in the context of the PY
2014 ESRD QIP using previous data from 2008. Figure 1 shows Facility
A's performance on the proposed Hemoglobin Greater Than 12g/dL measure.
The example benchmark calculated for this measure in this case is 2
percent (mean of the top decile during the baseline period), while the
example achievement threshold is 44 percent (one standard deviation
below the national performance rate during the baseline period).
Facility A's performance rate of 2 percent during the performance
period meets the benchmark, so Facility A would earn 10 points (the
maximum) for achievement for this measure. (Because in this example
Facility A has earned the maximum number of points possible for this
measure, its improvement score is irrelevant.)
[GRAPHIC] [TIFF OMITTED] TP08JY11.001

Figure 2 shows the scoring for another facility, Facility B. As
illustrated below, the facility's performance on the Kt/V Dialysis
Adequacy measure went from 83 percent in the baseline period to 94
percent during the performance period.

[[Page 40531]]

[GRAPHIC] [TIFF OMITTED] TP08JY11.002

Applying the achievement scale, Facility B would earn 6 points for
achievement, calculated as follows:

9 * [(94-88)/(98-88)] + .5 = 5.4 + .5 = 5.9, which is rounded to 6
points

However, because Facility B's performance during the performance
period is also greater than its baseline period performance (but
Facility B's performance period score is less than the benchmark), it
would be scored based on improvement as well. Applying the improvement
scale, based on Facility B's period-to-period improvement, from 83%
percent to 94% percent, Facility B would earn 7 improvement points,
calculated as follows:

10 * [(94 - 83)/(98 - 83)] - .5 = 7.3 - .5 = 6.8, which would be
rounded to 7 points

Because the higher of the two scores is used for determining the
measure score, Facility B would receive 7 points for this measure.
In Figure 3 below, Facility C's performance on the proposed SHR
measure drops from .75 in the baseline period to 1.4 in the performance
period, a decline of .65. We note that a lower performance score on
this proposed measure indicates better performance because it indicates
that a provider/facility had fewer than expected hospital admissions.

[[Page 40532]]

[GRAPHIC] [TIFF OMITTED] TP08JY11.003

Because Facility C's performance during the performance period
falls below the achievement threshold of 1.2, it would receive no
points for achievement. Facility C would also receive zero points for
improvement because its performance during the performance period was
lower than its performance during the baseline period. In this example,
Facility C would receive zero points for the SHR Measure.
vii. Proposed Weighting of the PY 2014 ESRD QIP Measures and
Calculation of the PY 2014 ESRD QIP Total Performance Score
Section 1881(h)(3)(A)(iii) of the Act provides that the methodology
for assessing provider/facility total performance must include a
process to weight the performance scores with respect to individual
measures to reflect priorities for quality improvement, such as
weighting scores to ensure that providers and facilities have strong
incentives to meet or exceed anemia management and dialysis adequacy
performance standards, as determined appropriate by the Secretary.
In determining how to appropriately weight the PY 2014 ESRD QIP
measures for purposes of calculating total performance scores, we
considered a number of criteria. Specifically, we considered the number
of measures we have proposed to include in the PY 2014 ESRD QIP as well
as CMS and Departmental quality improvement priorities. We believe that
weighting the five proposed clinical measures equally will incentivize
providers/facilities to improve and achieve high levels of performance
across all of the measures, resulting in overall improvement in the
quality of care provided to ESRD patients. For these reasons, we
propose to assign equal weight to the five proposed clinical
performance measures: Hemoglobin Greater Than 12g/dL measure, Kt/V
Dialysis Adequacy measure, Vascular Access Type measure, Vascular
Access Infections measure, and SHR-Admissions measure; with those equal
weights adding up to 90 percent of the total performance score. We
believe that while the proposed reporting measures are valuable, the
five proposed clinical measures measure actual patient outcomes and
therefore, justify a proposed combined weight of 90 percent. We propose
that the remaining 10 percent of the total performance score would be
comprised of the three proposed reporting measures, with each

[[Page 40533]]

measure weighted equally. We believe it is of utmost importance to
incentivize providers/facilities to improve clinical care, and,
therefore, we believe it is necessary to heavily weight these measures.
We recognize, however, that reporting is an important component in
quality improvement, and that this type of measure should also be
included in the ESRD QIP, although at a substantially lower weight.
We also considered whether and how we could award a total
performance score to providers/facilities that do not report data on at
least 11 cases with respect to one or more of the proposed clinical
measures. As we stated above, we are proposing that this minimum number
of cases must be reported with respect to each proposed clinical
measure in order for the provider/facility to receive a score on that
measure. We also note that we finalized a policy for the PY 2012 ESRD
QIP that providers/facilities that reported less than 11 cases meeting
the reporting criteria for each of the measures would not receive a
total performance score (76 FR 639). Now that we are proposing to adopt
additional measures, we believe it is appropriate to propose to
calculate total performance scores for all providers/facilities. In the
case of a provider/facility that has sufficient data from the
performance period, but lacks sufficient data from the baseline period,
we propose to only calculate its achievement score, since it would not
be possible to calculate its improvement score. We believe that this
approach is necessary to ensure that as many providers/facilities
receive a score as possible. We are proposing that the combined weight
of the clinical performance measures that are scored would still be
equal to 90 percent of the total performance score, but only those
measures for which providers/facilities report a minimum of 11 cases or
more would be included in determining this score, with each such
measure being weighting equally. We believe that this approach achieves
that goal of including as many providers/facilities as possible, while
ensuring the reliability of the measure scores.
Similarly, we propose to assign equal weight to the proposed NHSN
Dialysis Event reporting measure, Patient Experience Survey reporting
measure, and Mineral Metabolism reporting measure, with those equal
weights adding up to 10 percent of the total performance score.
Applying the proposed weighting criteria to a provider/facility that
receives a score on all eight proposed measures, we propose to
calculate the provider/facility total performance score using the
following formula:

Total Performance Score = [(.1800 * Hemoglobin Greater Than 12g/dL
Measure) + (.1800 * Kt/V Dialysis Adequacy Measure) + (.1800 * Vascular
Access Type Measure) + (.1800 * Vascular Access Infections Measure) +
(.1800 * SHR - Admissions)] + [(.0333 * NHSN Dialysis Event Reporting
Measure) + (.0333 * Patient Experience Survey Reporting Measure) +
(.0333 * Mineral Metabolism Reporting Measure)] * 10.

The Total Performance Score would be rounded to the nearest integer
(and any individual measure values ending in .5 would be rounded to the
next higher integer)).
However, if, for example, a provider/facility did not receive a
score on the proposed Vascular Access Type and Vascular Access
Infections measures, the provider's/facility's total performance score
would be calculated as follows:

Total Performance Score = [(.3000 * Hemoglobin Greater Than 12g/dL
Measure) + (.3000 * Kt/V Dialysis Adequacy Measure) + (.3000 * SHR) +
(.0333 * NHSN Reporting Measure) + (.0333 * Patient Experience Survey
Reporting Measure) + (.0333 * Mineral Metabolism Reporting Measure)] *
10, (the Total Performance Score will be rounded to the nearest integer
(and any values ending in .5 would be rounded to the next higher
integer)).
viii. Example of Applying the Proposed PY 2014 ESRD QIP Performance
Scoring Model and Calculating the Total Performance Score
To illustrate the application of the proposed 2014 ESRD QIP
performance scoring model, we offer the following example:
For the performance period, Facility D reports and receives raw
scores on the measures as set forth in columns 5 and 6 of Table 8
below. For this example, we calculated sample benchmarks and
achievement thresholds using 2009 National Facility Values data as the
baseline period, except for the proposed SHR measure, for which we used
2008 National Facility Values. Columns 7 and 8 of Table 8 below display
the individual measure scores (on achievement and improvement), while
column 9 displays the earned points for each measure. Finally, row 9
displays the total performance score Facility D would receive after
applying the proposed performance scoring and weighting methodology.

Table 8--Example of Calculation of Provider/Facility Total Performance Score Based on Proposed 2014 ESRD QIP Scoring Methodology
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Achievement
threshold (one
standard Provider/ Earned points
deviation Benchmark Provider/ facility Achievement Improvement (higher of
Quality measure Measure description/definition from the (mean of the facility performance points points achievement
national top decile)* baseline score score and
performance improvement)
rate)*
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Hemoglobin greater than 12 g/dL measure....... % of patients with hemoglobin 44% 2% 22.0% 14.0% 7 4 7
greater than 12 g/dL.
Dialysis Adequacy Measure (Kt/V).............. % of hemodialysis (HD) patients 85% 100% 80.0% 95.0% 7 8 8
with Kt/V >= 1.2.
Vascular Access Type Measure.................. Average of the two sub-measures. .............. .............. .............. .............. .............. .............. 3
(Fistula).................................... % of patients receiving 40% 73% 25.0% 40.0% 0 3 3
treatment with fistulae.
(Catheter)................................... % of patients receiving 38% 11% 29% 30% 3 0 3
treatment with catheter.

[[Page 40534]]

Vascular Access Infections Measure............ Overall access-related 3.1 0.0 0.5 1.1 6 0 6
bacteremia: Rate of access-
related bacteremia among adult
chronic HD patients (Express
as: Rate per 1000 HD patient
days).
SHR-Admissions Measure........................ Standardized Hospitalization 1.35 0.58 1.32 1.54 0 0 0
Ratio.
NHSN Dialysis Event Reporting Measure......... Enroll and report at least 3 N/A N/A N/A 10 N/A N/A 10
months of dialysis event data.
Patient Experience of Care Survey Usage Providers/facilities must attest N/A N/A N/A 10 N/A N/A 10
Reporting Measure. that they successfully fielded
survey during the performance
period.
Mineral Metabolism Reporting Measure.......... Measure serum calcium and serum N/A N/A N/A 10 N/A N/A 10
phosphorus levels of Medicare
patients.
---------------------------------------------------------------
.............. .............. .............. Provider/Facility Total Performance Score: 53.19
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* Achievement Thresholds and Benchmarks are based on 2009 National Facility Values (except for the SHR-Admissions Measure, which is based on 2008 National Facility Values).

We solicit public comment on the proposed performance scoring
methodology.
f. Proposed Payment Reductions for the PY 2014 ESRD QIP
Section 1881(h)(3)(A)(ii) of the Act requires the Secretary to
ensure that the application of the scoring methodology results in an
appropriate distribution of payment reductions across providers and
facilities such that providers and facilities achieving the lowest
total performance scores receive the largest payment reductions. We
have implemented a sliding scale of payment reductions for the PY 2012
ESRD QIP, (76 FR 634) and are proposing a similar scale for the PY 2013
ESRD QIP. In developing a payment reduction scale for the PY 2014 ESRD
QIP, we sought to create an approach that would retain aspects of the
tiered sliding scale selected for the PY 2012 ESRD QIP, but also
reflect the change in provider/facility scores under the new scoring
methodology. Under this proposed approach, a provider/facility would
not be required to meet or exceed the performance standards with
respect to each of the eight proposed measures in order to avoid
receiving a payment reduction under the ESRD QIP. Rather, even if a
provider/facility failed to meet or exceed the performance standards
with respect to one or more of these measures, the provider/facility
could avoid a payment reduction if it achieved a minimum total
performance score that is equal or greater than the minimum total
performance score it would receive if it had met the performance
standards for each proposed measure, or, in the case of the Vascular
Access Type measure, for the two subcomponent measures. Because we are
proposing to establish the performance standards, achievement
thresholds, and benchmarks for each of the proposed clinical measures
based on provider/facility performance during the respective proposed
baseline period that applies to the measure, we will not know what each
of those values will be until those baseline periods have concluded.
However, because we have proposed to assign 10 points to each provider/
facility that meets the achievement performance standard on each of the
three reporting measures, we know how performance on these measures
will factor into this minimum total performance score. We estimate at
this time that the minimum total performance score that a provider/
facility would have to achieve to avoid a payment reduction would be 60
points, and we will specify the exact number in the final rule. We
propose to implement at least a 1.0 percent payment reduction for all
providers/facilities that fail to meet or exceed this minimum total
performance score.
To ensure that the proposed payment reduction methodology complies
with the section 1881(h)(3)(A)(ii) requirement that providers and
facilities achieving the lowest total performance scores receiving the
largest reductions, we propose to increase the payment reduction from
1.0 percent to 1.5 percent for all providers/facilities that fail to
achieve a total performance score that is 10 points below the minimum
total performance score (described above). Additionally, we propose to
increase the payment reduction to 2.0 percent for all providers/
facilities that fail to achieve a total performance score that is 20
points below the minimum total performance score (described above). We
believe that such a sliding scale will incentivize providers/facilities
to meet the performance standards and continue to improve their
performance because even if a provider/facility fails to achieve the
minimum total performance score, such provider/facility will still be
incentivized to

[[Page 40535]]

strive for, and attain, better performance in order to reduce the
amount of its payment reduction. We will review this data to ensure
that all providers/facilities will be sufficiently incentivized to
provide high quality care. If we determine that the proposed approach
for selecting the minimum total performance score is not rigorous
enough we may finalize a higher minimum total performance score or a
scalable approach to the scoring methodology. As stated above, the
specific total performance score that a provider/facility would be
required to achieve to avoid a payment reduction will be specified in
the final rule.
We seek public comments on the proposed payment reductions for the
PY 2014 ESRD QIP.
3. Proposed Public Reporting Requirements
Section 1881(h)(6)(A) of the Act requires the Secretary to
establish procedures for making information regarding performance under
the ESRD QIP available to the public, including information on the
total performance score (as well as appropriate comparisons of
providers and facilities to the national average with respect to such
scores) and performance scores for individual measures achieved by each
provider and facility. Section 1881(h)(6)(B) of the Act further
requires that a provider or facility has an opportunity to review the
information to be made public with respect to that provider/facility
prior to its publication.
In addition, section 1881(h)(6)(C) of the Act requires the
Secretary to provide each provider and facility with a certificate
containing its total performance score to post in patient areas within
the facility. Finally, section 1881(h)(6)(D) of the Act requires the
Secretary to post a list of providers/facilities and performance-score
data on a CMS-maintained Web site.
For both the PY 2013 and PY 2014 ESRD QIP, we propose no change in
the implementation of these statutory provisions (section 1881(h)(6)(A)
through section 1881(h)(6)(A)(D) of the Act) from the proposals
finalized in the 2012 ESRD QIP final rule (76 FR 636 through 639),
wherein we finalized the establishment of procedures for providers/
facilities to review the information to be made public, and the
procedures for informing the public through facility-posted
certificates.
We seek public comments on the proposed public reporting
requirements for the PY 2013 and PY 2014 ESRD QIP.
4. Future QIP Measures
As part of our effort to continuously improve the ESRD QIP, we are
working to adopt additional robust measures that provide valid
assessments of the quality of care delivered to ESRD beneficiaries. To
that end, we are developing measures that apply to all modalities
(including home and in-center dialysis) and the pediatric population.
We are considering the adoption of measures on pediatric anemia (for
example, iron targets), and fluid management for future years.
We also seek public comment on the inclusion of iron management
measures, serum calcium management measures, and serum phosphorus
management measures for future years of the QIP. Specifically, we seek
public comment on:
Measurement of Serum Calcium Concentration.
Measurement of Serum Phosphorus Concentration.
Assessment of Iron Stores.
These measures are currently collected through CROWNWeb as part of
the Clinical Practice Measures set. The full specifications for these
measures may be accessed at: http://www.arborresearch.org/ESRD_QMS.aspx.
5. Proposed Process of Updating Measures
Section 1881(h)(2)(C) of the Act enables the Secretary to establish
a process for updating the measures specified under subparagraph (A) in
consultation with interested parties. Occasionally there are changes in
science or new issues arise related to patient safety concerns that may
impact the measures that have been adopted through the rulemaking
process. Therefore, for such cases where new information is available
that specifically relates to patient safety concerns, we are proposing
that we would post a notice of the updates we intend to make to the
measure(s) in the Federal Register. We would specify in the Notice a
time period during which we would accept comments from the public. We
would consider these comments and post a Notice in the Federal Register
finalizing any updates that we make to the measure(s). This process
will enable us to make necessary updates to the ESRD QIP measures to
ensure that the measures are based on the best available scientific
data.
We request comment on this proposed procedure for updating ESRD QIP
measures in accordance with section 1886(h)(2)(C) of the Act.

III. Ambulance Fee Schedule

A. Section 106 of the Medicare and Medicaid Extenders Act of 2010
(MMEA)

1. Amendment to Section 1834(l)(13) of the Act
Section 146(a) of the Medicare Improvements for Patients and
Providers Act of 2008 (Pub. L. 110-275) (MIPPA) amended section
1834(l)(13)(A) of the Act to specify that, effective for ground
ambulance services furnished on or after July 1, 2008 and before
January 1, 2010, the ambulance fee schedule amounts for ground
ambulance services shall be increased as follows:
For covered ground ambulance transports which originate in a rural
area or in a rural census tract of a metropolitan statistical area, the
fee schedule amounts shall be increased by 3 percent.
For covered ground ambulance transports which do not originate in a
rural area or in a rural census tract of a metropolitan statistical
area, the fee schedule amounts shall be increased by 2 percent.
Sections 3105(a) and 10311(a) of the Affordable Care Act further
amended section 1834(l)(13)(A) of the Act to extend the payment add-ons
described above for an additional year, such that these add-ons also
applied to covered ground ambulance transports furnished on or after
January 1, 2010 and before January 1, 2011. In the CY 2011 physician
fee schedule final rule (75 FR 73385 and 73386, 73625), we revised
Sec. 414.610(c)(1)(ii) to conform the regulations to this statutory
requirement.
Subsequently, section 106(a) of the Medicare and Medicaid Extenders
Act of 2010 (MMEA) again amended section 1834(l)(13)(A) of the Act to
extend the payment add-ons described above for an additional year, such
that these add-ons also apply to covered ground ambulance transports
furnished on or after January 1, 2011 and before January 1, 2012.
Accordingly, we are proposing to revise Sec. 414.610(c)(1)(ii) to
conform the regulations to this statutory requirement. This statutory
requirement is self-implementing. A plain reading of the statute
requires only a ministerial application of the mandated rate increase,
and does not require any substantive exercise of discretion on the part
of the Secretary. For further information regarding the extension of
these payment add-ons, please see Transmittal 706 (Change Request 6972)
dated May 21, 2010 and the CMS Web

[[Page 40536]]

site, http://www.cms.gov/AmbulanceFeeSchedule/02_afspuf.asp.
2. Amendment to Section 146(b)(1) of MIPPA
Section 146(b)(1) of the MIPPA amended the designation of rural
areas for payment of air ambulance services. The statute originally
specified that any area that was designated as a rural area for
purposes of making payments under the ambulance fee schedule for air
ambulance services furnished on December 31, 2006, shall continue to be
treated as a rural area for purposes of making payments under the
ambulance fee schedule for air ambulance services furnished during the
period July 1, 2008 through December 31, 2009.
Sections 3105(b) and 10311(b) of the Affordable Care Act amended
section 146(b)(1) of MIPPA to extend this provision for an additional
year, through December 31, 2010. In the CY 2011 physician fee schedule
final rule (75 FR 73385 through 86, 73625 through 26), we revised Sec.
414.610(h) to conform the regulations to this statutory requirement.
Subsequently, section 106(b) of the MMEA amended section 146(b)(1)
of MIPPA to extend this provision again through December 31, 2011.
Thus, we are proposing to revise Sec. 414.610(h) to conform the
regulations to this statutory requirement. This statutory requirement
is self-implementing. A plain reading of the statute requires only a
ministerial application of a rural indicator, and does not require any
substantive exercise of discretion on the part of the Secretary.
Accordingly, for areas that were designated as rural on December 31,
2006, and were subsequently re-designated as urban, we have re-
established the ``rural'' indicator on the ZIP Code file for air
ambulance services through December 31, 2011.
For further information regarding the extension of this MIPPA
provision, please see Transmittal 706 (Change Request 6972) dated May
21, 2010 and the CMS Web site, http://www.cms.gov/AmbulanceFeeSchedule/02_afspuf.asp.
3. Amendment to Section 1834(l)(12) of the Act
Section 414 of the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (MMA) added paragraph (12) to section 1834(l)
of the Act, which originally specified that in the case of ground
ambulance services furnished on or after July 1, 2004, and before
January 1, 2010, for which transportation originates in a qualified
rural area (as described in the statute), the Secretary shall provide
for a percent increase in the base rate of the fee schedule for such
transports. The statute requires this percent increase to be based on
the Secretary's estimate of the average cost per trip for such services
(not taking into account mileage) in the lowest quartile of all rural
county populations as compared to the average cost per trip for such
services (not taking into account mileage) in the highest quartile of
rural county populations. Using the methodology specified in the July
1, 2004 interim final rule (69 FR 40288), we determined that this
percent increase was equal to 22.6 percent. As required by the MMA,
this payment increase was applied to ground ambulance transports that
originated in a ``qualified rural area''; that is, to transports that
originated in a rural area included in those areas comprising the
lowest 25th percentile of all rural populations arrayed by population
density. For this purpose, rural areas included Goldsmith areas (a type
of rural census tract).
Sections 3105(c) and 10311(c) of the Affordable Care Act amended
section 1834(l)(12)(A) of the Act to extend this rural bonus for an
additional year through December 31, 2010. In the CY 2011 PFS final
rule (75 FR 73385 through 73386 and 73625), we revised Sec.
414.610(c)(5)(ii) to conform the regulations to this statutory
requirement.
Subsequently, section 106(c) of the MMEA again amended section
1834(l)(12)(A) of the Act to extend the rural bonus described above for
an additional year, through December 31, 2011. Therefore, as directed
by the MMEA, we are continuing to apply the rural bonus described above
(in the same manner as in previous years), to ground ambulance services
with dates of service on or after January 1, 2011 and before January 1,
2012 where transportation originates in a qualified rural area.
This rural bonus is sometimes referred to as the ``Super Rural
Bonus'' and the qualified rural areas (also known as ``super rural''
areas) are identified during the claims adjudicative process via the
use of a data field included on the CMS supplied ZIP Code File.
Accordingly, we are proposing to revise Sec. 414.610(c)(5)(ii) to
conform the regulations to the statutory requirement set forth at
section 106(c) of the MMEA. This statutory requirement is self-
implementing. The statute requires a one-year extension of the rural
bonus (which was previously established by the Secretary), and does not
require any substantive exercise of discretion on the part of the
Secretary. For further information regarding the extension of this
rural bonus, please see Transmittal 706 (Change Request 6972) dated May
21, 2010 and the CMS Web site, http://www.cms.gov/AmbulanceFeeSchedule/02_afspuf.asp.

B. Technical Correction

In addition, we are making a technical correction to Sec.
414.610(c)(1). In the CY 2011 physician fee schedule final rule (75 FR
73386, 73625), CMS made technical changes to reformat Sec.
414.610(c)(1). However, in making these revisions, language was
inadvertently left out of this regulation. Specifically, the following
sentence was inadvertently omitted from revised Sec. 414.610(c)(1):
``The CF is multiplied by the applicable RVUs for each level of service
to produce a service-level base rate.'' Prior to the changes made in
the CY 2011 physician fee schedule final rule, this was the first
sentence under Sec. 414.610(c)(1)(i). We did not intend to delete this
language in making the CY 2011 formatting changes. Thus, we are
proposing to revise Sec. 414.610(c)(1) to reinstate this sentence
which was inadvertently deleted in the CY 2011 physician fee schedule
final rule.

IV. Durable Medical Equipment and Supplies

A. Background for Durable Medical Equipment and Supplies

Title XVIII of the Social Security Act (the Act) governs the
administration of the Medicare Program. The statute provides coverage
for broad categories of benefits, including inpatient and outpatient
hospital care, skilled nursing facility care, home health care,
physician services, and durable medical equipment (DME). DME is covered
by Medicare based, in part, upon section 1832(a) of the Act, which
describes the scope of benefits under the supplementary medical
insurance program (Medicare Part B). Section 1861(s)(6) of the Act
defines ``medical and other health services'' to include DME as a
separate benefit for which payment is authorized by section 1832 of the
Act. Section 1861(m)(5) of the Act specifically includes DME in the
definition of the term ``home health services.''
In accordance with section 1861(n) of the Act, the term ``durable
medical equipment'' includes iron lungs, oxygen tents, hospital beds,
and wheelchairs used in the patient's home whether furnished on a
rental basis or purchased. The patient's home includes an institution
used as his or her home other than an institution that meets the
requirements of section 1861 (e)(1) or

[[Page 40537]]

section 1819(a)(1) of the Act. Besides being subject to this provision,
the coverage of DME must also meet the requirements of section
1862(a)(1)(A) of the Act, which in general excludes from payment any
items or services that are not reasonable and necessary for the
diagnosis or treatment of illness or injury or to improve the
functioning of a malformed body member, and section 1862(a)(6) of the
Act, which (except for certain specified exceptions) precludes payment
for personal comfort items.
Section 1834(a) of the Act, as added by section 4062 of the Omnibus
Budget Reconciliation Act of 1987 (OBRA 87), Public Law 100-203, sets
forth the payment rules for DME furnished on or after January 1, 1989.
The Medicare payment amount for a DME item is generally equal to 80
percent of the lesser of the actual charge or the fee schedule amount
for the item, less any unmet Part B deductible. The beneficiary
coinsurance for such items is generally equal to 20 percent of the
lesser of the actual charge or the fee schedule amount for the item
once the deductible is met. The fee schedule amounts are generally
calculated using average allowed charges from a base period and then
updated by annual update factors. Sections 1834(a)(2) through (a)(7) of
the Act set forth six separate classes of DME and separate payment
rules for each class. The six classes of items are: inexpensive and
other routinely purchased DME; items requiring frequent and substantial
servicing; customized items; oxygen and oxygen equipment; other covered
items (other than DME); and capped rental items. For DME in general,
Sec. 414.210(f) specifies that payment can be made for replacement of
DME that is lost, stolen, irreparably damaged, or has been in
continuous use for the equipment's reasonable useful lifetime (RUL). In
general, the RUL for DME is established as 5 years. Computation of the
RUL is based on when the equipment is delivered to the beneficiary, not
the age of the equipment. The 5-year standard is set forth in section
1834(a)(7)(C)(iii) of the Act for capped rental DME, but was applied to
all DME through the regulations. The RUL is used to determine how often
it is reasonable to pay for replacement of DME under the program and is
not specifically set forth as a minimum lifetime standard. Therefore,
we are using our discretion to propose a rule regarding how long
equipment must withstand repeated use to be considered durable medical
equipment.
Payment for inexpensive or routinely purchased DME is made on a
purchase or rental basis, with total payments being limited to the
purchase fee schedule amount for the item. The regulation at 42 CFR
Sec. 414.220 provides that inexpensive DME have an average purchase
price of $150 or less and routinely purchased DME are items that have
historically been acquired on a purchase basis 75 percent of the time
or more. Accessories used with DME are also included in the inexpensive
or routinely purchased DME class. Payment is generally made on a
monthly rental basis with no cap on the number of rental payments made
for items such as ventilators that require frequent and substantial
servicing. Payment for items meeting the definition of customized DME
set forth at Sec. 414.224 is made on a lump sum purchase basis in an
amount established based on the Medicare claims processing contractor's
individual consideration and judgment of a reasonable payment amount
for each item. Payment for oxygen equipment set forth at Sec. 414.226
is made on a monthly basis for up to 36 months of continuous use. The
supplier retains ownership of the oxygen equipment following the 36-
month cap, but must continue to furnish the equipment for the remainder
of the equipment's 5-year RUL, at which point the beneficiary can elect
to obtain new equipment. Payment for capped rental items set forth at
Sec. 414.229(f) is made on a monthly rental basis for up to 13 months
of continuous use. The supplier must transfer title to the equipment to
the beneficiary on the first day following the 13th month of continuous
use.
In establishing regulations for the purpose of implementing the
payment rules mandated by OBRA 87, 42 CFR Sec. 414.202 sets forth the
basic definition of DME that was originally established and elaborated
upon in program instructions discussed below. Section 414.202 defines
DME as equipment furnished by a supplier or a home health agency that--
Can withstand repeated use;
Is primarily and customarily used to serve a medical
purpose;
Generally is not useful to an individual in the absence of
an illness or injury; and
Is appropriate for use in the home.
The benefit for DME as it was initially defined at section
1861(s)(6) of the Act was a benefit for ``rental of durable medical
equipment.'' The owner of rented equipment is paid for the use of the
equipment. When the equipment is no longer needed, it is returned to
the owner and can then be rented by another customer. Items that are
disposable cannot be rented and items that last for short periods of
time are not likely to be items that would be rented. The Act was
amended by section 16 of the Medicare-Medicaid Anti-Fraud and Abuse
Amendments of 1977 (P.L. 95-142) to allow for purchase of DME in cases
where purchase is less costly or more practical than rental. In 1978,
program instructions were added to the Medicare Part B Carriers Manual
(HCFA-Pub. 14-3, Rev. 3-669) to further define DME and durability of an
item, that is, when an item is considered durable. The instructions are
now included in section 110.1 of chapter 15 of the Medicare Benefit
Policy Manual (CMS-Pub. 100-02). In specifying which items satisfy the
durability criteria, these program instructions provide that ``an item
is considered durable if it can withstand repeated use, that is, the
type of item which could normally be rented'' and excludes items that
are ``of an expendable nature.'' The instructions do not specify
exactly how long an item must last to be considered a durable item that
would normally be rented as opposed to a disposable item or an item
that would not normally be rented.
CMS has provided program instructions for coverage of supplies and
accessories at Section 110.3 in Chapter 15 of the Medicare Benefits
Policy Manual. The instructions provide that payment may be made for
supplies that are necessary for the effective use of DME, such as
lancets used to draw blood for use with a home blood glucose monitor.
The lancet itself is disposable and would not be covered as DME, but it
is a covered item that falls under the general DME benefit because it
is necessary for the effective use of DME--the home blood glucose
monitor. Supplies necessary for the effective use of DME also include
oxygen and those drugs and biologicals which must be inserted directly
into the equipment for the effective use of DME.
The Healthcare Common Procedure Coding System (HCPCS) is a
standardized coding system used to process claims submitted to
Medicare, Medicaid, and other health insurance programs by providers,
physicians, and other suppliers. The HCPCS Code Set is divided into two
principal subsystems, referred to as level I and level II of the HCPCS:
Level I of the HCPCS codes is comprised of Current Procedural
Terminology (CPT) codes, which are copyrighted by the American Medical
Association, and are used primarily to identify medical services and
procedures furnished by physicians and other healthcare professionals
that are billed to public or private health insurance programs.

[[Page 40538]]

Level II of HCPCS is a standardized coding system used primarily to
identify products and supplies that are not included in the CPT codes,
such as DME, orthotics, prosthetics, and supplies when used outside a
physician's office. Assignment of HCPCS code is not a coverage
determination and does not imply that any payer will cover the items in
the code category. In October 2003, the Secretary delegated authority
under the Health Insurance and Portability Act of 1996 to CMS to
maintain and distribute HCPCS Level II codes.

B. Current Issues

Section 1861(n) of the Act defines DME to include items such as
iron lungs, oxygen tents, hospital beds, and wheelchairs used in the
patient's home whether furnished on a rental basis or purchased. The
regulation at Sec. 414.202 defines DME as equipment furnished by a
supplier or a home health agency that--
Can withstand repeated use;
Is primarily and customarily used to serve a medical
purpose;
Generally is not useful to an individual in the absence of
an illness or injury; and
Is appropriate for use in the home.
CMS program instructions at section 110.1 of chapter 15, Medicare
Benefits Policy Manual further clarify that an item can be considered
durable if it can withstand repeated use, in other words, the type of
item that could normally be rented. Section 1834(a)(7)(C) of the Act
sets forth the provisions for the establishment of RUL for certain
items of DME, payment for replacement of items and the length of RUL.
However, the RUL is not specifically set forth as a minimum lifetime
standard. Computation of the RUL is based on when the equipment is
delivered to the beneficiary, not the age of the equipment.
The regulation and program instructions do not lend any guidance
regarding the specific period of time that equipment must function in
order to be considered ``durable''. In addition, the regulation does
not provide specific guidance or criteria regarding how to determine if
new devices consisting of a system of durable and non durable
components that together serve a medical purpose fall within the DME
benefit category. Therefore, we believe it is necessary to revise the
regulation at this time to include a definition of DME that uses more
specific language to define the term ``durable'' for the purpose of
determining whether equipment is DME. The issue of linking durability
to the lifetime of equipment and where to draw the line has come to the
forefront in light of the recent technology and engineering in the
field of medical devices and equipment. Establishing a minimum lifetime
criteria would help facilitate the benefit category determination
process for items that clearly last longer or shorter than the minimum
lifetime threshold.
In cases where it is not clear that the equipment can function for
the specified minimum period of time, reviewing additional information
and evidence consistent with the present benefit category determination
process would be necessary to determine the expected life of the
equipment. CMS and CMS contractors would base the decision on various
sources of information including but not limited to the HCPCS request
form, pre-market clearance documents from the Food and Drug
Administration (FDA), product warranty documents, product Web site,
product marketing materials, product user guides, product operating
manuals, consumer product reviews, subject matter expert reviews,
industry product standards data, and product data created as a result
of clinical studies or standardized test results. A minimum lifetime
standard for DME may also help facilitate the HCPCS process. The
current application form used to request new HCPCS codes for items
includes the question regarding whether equipment is durable and, if
so, instructs the applicant to provide an explanation of how the item
can withstand repeated use. We have received requests from several
entities including DME stakeholders for additional clarification
regarding the durability standard for DME. Comments from some of these
entities indicate that there is limited direction on what is required
for an item to be considered ``durable'' in the current regulation.
Additional clarification of the term ``durable'' would be helpful to
industry stakeholders such as manufacturers in anticipating how their
products would be treated under coding classification and benefit
category determinations.

C. Provisions of the Proposed Regulations

We are proposing changes to the definition of DME at 42 CFR Sec.
414.202 in order to clarify the meaning of the term ``durable'' and
reflect our current interpretation of the statute. Specifically, we
propose to establish a 3-year minimum lifetime requirement that
equipment must meet in order to be considered DME. Section 1861(n) of
the Act provides examples of items such as wheelchairs, power operated
vehicles, hospital beds, ventilators, and oxygen equipment to
illustrate the DME benefit. The citation of these examples in the
statutory language for many years indicates that the DME benefit was
intended to be limited to medical items designed to be durable.
Although the ability to pay on a purchase basis for certain items was
added to the statute, the addition of this flexibility to the program
did not fundamentally alter the types of items included in the DME
benefit category or the requirement that the equipment must be durable.
Section 1861(n) of the Act states that items may be included under
the DME benefit whether furnished on a rental basis or purchased. The
regulation at Sec. 414.202 and program instructions at Section 110.1
of Chapter 15 of the Medicare Benefits Policy Manual specify that an
item is considered durable if it can withstand repeated use, that is,
the type of item that could normally be rented. This excludes items
that are of a disposable or single use nature. Based upon the statute
and current regulations, equipment could be eliminated from the DME
benefit category if it could not withstand repeated use or be reused by
successive patients or the same patient. Although the capacity for
reuse is in itself a logical characteristic of durability, it is not
clear how many months or years an item must withstand repeated use in
order to be considered durable. The Merriam Webster dictionary defines
``durable'' as the ability to exist for a long time without significant
deterioration. The United States Department of Commerce uses a
durability standard of 3 years for consumer durable goods for National
Income and Accounts estimates.\8\ Furthermore, economics
dictionaries,\9\ various encyclopedias,\10\ and economics textbooks
\11\ define durable goods as goods that are expected to last longer
than 3 years.
---------------------------------------------------------------------------

\8\ The NIPA Handbook (Concepts and Methods of the U.S National
Income and Product Accounts, Chapter 5--Personal Care Expenditures.
The handbook is available at http://www.bea.gov/national/pdf/NIPAhandbookch5.pdf.
\9\ The McGraw Hill Dictionary of Modern Economics by Douglas
Greenwald & Associates, Economics dictionary by Donald Moffat,
Dictionary of Business and Economics by Christine Ammer and Dean
Ammer.
\10\ Encyclopedia of Business, Britannica Encyclopedia and Gale
Encyclopedia.
\11\ A Lexicon of Economics by Kenyon A. Knopf.
---------------------------------------------------------------------------

In addition, information gathered from various sources such as
Rehabilitative Engineering and Assistive Technology Society of North
America (RESNA),\12\ product catalogs, product warranty documents, and
consumer product reviews indicate that

[[Page 40539]]

conventional DME items such as wheelchairs, hospital beds, and
ventilators specified in section 1861(n) of the Act typically have a
useful life of 3 or more years before they need to be replaced or need
major repairs. Therefore, we propose a 3-year minimum lifetime standard
for items to meet the durability criterion for DME.
---------------------------------------------------------------------------

\12\ http://resna.org/.
---------------------------------------------------------------------------

A minimum lifetime standard would increase the clarity of the
current definition and give regulatory weight to a reasonable benchmark
for a minimum period of durability or repeated use that would need to
be met in order for the equipment to be considered DME. In addition,
the revised regulation would provide clear guidance to CMS and other
stakeholders for making consistent informal benefit category
determinations and national coverage determinations for DME. It would
assist manufacturers in designing and developing new medical equipment
to have a better understanding of how long a period of time an item
must be able to withstand repeated use in order to be considered DME
for Medicare purposes. It is important to note that the 3-year minimum
period of durability does not replace the RUL standard established by
section 1834(a)(7)(C) of the Act for payment purposes. The RUL rules
are used to determine how often payment can be made for replacement
items and is not a minimum lifetime requirement for DME. Although the
proposed 3-year lifetime would be a requirement for determining whether
an item is durable, it is not an indication of the typical or average
lifespan of DME, which in many cases may last for much longer than 3
years.
1. Application of the 3-Year Lifetime Standard to Items Currently
Covered as DME and to Supplies and Accessories of Covered DME
The 3-year minimum lifetime requirement would be prospective only
and would not apply to items classified as DME before the proposed rule
would be implemented. We expect that a vast majority of the categories
of items that are currently classified as DME function for 3 or more
years. In addition, the proposed regulation would allow for continued
coverage of attendant supplies that are necessary for the effective use
of DME. Such supplies include drugs and biologicals which must be
inserted directly into the equipment for the effective use of DME.
Finally, we do not propose to apply the 3-year lifetime requirement to
accessories used with DME.
2. Application of the 3-Year Minimum Lifetime Criteria to Multi-
Component Devices
In some cases, a device may be a system consisting of durable and
non-durable components that together serve a medical purpose.
Currently, a multi-component device consisting of durable and non-
durable components is considered non-durable if the component that
performs the medically necessary function of the device is non-durable,
even if other components that are part of the device are durable.
Therefore, if the proposed regulation to establish a minimum 3-year
lifetime standard for DME is applied to these devices, the component(s)
of a multi-component device that performs the medically necessary
function of the device would need to meet the 3-year minimum lifetime
requirement. Although we are not proposing to change our policy with
regard to these types of systems at this point, we are seeking public
comments on this topic. Specifically, we are soliciting public comments
on various ways we might consider applying the 3-year rule to multi-
component devices consisting of both durable and non-durable
components. Various options might include the following:
1. Apply the 3-year lifetime standard to the component(s) that
performs the entire medically necessary function of the device.
2. Apply the 3-year lifetime standard to the component(s) that
performs a vital part of the medically necessary function of the
device.
3. Consider a device/system to be durable only if the cost of the
durable component(s) over a period of time (for example, 5 years) makes
up greater than 50 percent of the overall cost of the device/system
over the same period.

V. Collection of Information Requirements

A. Legislative Requirement for Solicitation of Comments

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

B. Requirements in Regulation Text

We are soliciting public comment on each of these issues for the
following sections of this document that contain information collection
requirements (ICRs):
As discussed in section I.C.5 of this proposed rule, to receive the
low-volume adjustment, an ESRD facility would need to provide an
attestation to their Fiscal Intermediary or Medicare Administrative
Contractor (FI/MAC) that it has met the criteria to qualify as a low-
volume facility prior to November 1st of each year. The FI/MAC would
verify the ESRD facility's attestation of their low-volume status for
the 3-consecutive years immediately preceding the payment year, using
the ESRD facility's most recent final-settled or as-filed 12-month cost
reports.
The burden associated with the requirement is the time and effort
necessary for an ESRD facility attesting as a low-volume facility to
develop an attestation and submit it to their FI/MAC. In this proposed
rule, for CY 2012, we estimate that it would require an administrative
staff member from each low-volume facility 10 minutes to obtain the
total number of treatments in the cost reports necessary for
eligibility determination, develop the attestation, and submit it to
their FI/MAC. For this proposed rule, using 2009 claims our contractor,
UM-KECC, identified 939 ESRD facilities as providing treatments below
the low-volume threshold of 4,000 treatments in 2009. Of these 939
facilities, we estimated that 358 met the additional low-volume
criteria as specified in Sec. 413.232. Further, due to the historical
trend of increase in the number of small dialysis facilities, we
believe that several dozen additional ESRD facilities may meet the
criteria of a low-volume facility prior to the CY 2012 payment year. To
take these facilities into account, we have rounded the total number of
estimated low-volume facilities to 400. Therefore, for CY 2012, we
estimate that the total initial ESRD facility burden would be 67 hours.
The estimated cost associated with compliance with this requirement is
$2.61 per ESRD facility and total of $1,044 for all 400 facilities.
These costs are estimated using the 2010 estimate for the occupational
code 43-0000 Office and Administrative Support

[[Page 40540]]

Occupation mean hourly wage of $15.66 as stated by the U.S. Bureau of
Labor Statistics.

C. Additional Information Collection Requirements

This proposed rule imposes collection of information requirements
as outlined in the regulation text and specified above. However, this
proposed rule also makes reference to several associated information
collections that are not discussed in the regulation text contained in
this document. The following is a discussion of these information
collections, some of which have already received OMB approval.
1. Proposed Display of Certificates for PY 2013 and PY 2014 ESRD QIP
Section II.B of this proposed rule discusses a disclosure
requirement for both the PY 2013 and the PY 2014 ESRD QIP. As stated
earlier in this proposed rule, section 1881(h)(6)(C) of the Act
requires the Secretary to provide certificates to dialysis care
providers and facilities about their total performance scores under the
QIP. This section also requires each provider and facility that
receives a QIP certificate to display it prominently in patient areas.
To comply with this requirement, we are proposing to issue a PY
2013 and PY 2014 QIP certificate to providers and facilities via a
generally accessible electronic file format. We propose that each
provider and facility would be required to prominently display the
applicable QIP certificate in patient areas. In addition, we propose
that each provider and facility will take the necessary measures to
ensure the security of the certificate in the patient areas. Finally,
we propose that each provider/facility would be required to have staff
available to answer questions about the certificate in an
understandable manner, taking into account that some patients might
have limited English proficiency. These proposals represent no change
from the policy finalized for the 2012 ESRD QIP.
The burden associated with the aforementioned requirements is the
time and effort necessary for providers and facilities to print the
applicable QIP certificate, display the certificate prominently in
patient areas, ensure the safety of the certificate, and respond to
patient inquiries in reference to the certificates. We estimate that
approximately 5,227 providers and facilities will receive a QIP
certificate in PY 2013 and PY 2014 and will be required to display it.
We also estimate that it will take each provider or facility 10 minutes
per year to print, prominently display and secure the QIP certificate,
for a total estimated annual burden of 871 hours at a cost of $30,000.
We estimate that approximately one-third of ESRD patients will ask a
question about the QIP certificate. We further estimate that it will
take each provider/facility approximately 5 minutes to answer each
patient question about the applicable QIP certificate, or 1.65 hours
per provider or facility each year. The total estimated annual burden
associated with this requirement is 8,625 hours. The total estimated
annual burden for both displaying the QIP certificates and answering
patient questions about the certificates is 9,496 hours (for each of PY
2013 and PY 2014). While the total estimated annual burden associated
with both of these requirements as discussed is 9,496 hours, we do not
believe that there will be a significant cost associated with these
requirements because we are not proposing to require providers/
facilities to complete new forms. As discussed in section A.1.3 of this
proposed rule, we estimate that the total cost for all ESRD providers/
facilities to comply with the collection of information requirements
associated with the certificate each year would be less than $300,000.
2. Proposed NHSN Reporting Requirement for the PY 2014 ESRD QIP
As stated above in section II.B.2.b.vi of this proposed rule, we
propose to include reporting dialysis events to the National Healthcare
Safety Network (NHSN) as a reporting measure for the PY 2014 ESRD QIP.
Specifically, we would require providers/facilities to: (1) enroll in
the NHSN and complete required training as verified by a digital
certificate obtained from CDC; and (2) submit at least 3-consecutive
months of dialysis event data to the NHSN.
The burden associated with these requirements is the time and
effort necessary for providers and facilities to enroll in the NHSN and
conduct the required training and submit 3 months of data. We estimate
that approximately 5,227 providers and facilities will enroll in the
NHSN and submit the necessary data. We also estimate that it will take
each provider or facility 48 hours per year to enroll in the NHSN and
complete the required training, for a total estimated annual burden of
250,896 hours. Based on the Bureau of Labor Statistics we estimate the
average inflation adjusted salary to be $34.63 per hour. Thus, average
cost for each provider/facility would be $1,662.24 (48 hours times
$34.63 per hour). Across all 5,227 providers/facilities, this would
equal $8.7 million. However, we further estimate that the number of
dialysis events in a 3-month period will be 125,680 for the 2014 ESRD
population. We estimate it will require 10 minutes to collect and
submit data on these events and the estimated burden for submitting 3
months of data will be 20,947 hours. If the dialysis events were
distributed evenly across all 5,227 providers/facilities, that would
result in an additional 4 hour burden ($138.78) for each provider/
facility. The total estimated annual burden for enrolling in the NHSN,
conducting the required training, and submitting 3 consecutive months
of data is 271,843 hours. We estimate that the total cost for all ESRD
providers/facilities to comply with the proposed collection of
information requirements associated with NHSN reporting requirement
each year would be less than $9.5 million, with the total average cost
per provider/facility approximately $1,801.02.
3. Proposed Patient Experience Survey Usage Requirement for the PY 2014
ESRD QIP
As stated above in section B.A.2. of this proposed rule, we propose
to include a measure that assesses provider/facility usage of the In-
Center Hemodialysis (ICH) Consumer Assessment of Healthcare Providers
and Systems (CAHPS) Survey as a reporting measure for the PY 2014 ESRD
QIP. The burden associated with this requirement is the time and effort
necessary for providers and facilities to administer the ICH CAHPS
survey and submit an attestation to CMS that they successfully
administered the survey.
We estimate that approximately 5,227 providers and facilities will
administer the ICH CAHPS survey and submit an attestation to that
affect. We estimate that it will take each provider or facility 16
hours per year to be trained on the survey features. We further
estimate that it will take each provider/facility approximately 5
minutes to submit the attestation each year. The estimated total annual
burden on providers/facilities is estimated to be 84,068 hours which is
valued at $2.9 million, or $556.97 per provider/facility. We estimate
that administering the survey would take 45 minutes per patient (to
account for variability in education levels) and 200 surveys per year
which equals 154 hours or $2,707.32 per facility-year to administer the
ICH CAHPS survey for an estimated annual burden of 804,958 hours which
is valued at $14.1 million. As discussed in section A. of this proposed
rule, we estimate that the total cost for ESRD providers/facilities to
comply with the collection of information requirements associated with
administering the ICH CAHPS survey each year would be

[[Page 40541]]

approximately $3,264.29, or $17.1 million across all ESRD providers/
facilities.
4. Proposed Mineral Metabolism Reporting Requirement for the 2014 ESRD
QIP
As stated above in section B.A.2. of this proposed rule, we propose
to include a Mineral Metabolism reporting measure as part of the PY
2014 ESRD QIP. The burden associated with this requirement is the time
and effort necessary for providers and facilities to review their
records and submit an attestation to CMS that they had monitored on a
monthly basis, the serum calcium and serum phosphorus levels of all
patients each month.
We estimate that approximately 5,227 providers and facilities will
submit the attestation. We estimate that it will take each provider or
facility approximately 18 hours to review its records and submit the
attestation each year. The estimated total annual burden on providers/
facilities is estimated to be 94,086 hours which is valued at $3.3
million, or $623 per provider/facility.
To obtain copies of the supporting statement and any related forms
for the proposed paperwork collections referenced above, access CMS'
Web site at http://www.cms.gov/PaperworkReductionActof1995/PRAL/list.asp#TopOfPage.
If you comment on these information collection and recordkeeping
requirements, please do either of the following:
1. Submit your comments electronically as specified in the
ADDRESSES section of this proposed rule; or
2. Submit your comments to the Office of Information and Regulatory
Affairs, Office of Management and Budget, Attention: CMS Desk Officer,
[CMS-1577-P]. Fax: (202) 395-6974; or E-mail: [email protected].

VI. Response to Comments

Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, when we proceed with a subsequent document, we will respond to the
comments in the preamble to that document.

VII. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
We have examined the impacts of this proposed rule as required by
Executive Orders 12866 (September 30, 1993, Regulatory Planning and
Review) and Executive Order 13563 on Improving Regulation and
Regulatory Review (January 18, 2011). Executive Orders 12866 and 13563
direct agencies to assess all costs and benefits of available
regulatory alternatives and, if regulation is necessary, to select
regulatory approaches that maximize net benefits (including potential
economic, environmental, public health and safety effects, distributive
impacts, and equity). Executive Order 13563 emphasizes the importance
of quantifying both costs and benefits, of reducing costs, of
harmonizing rules, and of promoting flexibility. This rule has been
designated an ``economically'' significant rule, under section 3(f)(1)
of Executive Order 12866. Accordingly, the rule has been reviewed by
the Office of Management and Budget. We have prepared a Regulatory
Impact Analysis that to the best of our ability presents the costs and
benefits of the proposed rule. We solicit comment on the Regulatory
Impact Analysis provided.
2. Statement of Need
This rule proposes a number of routine updates for renal dialysis
services in CY 2012, implementing the second year of the transition,
and making several policy and technical changes to the CY 2011 ESRD PPS
final rule as well as proposed revisions to the regulations. This
includes proposed updates to the ESRD PPS and composite rate base
rates, wage index values, wage index budget-neutrality adjustment
factors, outlier payment policy, low-volume adjustment and transition
budget-neutrality adjustment. Failure to publish this proposed rule
would result in ESRD facilities not receiving appropriate payments in
CY 2012.
In addition, this rule implements a QIP for Medicare ESRD dialysis
providers and facilities with payment reductions beginning January 1,
2013. Under section 1881(h) of the Act, after selecting measures,
establishing performance standards that apply to each of the measures,
specifying a performance period, and developing a methodology for
assessing the total performance of each provider and facility based on
the specified performance standards, the Secretary is required to apply
an appropriate reduction to ESRD providers and facilities that do not
meet or exceed the established total performance score. Our vision is
to continue to implement a robust, comprehensive ESRD QIP that builds
on the foundation that has already been established in providing
incentives to providers/facilities to improve the quality of care they
provide to Medicare beneficiaries.
Also, this proposed rule would revise the ambulance fee schedule
regulations to conform with the requirements of section 106 of the
Medicare and Medicaid Extenders Act of 2010 Public Law 111-309 (MMEA).
Finally, this proposed rule revises the definition of durable medical
equipment. The revision adds a 3-year minimum lifetime criterion that
must be met by an item or device in order to be considered durable for
the purpose of classifying the item under the Medicare benefit category
for DME. The proposed rule would not impact items classified and
covered as DME before the new rule takes effect or supplies and
accessories used with covered DME.
3. Overall Impact
We estimate that the proposed revisions to the ESRD PPS will result
in an increase of approximately $200 million in payments to ESRD
facilities in CY 2012. Furthermore, as a result of implementing the QIP
for Medicare outpatient ESRD dialysis providers and facilities, we
estimate aggregate payment reductions in payment years 2013 and 2014
would be $47.2 million and $14 million, respectively. However, given
the lack of data for several measures, the actual impact of the
proposed 2014 QIP may vary significantly from the values provided
herein. Lastly, the aggregate costs associated with the QIP collection
of information requirements described in section III.1 of this proposed
rule (Display of Certificates for the 2013 ESRD QIP) are estimated to
be $300,000 for all ESRD facilities in 2013. The additional estimated
aggregate costs associated with the collection of information
requirements described in sections III.1. (Display of Certificates for
the 2013 and 2014 ESRD QIP), III.2 (NHSN Reporting Requirement for the
2014 ESRD QIP), III.3 (CAHPS Survey Requirement for the 2014 ESRD QIP)
and III.4 (Mineral Metabolism Reporting Requirement for the 2014 ESRD
QIP) in this proposed rule are expected to be approximately less than
$24 million for all participating ESRD facilities.''
The impact of section 106 of the MMEA, requiring the extension of
certain add-on payments for ground ambulance services, and the
extension of certain rural area designations for

[[Page 40542]]

purposes of air ambulance payment, through CY 2011, is estimated to be
$20 million (for CY 2011).
Finally, the fiscal impact of the proposed 3-year minimum lifetime
standard cannot be estimated because it is difficult to predict how
many different types of devices will be introduced in the market in the
future that may or may not qualify as DME items as a result of the new
rule. However, we would expect that this proposed rule would have a
small, if any, savings impact on the program.

B. Detailed Economic Analysis

1. CY 2012 End-Stage Renal Disease Prospective Payment System
a. Effects on ESRD Facilities
To understand the impact of the changes affecting payments to
different categories of ESRD facilities, it is necessary to compare
estimated payments (that is, payments made under the 100 percent ESRD
PPS and those under the ESRD PPS blended payment during the transition)
in CY 2012 to estimated payments (that is, payments made under the 100
percent ESRD PPS and those under the ESRD PPS blended payment during
the transition) in CY 2011. To estimate the impact among various
classes of ESRD facilities, it is imperative that the estimates of
payments in CY 2011 and CY 2012 contain similar inputs. Therefore, we
simulated payments only for those ESRD facilities that we are able to
calculate both current payments and new payments.
We used the June 2010 update of CY 2009 National Claims History
file as a basis for Medicare dialysis treatments and payments under the
ESRD PPS. We updated the 2009 claims to 2011 and 2012 using various
updates. The updates to the ESRD PPS base rate and the base composite
rate portion of the blended rate during the transition are described in
section I.C.7 of this proposed rule. In addition, in order to prepare
an impact analysis, since some providers opted to be paid the blended
payment amount during the transition, we made various assumptions about
price growth for the formerly separately billable drugs and laboratory
tests with regard to the composite portion of the ESRD PPS blended
payment during the transition. These rates of price growth are briefly
outlined below, and are described in more detail in the CY 2011 ESRD
PPS final rule (75 FR 49078 through 49080).
We used the CY 2009 amounts as the CY 2011 and CY 2012 amounts for
Supplies and Other Services, since this category primarily includes the
$0.50 administration fee for separately billable Part B drugs and this
fee is not increased; thus we used no price update. Because some ESRD
facilities will receive blended payments during the transition and
receive payment for ESRD drugs and biologicals based on their average
sales price plus 6 percent (ASP+6), we estimated price growth for these
drugs and biologicals based on ASP+6 percent where ASP data was
available. We updated the last available quarter of actual ASP data for
the top twelve drugs (the second quarter of 2011) thru 2012 by using
the quarterly growth in the Producer Price Index for Drugs (PPI),
consistent with the method for addressing price growth in the ESRDB
market basket. This resulted in 1.5 percent, 1.0 percent, 1.7 percent,
1.2 percent, 1.2 percent and 0.2 percent increase, respectively, for
the third quarter of 2011 thru the fourth quarter of 2012. Since the
top twelve drugs account for over 99 percent of total former separately
billable Part B drug payments, we used a weighted average growth of the
top twelve drugs, for the remainder. Table 9 below shows the updates
used for the drugs.
We updated payments for laboratory tests paid through the
laboratory fee schedule to 2011 and 2012 using the statutory required
update of the CPI-U increase with any legislative adjustments. For this
proposed rule, the growth from 2009 to 2011 is -3.6 percent and the
growth from 2009 to 2012 is -5.1 percent.

Table 9--Price Increases From 2009 to 2011 and 2009 to 2012 of
Separately Billable Part B Drugs
------------------------------------------------------------------------
Price update Price update
Drugs and biologicals 2009 to 2011 2009 to 2012
(percent) (percent)
------------------------------------------------------------------------
EPO................................. 3.9 9.1
Paricalcitol........................ -16.2 -14.6
Sodium--ferric--glut................ 5.1 9.6
Iron--sucrose....................... -6.0 -1.6
Levocarnitine....................... 1.4 15.5
Doxercalciferol..................... 8.0 15.7
Calcitriol.......................... -6.4 -2.0
Iron--dextran....................... -4.3 0.5
Vancomycin.......................... 1.6 7.2
Alteplase........................... 15.9 21.6
Aranesp............................. 3.0 8.6
Daptomycin.......................... 16.6 22.5
Other Injectibles................... 0.8 5.5
------------------------------------------------------------------------

Table 10 shows the impact of the proposed estimated CY 2012 ESRD
payments compared to estimated payments to ESRD facilities in CY 2011.

[[Page 40543]]

Table 10--Impact of Proposed Changes in Payment to ESRD facilities for CY 2012 ESRD proposed rule
[(Percent change in total payments to ESRD facilities (both program and beneficiaries))]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Effect of 2012
Number of Number of changes in Effect of 2012 Effect of total
Facility type facilities treatments (in outlier policy changes in wage 2012 changes \3\
millions) percent indexes percent percent
A B C D E
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities................................................ 5,304 38.4 0.2 0.0 2.1
Type:
Freestanding.............................................. 4,759 34.8 0.3 0.0 2.1
Hospital based............................................ 545 3.6 -0.1 -0.3 1.7
Ownership Type:
Large dialysis organization............................... 3,396 24.8 0.3 0.0 2.2
Regional chain............................................ 848 6.4 0.1 -0.1 1.8
Independent............................................... 624 4.3 0.0 0.0 2.0
Hospital based \1\........................................ 430 2.8 -0.1 -0.4 1.7
Unknown................................................... 6 0.0 0.2 0.2 2.1
Geographic Location:
Urban..................................................... 4,117 31.9 0.2 0.0 2.0
Rural..................................................... 1,187 6.4 0.3 -0.1 2.1
Census Region:
East North Central........................................ 875 5.9 0.2 -0.2 1.9
East South Central........................................ 415 2.9 0.4 -0.2 2.0
Middle Atlantic........................................... 584 4.7 0.1 0.0 2.1
Mountain.................................................. 321 1.7 0.1 0.1 2.1
New England............................................... 163 1.3 0.2 0.1 2.1
Pacific................................................... 620 5.0 0.1 0.2 2.2
South Atlantic............................................ 1,180 8.7 0.3 -0.3 1.9
West North Central........................................ 389 2.1 0.2 0.2 2.2
West South Central........................................ 718 5.5 0.3 0.3 2.4
Puerto Rico and Virgin Islands............................ 39 0.4 0.2 -2.5 0.0
Facility Size:
Less than 4,000 treatments \2\............................ 939 2.0 0.2 -0.1 2.1
4,000 to 9,999 treatments................................. 2,101 10.9 0.3 -0.1 2.0
10,000 or more treatments................................. 2,214 25.4 0.2 0.0 2.1
Unknown................................................... 50 0.2 0.1 -0.4 1.8
Percentage of Pediatric Patients:
Less than 2%.............................................. 5,192 37.8 0.2 0.0 2.1
Between 2% and19%......................................... 55 0.5 0.1 -0.3 1.8
Between 20% and 49%....................................... 7 0.0 0.0 0.2 1.8
More than 50%............................................. 50 0.0 0.0 -0.3 1.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Includes hospital based facilities not reported to be part of a large dialysis organization or part of regional chain ownership.
\2\ Of the 939 Facilities with less than 4,000 treatments, only 358 qualify for the low-volume adjustment. The low-volume adjustment was not applied to
pediatric patients. The estimated impact to these Low volume Facilities is a 2.4% increase in payments.
\3\ Includes the effect of the ESRDB Market Basket minus productivity adjustment, which results in an increase of 1.8% to the ESRD PPS base and the
Composite Rate portion of the blended payment for those facilities that opted to be paid under the transition. Also Includes the effect of the change
in the drug add-on percentage from 14.7% to 14.4% to the composite ration portion of the blended payment for those facilities that opted to be paid
under the transition. Includes the effect of the blended payment changing from 75/25 to 50/50 from CY 2011 to CY 2012 for those facilities that choose
to be paid under the transition.
Note: Totals do not necessarily equal the sum of rounded parts.

Column A of impact table indicates the number of ESRD facilities
for each impact category and column B indicates the number of dialysis
treatments (in millions). The overall effect of the proposed changes in
outlier payment policy and the proposed change for the BSA national
average described in section I.C.10 and section I.C.9, respectively, of
this proposed rule, are shown in column C. For CY 2012, the impact on
all facilities of our proposed changes in outlier payment policy and
the proposed BSA national average would be a 0.2 percent increase in
estimated payments. The estimated impact of our proposed changes in
outlier payment policy and the BSA national average ranges from -0.1
percent decrease to a 0.4 percent increase. Most ESRD facilities are
anticipated to have a positive effect on the estimated CY 2012 payments
as a result of the proposed outlier and BSA national average changes.
Column D shows the effect of the wage index on ESRD facilities and
reflects the CY 2012 wage index values for the composite rate portion
of the blended payment during the transition and the ESRD PPS payments.
Facilities located in the census region of Puerto Rico and the Virgin
Islands would receive a 2.5 percent decrease in estimated payments in
CY 2012. Since most of the facilities in this category are located in
Puerto Rico, the decrease is primarily due to the proposed reduction in
the wage index floor (which only affects facilities in Puerto Rico in
CY 2012). Renal dialysis facilities outside of Puerto Rico would
experience changes in estimated payments ranging from a 0.4 percent
decrease to a 0.3 percent increase due to changes in the wage index.
Column E reflects the overall impact (that is the effects of the
proposed outlier and BSA national average changes, the proposed wage
index, the effect of the ESRDB market basket increase minus
productivity adjustment, and the effect of the change in the blended
payment percentage from 75 percent of payments based on the composite
rate system and 25 percent based on the ESRD PPS in 2011, to 50/

[[Page 40544]]

50, respectively, for 2012, for those facilities that opted to be paid
under the transition). It is expected that overall ESRD facilities will
experience a 2.1 percent increase in estimated payments in 2012. Puerto
Rico is expected to receive no increase in their estimated payments in
CY 2012 primarily due to the negative impact of the wage index. The
remainder of ESRD facilities are expected to be positively impacted
ranging from an increase of 1.3 percent to 2.4 percent in their 2012
estimated payments.
b. Effects on Other Providers
Under the ESRD PPS, ESRD facilities are paid directly for the renal
dialysis bundle and other provider types such as laboratories, DME
suppliers, and pharmacies may no longer bill Medicare directly for
renal dialysis services; rather, effective January, 1, 2011, such other
providers can only furnish renal dialysis services under arrangements
with ESRD facilities and must seek payment from ESRD facilities rather
than Medicare. Under the ESRD PPS, Medicare pays ESRD facilities one
payment for renal dialysis services, which may have been separately
paid by Medicare prior to the implementation of the ESRD PPS.
Therefore, in CY 2012, the second year of the ESRD PPS, we estimate
that the proposed ESRD PPS will have zero impact on these other
providers.
c. Effects on the Medicare Program
We estimate that Medicare spending (total Medicare program
payments) for ESRD facilities in 2012 will be approximately $8.3
billion. This estimate is based on various price update factors
discussed in section VII of this proposed rule. In addition, we
estimate that there will be an increase in fee-for-service Medicare
beneficiary enrollment of 4.2 percent in CY 2012.
d. Effects on Medicare Beneficiaries
Under the ESRD PPS, beneficiaries are responsible for paying 20
percent of the ESRD PPS payment amount or blended payment amount for
patients treated in facilities that have chosen the ESRD PPS
transition. As a result of the projected 2.1 percent overall increase
in the proposed ESRD PPS payment amounts in CY 2012, we estimate that
there will be an increase in beneficiary co-insurance payments of 2.1
percent in CY 2012, which translates to approximately $40 million.
e. Alternatives Considered
In developing this proposed rule, we considered eliminating all
laboratory tests from the outlier policy, but instead we are proposing
to eliminate only the Automated Multi-Channel Chemistry (AMCC) panel
tests. We believe this proposed approach would continue to recognize
expensive laboratory tests in the outlier policy while reducing the
burden associated with the 50 percent rule (see section I.C.10 of this
proposed rule).
We also considered alternatives for applying the wage index budget-
neutrality adjustment factor under the ESRD PPS for purposes of the
full ESRD PPS payments and ESRD PPS portions of the blended payment
during the transition, such as applying the wage index budget-
neutrality adjustment factor to the ESRD PPS wage index values, but
instead we proposed applying the wage index budget-neutrality
adjustment factor to the ESRD PPS base rate and ESRD PPS portions of
the transition blended payment to be consistent with how these
adjustments are applied in other PPSs (see section I.C.c of this
proposed rule for additional information on how we propose to apply the
wage budget-neutrality adjustment factor).
2. End-Stage Renal Disease Quality Incentive Program (QIP)
a. Effects of the Proposed 2013 and 2014 ESRD QIP
This proposed rule is intended to mitigate possible reductions in
the quality of ESRD dialysis facility services provided to
beneficiaries as a result of payment changes under the ESRD PPS by
implementing a QIP that would reduce ESRD payments by up to 2 percent
to dialysis providers/facilities that fail to meet or exceed a total
performance score with respect to performance standards established by
the Secretary with respect to certain specified measures.
The methodology that we are proposing to determine a provider/
facility's performance score is described in section IV.A.3
(Methodology for Calculating the Total Performance Score for the 2013
ESRD QIP) and section IV.A.2.e (Methodology for Calculating the Total
Performance Score for the PY 2014 ESRD QIP) of this proposed rule. Any
reductions in ESRD payment would begin on January 1, 2013 for services
furnished on or after January 1, 2013 for the 2013 ESRD QIP and any
reductions in ESRD payment would begin on January 1, 2014 for services
furnished on or after January 1, 2014 for the 2014 ESRD QIP.
As a result, based on the QIP outlined in this proposed rule, we
estimate that approximately 38.8 percent or 2,059 of total ESRD
dialysis facilities would likely receive a payment reduction for PY
2013. In PY 2014, we estimate that approximately 13.8 percent or 737 of
total ESRD facilities would likely receive some type of payment
reduction.
The QIP impact assessment assumes an initial count of 5,430
dialysis facilities with paid Medicare dialysis claims in 2009. The PPS
analysis, presented earlier, excludes 126 facilities for PPS-specific
reasons thereby narrowing the final analytic sample to 5,304.
Specifically, facilities excluded include those they do not have
information on the PPS phase-in election. Most of these facilities
closed during 2009 or 2010. In addition, they exclude a relatively
small number of facilities that were either located in certain US
territories (Guam, American Samoa, Marianna Islands) where a different
payment approach has been used (they have not been paid under the
Composite Rate system) or that represented facilities with no payments
reported on the very small number of claims they submitted. As a
result, Table 11 shows the overall estimated distribution of payment
reductions resulting from the PY 2013 ESRD QIP. Table 12 shows the
overall estimated distribution of payment reductions resulting from the
PY 2014 ESRD QIP.

Table 11--Estimated Distribution of CY 2013 ESRD QIP Payment Reductions.
------------------------------------------------------------------------
Percent of
Payment reduction percent Number of facilities
facilities percent
------------------------------------------------------------------------
0.0........................................... 3,245 61.2
1.0........................................... 741 14.0
1.5........................................... 755 14.2
2.0........................................... 563 10.6
------------------------------------------------------------------------

Table 12--Estimated Distribution of CY 2014 ESRD QIP Payment Reductions.
------------------------------------------------------------------------
Percent of
Payment reduction percent Number of facilities
facilities percent
------------------------------------------------------------------------
0.0........................................... 4,567 86.1
1.0........................................... 434 8.2
1.5........................................... 211 4.0
2.0........................................... 92 1.7
------------------------------------------------------------------------
\1\ CY 2014 QIP Scores estimated using the measures Hemoglobin > 12 g/
dl, Urea Reduction Ratio >= 65% as a proxy for the Kt/V measure, and
Standard Hospitalization Ratio.

To estimate the total payment reductions in 2013 and 2014 resulting
from the proposed rule for each facility, we multiplied the number of
patients treated at each facility receiving a reduction times an
average of three

[[Page 40545]]

treatments per week. We then multiplied this product by a base rate of
$229.63 per dialysis treatment (before an adjustor is applied) to
arrive at a total ESRD payment for each facility: ((Number of patients
treated at each facility x 3 treatments per week) x base rate).
Finally, we applied the estimated payment reduction percentage
expected under the QIP, yielding a total payment reduction amount for
each facility: (Total ESRD payment x estimated payment reduction
percentage).
For payment consequence year 2013, totaling all of the payment
reductions for each of the 2,059 facilities expected to receive a
reduction leads to a total payment reduction of approximately $47.2
million. Further, we estimate that the total costs associated with the
collection of information requirements described in section III.1, of
this proposed rule (Display of Certificates for the 2013 ESRD QIP)
would be less than $300,000 for all ESRD facilities in 2013.
For payment consequence year 2014, totaling all of the payment
reductions for each of the 737 facilities expected to receive a
reduction leads to a total payment reduction of approximately $14
million. Further, we estimate that the total costs associated with the
collection of information requirements described in sections III.1.
(Display of Certificates for the 2013 and 2014 ESRD QIP), III.2 (NHSN
Reporting Requirement for the 2014 ESRD QIP), III.3 (Patient Experience
Survey Usage Reporting Requirement for the 2014 ESRD QIP) and III.4
(Mineral Metabolism Reporting Requirement for the 2014 ESRD QIP) of
this proposed rule would be less than $24 million for all ESRD
facilities.
As a result, we estimate that ESRD facilities will experience an
aggregate impact of $47.5 million for 2013 and $38 million payment
reduction for 2014.
Table 13 below shows the estimated impact of the proposed QIP
payment reductions to all ESRD facilities for payment consequence year
2013. The table details the distribution of ESRD providers/facilities
by facility size (both among facilities considered to be small entities
and by number of treatments per facility), geography (both urban/rural
and by region), and by facility type (hospital based/freestanding
facilities).

Table 13--Impact of Proposed QIP Payment Reductions to ESRD Facilities for CY 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of
Number of facilities Payment
Number of Medicare Number of expected to reduction
facilities treatments 2009 facilities with receive a (percent change
(in millions) QIP score payment in total ESRD
reduction payments)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities................................................ 5,304 38.4 4,709 2,059 -0.57
Facility Type:
Freestanding.............................................. 4,759 34.8 4,334 1,874 -0.57
Hospital-based............................................ 545 3.6 375 185 -0.57
Ownership Type:
Large Dialysis............................................ 3,396 24.8 3,145 1,326 -0.56
Regional Chain............................................ 848 6.4 755 348 -0.62
Independent............................................... 624 4.3 519 250 -0.60
Hospital-based (non-chain)................................ 430 2.8 288 135 -0.52
Unknown................................................... 6 0 2 0 0.00
Facility Size:
Large Entities............................................ 4,302 31.7 3,953 1,700 -0.57
Small Entities \1\........................................ 1,054 7.1 807 385 -0.57
Unknown................................................... 6 0 0 0 -
Urban/Rural Status:
Urban..................................................... 4,117 31.9 3,630 1,581 -0.56
Rural..................................................... 1,187 6.4 1,079 478 -0.60
Census Region:
Northeast................................................. 746 6.1 671 284 -0.58
Midwest................................................... 1,258 8 1,075 479 -0.57
South..................................................... 2,311 17.1 2,123 980 -0.61
West...................................................... 939 6.8 806 303 -0.46
US Territories \2\........................................ 39 0.4 34 13 -0.52
Unknown................................................... 11 0 0 0 -
Census Division:
East North Central........................................ 875 5.9 730 330 -0.56
East South Central........................................ 415 2.9 384 189 -0.69
Middle Atlantic........................................... 584 4.7 526 232 -0.61
Mountain.................................................. 321 1.7 276 87 -0.40
New England............................................... 163 1.3 145 52 -0.50
Pacific................................................... 620 5 530 216 -0.49
South Atlantic............................................ 1,180 8.7 1,088 514 -0.62
West North Central........................................ 389 2.1 345 149 -0.61
West South Central........................................ 718 5.5 651 277 -0.56
US Territories \2\........................................ 39 0.4 34 13 -0.52
Facility Size ( of total treatments):
Less than 4,000 treatments................................ 939 2 514 171 -0.29
4,000-9,999 treatments.................................... 2,101 10.9 2,006 846 -0.60
Over 10,000 treatments.................................... 2,214 25.4 2,177 1,038 -0.66
Unknown................................................... 50 0.2 12 4 -0.19
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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.

[[Page 40546]]

We note that for the 2014 ESRD QIP we lacked performance data on
the Vascular Access Type Measure (Fistula), Dialysis Adequacy Measure
(Kt/V), the Vascular Access Type Measure (Catheter), and the Vascular
Access Infections Measure to conduct an analysis at this time and we
have omitted those measures from these estimates. Rather, we conducted
a simulation using the latest available performance data on the
Hemoglobin Greater Than 12g/dL measure, the Dialysis Adequacy (URR)
measure (as a proxy for the Dialysis Adequacy Measure (Kt/V)), and the
SHR measure to estimate the impact of this proposed rule as accurately
as possible. These simulated analyses were performed using 2009 claims
data as the performance year and 2008 claims data as the baseline year
for the Hemoglobin Greater Than 12g/dL measure and the Dialysis
Adequacy Measure (URR); SHR performance data was extracted from the
2010 DFR data set using 2008 as the performance year and 2007 as the
baseline year.
Using these conditions, we calculated estimated national
achievement threshold and benchmark values for the Hemoglobin Greater
than 12g/dL, Dialysis Adequacy (URR), and SHR measures using all
facilities present in the data set. Equal weighting was applied in
calculating total performance scores. Given the lack of data for
several measures, the actual impact of the proposed 2014 QIP may vary
significantly from the values provided here.
Using the above assumptions, Table 14 below shows the estimated
impact of the proposed QIP payment reductions to all ESRD facilities
for payment consequence year 2014. The table details the distribution
of ESRD providers/facilities by facility size (both among facilities
considered to be small entities and by number of treatments per
facility), geography (both urban/rural and by region), and by facility
type (hospital based/freestanding facilities).

Table 14--Impact of Proposed QIP Payment Reductions to ESRD Facilities for CY 2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of
Number of facilities Payment
Number of medicare Number of expected to reduction
facilities treatments 2009 facilities with receive a (percent change
(in millions) QIP score payment in total ESRD
reduction payments)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities............................................ 5,304 38.4 4,238 737 -0.17
Facility Type:
Freestanding.............................................. 4,759 34.8 4,077 712 -0.18
Hospital-based............................................ 545 3.6 161 25 -0.06
Ownership Type:
Large Dialysis............................................ 3,396 24.8 2,981 497 -0.18
Regional Chain............................................ 848 6.4 671 108 -0.16
Independent............................................... 624 4.3 477 115 -0.24
Hospital-based (non-chain)................................ 430 2.8 109 17 -0.05
Unknown................................................... 6 0 0 0 0.00
Facility Size:
Large Entities............................................ 4,302 31.7 3,696 616 -0.18
Small Entities\1\......................................... 1,054 7.1 586 132 -0.16
Unknown................................................... 6 0 0 0 -
Urban/Rural Status:
Urban..................................................... 4,117 31.9 3,289 587 -0.18
Rural..................................................... 1,187 6.4 949 150 -0.16
Census Region:
Northeast................................................. 746 6.1 579 116 -0.19
Midwest................................................... 1,262 8 937 189 -0.19
South..................................................... 2,312 17.1 1,994 329 -0.18
West...................................................... 939 6.8 703 94 -0.12
US Territories \2\........................................ 39 0.4 25 9 -0.28
Unknown................................................... 6 0 0 0 -
Census Division:
East North Central........................................ 875 5.9 643 128 -0.18
East South Central........................................ 415 2.9 364 64 -0.19
Middle Atlantic........................................... 584 4.7 447 98 -0.21
Mountain.................................................. 321 1.7 230 26 -0.10
New England............................................... 163 1.3 132 18 -0.12
Pacific................................................... 620 5 473 68 -0.14
South Atlantic............................................ 1,180 8.7 1,014 175 -0.18
West North Central........................................ 389 2.1 294 61 -0.20
West South Central........................................ 718 5.5 616 90 -0.16
US Territories \2\........................................ 39 0.4 25 9 -0.28
Facility Size ( of total treatments):
Less than 4,000 treatments................................ 939 2 384 63 -0.09
4,000-9,999 treatments.................................... 2,101 10.9 1,822 332 -0.20
Over 10,000 treatments.................................... 2,214 25.4 2,023 338 -0.18
Unknown................................................... 50 0.2 9 4 -0.22
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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\ CY 2014 QIP Scores estimated using the measures Hemoglobin > 12 g/dl, Urea Reduction Ratio >= 65%, and Standard Hospitalization Ratio.

[[Page 40547]]

b. Alternatives Considered for 2013 and 2014 ESRD QIP
In developing the proposed PY 2013 ESRD QIP, we carefully
considered the size of the incentive to providers and facilities to
provide high-quality care. We also selected the measures adopted for
the PY 2013 ESRD QIP because these measures are important indicators of
patient outcomes and quality of care. For example, inadequate dialysis
can lead to avoidable hospitalizations, decreased quality of life, and
death. Thus, we believe the measures selected will allow CMS to
continue focusing on improving the quality of care that Medicare
beneficiaries receive from ESRD dialysis providers and facilities.
Additionally, for 2013 we considered whether to leave the
Hemoglobin Measure Less Than 10g/dL in the program. Ultimately we
decided that the clinical evidence shows that this measure is not
conducive to improving the patient quality of care that the QIP strives
for. The ESA labeling approved by the FDA on June 24, 2011 states that
no trial has identified a hemoglobin target level that does not
increase risks, and that ``in controlled trials, patients experienced
greater risks for death, serious adverse cardiovascular reactions, and
stroke when administered ESAs to target a hemoglobin level of greater
than 11g/dL. We have decided to retire the Hemoglobin Less Than 10g/dL
measure from the program, and are requesting the public's comments on
this proposal.
As stated previously for the PY 2014 ESRD QIP, we propose to
implement a QIP for Medicare ESRD dialysis providers and facilities
with payment reductions beginning January 1, 2014. Under section
1881(h) of the Act, after selecting measures, establishing performance
standards that apply to each of the measures, specifying a performance
period, and developing a methodology for assessing the total
performance of each provider and facility based on the specified
performance standards, the Secretary is required to apply an
appropriate reduction to ESRD providers and facilities that do not meet
or exceed the established total performance score. In developing the
proposed QIP, we carefully considered the size of the incentive to
providers and facilities to provide high-quality care. We also selected
the measures adopted for the 2014 ESRD QIP because these measures are
important indicators of patient outcomes and quality of care. Poor
management of anemia and inadequate dialysis, for example, can lead to
avoidable hospitalizations, decreased quality of life, and death.
Infections are also a leading cause of death and hospitalization among
hemodialysis patients, but there are proven infection control methods
that have been shown effective in reducing morbidity and mortality.
Thus, we believe the measures selected will allow CMS to continue
focusing on improving the quality of care that Medicare beneficiaries
receive from ESRD dialysis providers and facilities.
In proposing the scoring methodology for the 2014 ESRD QIP, we
considered a number of alternatives, including continuing to use the
existing scoring model. In proposing to move to a new scoring approach
for the 2014 ESRD QIP, we aim to design a scoring methodology that is
straightforward and transparent to providers/facilities, patients, and
other stakeholders. We believe that all scoring methodologies for
Medicare Value-Based Purchasing programs should be aligned as
appropriate given their specific statutory requirements.
3. Ambulance Fee Schedule
Section 106 of the Medicare and Medicaid Extenders Act of 2010 (MMEA)
As discussed in section V. of this proposed rule, section 106 of
the MMEA requires the extension of certain add-on payments for ground
ambulance services, and the extension of certain rural area
designations for purposes of air ambulance payment, through CY 2011. As
further discussed in section V, we are proposing to amend the Medicare
program regulations to conform the regulations to this section of the
MMEA. This MMEA section is essentially prescriptive and does not allow
for discretionary alternatives on the part of the Secretary.
As discussed in the July 1, 2004 interim final rule (69 FR 40288),
in determining the super-rural bonus amount under section 1834(l)(12)
of the Act, we followed the statutory guidance of using the data from
the Comptroller General (GAO) of the U.S. We obtained the same data as
the data that were used in the GAO's September 2003 Report titled
``Ambulance Services: Medicare Payments Can Be Better Targeted to Trips
in Less Densely Populated Rural Areas'' (GAO report number GAO-03-986)
and used the same general methodology in a regression analysis as was
used in that report. The result was that the average cost per trip in
the lowest quartile of rural county populations was 22.6 percent higher
than the average cost per trip in the highest quartile. As required by
section 1834(l)(12) of the Act, this percent increase is applied to the
base rate for ground ambulance transports that originate in qualified
rural areas, which were identified using the methodology set forth in
the statute. Payments for ambulance services under Medicare are
determined by the point of pick-up (by zip code area) where the
beneficiary is loaded on board the ambulance.
We determined that ground ambulance transports originating in 7,842
zip code areas (which were determined to be in ``qualified rural
areas'') out of 42,879 zip code areas, according to the July 2010 zip
code file, will realize increased base rate payments under section
106(c) of the MMEA for CY 2011; however, the number and level of
services that might occur in these areas for CY 2011 is unknown at this
time. Similarly, for purposes of assessing the impact of MMEA section
106(a) and (b), the number and level of services that might occur
during CY 2011 in rural and urban areas generally is unknown at this
time. While many elements may factor into the final impact of section
106 of the MMEA, our Office of the Actuary (OACT) estimates the impact
of this section to be $20 million for CY 2011.
4. Durable Medical Equipment (DME) and Supplies
The fiscal impact of the proposed 3-year minimum lifetime standard
for DME is likely to be minimal because we believe that this standard
is consistent with our current interpretation of durability for DME. It
is difficult to predict how many different types of new devices will be
introduced in the market in the future that may or may not meet the 3-
year minimum lifetime standard. However, even absent the rule, it is
likely that new products which do not meet the 3-year lifetime standard
would not qualify as DME based upon our current interpretation of
durability for DME. It is possible that with the clarification of the
3-year minimum lifetime standard, we would be limiting what can be
covered as DME compared to what we would have covered as DME absent
this regulatory clarification. To the extent the regulatory change is
binding to some new products, there may be reduced program cost. Also,
the revised regulation does not apply to items that were classified as
DME before the effective date of the amended regulation, which tends to
lessen the overall impact to the program. In general, we would expect
that this proposed rule would have a small, if any, savings impact on
the program.

[[Page 40548]]

C. Accounting Statement

As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4), in Table 15 below, we
have prepared an accounting statement showing the classification of the
transfers and costs associated with the various provisions of this
proposed rule.

Table 15--Accounting Statement: Classification of Estimated Transfers and Costs ESRD PPS for CY 2012
----------------------------------------------------------------------------------------------------------------
Category Transfers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers................... $160 million.
From Whom to Whom................................ Federal Government to ESRD providers.
----------------------------------------------------------------------------------------------------------------
Category Costs
----------------------------------------------------------------------------------------------------------------
Increased Beneficiary Co-insurance Payments...... $40 million.
----------------------------------------------------------------------------------------------------------------
ESRD QIP for PYs 2013 and 2014
----------------------------------------------------------------------------------------------------------------
Category Transfers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers at the 7% Discount -$31.2 million.
Rate.
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers at the 3% Discount -$30.9 million.
Rate.
----------------------------------------------------------------------------------------------------------------
From Whom to Whom................................ Federal Government to ESRD providers.
----------------------------------------------------------------------------------------------------------------
Category Costs
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ESRD Provider Costs at the $11.7 million.
7% Discount Rate.
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ESRD Provider Costs at the $11.9 million.
7% Discount Rate.
----------------------------------------------------------------------------------------------------------------
Ambulance Fee Schedule for CY 2011
----------------------------------------------------------------------------------------------------------------
Category Transfers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers................... $20 million.
From Whom to Whom................................ Federal Government to Medicare Ambulance Providers.
----------------------------------------------------------------------------------------------------------------
Durable Medical Equipment (DME) and Supplies
----------------------------------------------------------------------------------------------------------------
Category Transfers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers................... Impact of the 3 year RUL not estimated.
----------------------------------------------------------------------------------------------------------------
From Whom to Whom................................ Federal Government to DME suppliers.
----------------------------------------------------------------------------------------------------------------

VIII. Regulatory Flexibility Act Analysis

The Regulatory Flexibility Act (September 19, 1980, Pub. L. 96-
354)(RFA) requires agencies to analyze options for regulatory relief of
small entities, if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, small entities
include small businesses, nonprofit organizations, and small
governmental jurisdictions. Approximately 20 percent of ESRD dialysis
facilities are considered small entities according to the Small
Business Administration's size standards, which classifies small
businesses as those dialysis facilities having total revenues of less
than $34.5 million in any 1 year. Individuals and States are not
included in the definitions of a small entity and seventeen percent of
dialysis facilities are nonprofit organizations. For more information
on SBA's size standards, see the Small Business Administration's Web
site at http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf (Kidney Dialysis Centers are listed as 621492 with a
size standard of $34.5 million).
The claims data utilized to estimate payments to ESRD facilities in
this RFA and RIA do not identify which dialysis facilities are part of
an large dialysis organizations (LDO), regional chain, or other type of
ownership. Each individual dialysis facility has its own provider
number and bills Medicare using this number. Therefore, in previous
RFAs and RIAs presented in proposed and final rules that updated the
basic case-mix adjusted composite payment system, we considered each
ESRD to be a small entity for purposes of the RFA. However, we
conducted a special analysis for this proposed rule that enabled us to
identify the ESRD facilities that are part of an LDO or regional chain
and therefore, were able to identify individual ESRD facilities,
regardless of ownership, that would be considered small entities.
We do not believe ESRD facilities are operated by small government
entities such as counties or towns with populations 50,000 or less and
therefore, they are not enumerated or included in this estimated RFA.
Individuals and States are not included in the definition of a small
entity.
For purposes of the RFA, we estimate that approximately 20 percent
of ESRD facilities are small entities as that term is used in the RFA
(which includes small businesses, nonprofit organizations, and small
governmental jurisdictions). This amount is based on the number of ESRD
facilities shown in the ownership category in the impact Table 15.
Using the definitions in this ownership category, we consider the 624
facilities that are independent and

[[Page 40549]]

the 430 facilities that are shown as hospital-based to be small
entities. The ESRD facilities that are owned and operated by LDOs and
regional chains would have total revenues more than $34.5 million in
any year when the total revenues for all locations are combined for
each business (individual LDO or regional chain) are not included as
small entities.
For the ESRD PPS updates proposed in this rule, a hospital-based
ESRD facility (as defined by ownership type) is estimated to receive a
1.7 percent increase in payments for CY 2012. An independent facility
(as defined by ownership type) is estimated to receive a 2.0 percent
increase in payments for 2012.
Based on the proposed QIP payment reduction impacts to ESRD
facilities for PY 2013, we estimate that of the 2,059 ESRD facilities
expected to receive a payment reduction, 385 ESRD small entity
facilities would experience a payment reduction (ranging from 0.5
percent up to 2.0 of total payments), as presented in Table 15 above.
We anticipate the payment reductions to average approximately $22,934
per facility, with an average of $23,807 per small entity. Using our
projections of provider/facility performance, we then estimated the
impact of anticipated payment reductions on ESRD small entities, by
comparing the total payment reductions for the 385 small entities
expected to receive a payment reduction, with the aggregate ESRD
payments to all small entities. For the entire group of 1,054 ESRD
small entity facilities, a decrease of 0.57 percent in aggregate ESRD
payments is observed.
Furthermore, based on the proposed QIP payment reduction impacts to
ESRD facilities for PY 2014, we estimate that of the 737 ESRD entity
facilities expected to receive a payment reduction, 132 small entities
are expected to experience a payment reduction (ranging from 1.0
percent up to 2.0 of total payments), as presented in Table 15 above.
We anticipate the payment reductions to average approximately $18,820
per facility, with an average of $20,436 per small entity facility.
Using our projections of provider/facility performance, we then
estimated the impact of anticipated payment reductions on small
entities, by comparing the total payment reductions for the 132 small
entities expected to receive a payment reduction, with the aggregate
ESRD payments to all small entities. For the entire group of 1,054
small entity facilities, a decrease of 0.16 percent in aggregate ESRD
payments is observed.
Therefore, the Secretary has determined that this proposed rule
will not have a significant economic impact on a substantial number of
small entities. We solicit comment on the RFA analysis provided.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. Any
such regulatory impact analysis must conform to the provisions of
section 603 of the RFA. For purposes of section 1102(b) of the Act, we
define a small rural hospital as a hospital that is located outside of
a metropolitan statistical area and has fewer than 100 beds. We do not
believe this proposed rule would have a significant impact on
operations of a substantial number of small rural hospitals because
most dialysis facilities are freestanding. While there are 174 rural
hospital-based dialysis facilities, we do not know how many of them are
based at hospitals with fewer than 100 beds. However, overall, the 174
rural hospital-based dialysis facilities will experience an estimated
1.8 percent increase in payments. As a result, this proposed rule is
estimated to not have a significant impact on small rural hospitals.
Therefore, the Secretary has determined that this proposed rule will
not have a significant impact on the operations of a substantial number
of small rural hospitals.

IX. Unfunded Mandates Reform Act Analysis

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
(Pub. L. 104-4) also requires that agencies assess anticipated costs
and benefits before issuing any rule whose mandates require spending in
any 1 year $100 million in 1995 dollars, updated annually for
inflation. In 2011, that threshold is approximately $136 million. This
proposed rule does not include any mandates that would impose spending
costs on State, local, or Tribal governments in the aggregate, or by
the private sector, of $136 million.

X. Federalism Analysis

Executive Order 13132 on Federalism (August 4, 1999) establishes
certain requirements that an agency must meet when it promulgates a
proposed rule (and subsequent final rule) that imposes substantial
direct requirement costs on State and local governments, preempts State
law, or otherwise has Federalism implications. We have reviewed this
proposed rule under the threshold criteria of Executive Order 13132,
Federalism, and have determined that it would not have substantial
direct effects on the rights, roles, and responsibilities of States,
local or Tribal governments.

XI. Files Available to the Public via the Internet

This section lists the Addenda referred to in the preamble of this
proposed rule. Beginning in CY 2012, the Addenda for the annual ESRD
PPS proposed and final rulemakings will no longer appear in the Federal
Register. Instead, the Addenda will be available only through the
Internet. We will continue to post the Addenda through the Internet.
Readers who experience any problems accessing the Addenda that are
posted on the CMS Web site at http://www.cms.gov/ESRDPayment/PAY/list.asp, should contact Lisa Hubbard at (410) 786-4533.

List of Subjects

42 CFR Part 413

Health facilities, Kidney diseases, Medicare, Reporting and
recordkeeping requirements.

42 CFR Part 414

Proposed Rule to revise the definition of durable medical equipment
(DME) to incorporate a minimum lifetime standard of 3 years and further
refine the meaning of the term durable.
For the reasons set forth in the preamble, the Center for Medicare
& Medicaid Services proposes to amend 42 CFR chapter IV as set forth
below:

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

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

Authority : Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i),and
(n), 1861(v), 1871, 1881, 1883, and 1886 of the Social Security Act
(42 U.S.C. 1302, 1395d(d), 1395f(b), 1395(g), 1395I(a), (i), and
(n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of
Pub. L. 106-113 (133 stat. 1501A-332)

2. Section 413.232 is amended by revising paragraphs (b)(1),
(b)(2), and (f) to read as follows:

Sec. 413.232 Low-Volume adjustment.

(a) * * *
(b) * * *
(1) Furnished less than 4,000 treatments in each of the 3 cost
reporting years (based on as-filed or

[[Page 40550]]

final settled 12-consecutive month cost reports, whichever is most
recent) preceding the payment year; and
(2) Has not opened, closed, or had a change in ownership in the 3
cost reporting years (based on as-filed or final settled 12-consecutive
month cost reports, whichever is most recent) preceding the payment
year.
* * * * *
(f) To receive the low-volume adjustment an ESRD facility must
provide an attestation statement, prior to November 1st of each year,
to its Medicare administrative contractor that the facility has met all
the criteria established in paragraphs (a), (b), (c), and (d) of this
section.
* * * * *
4. Section 413.237 is amended by adding paragraph (a)(1)(v) to read
as follows:

Sec. 413.237 Outliers.

(a) * * *
(1) * * *
(v) As of January 1, 2012, the laboratory tests that comprise the
Automated Multi-Channel Chemistry panel are excluded from the
definition of outlier services.
* * * * *

PART 414--PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES

5. The authority citation for part 414 continues to read as
follows:

Authority: Secs. 1102, 1871, and 1881(b)(l) of the Social
Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(l)).

Subpart D--Payment for Durable Medical Equipment and Prosthetic and
Orthotic Devices

6. Section 414.202 is amended by revising the definition of durable
medical equipment to read as follows:

Sec. 414.202 Definitions.

* * * * *
Durable medical equipment means equipment, furnished by a supplier
or a home health agency that meets the following conditions:
(1) Can withstand repeated use.
(2) Has an expected life of at least 3 years (This expected life
requirement applies to items classified as DME after [EFFECTIVE DATE OF
FINAL RULE]).
(3) Is primarily and customarily used to serve a medical purpose.
(4) Generally is not useful to an individual in the absence of an
illness or injury.
(5) Is appropriate for use in the home.
* * * * *

Subpart H--Fee Schedule for Ambulance Services

7. Section 414.610 is amended by revising paragraphs (c)(1)
introductory text, (c)(1)(ii), (c)(5)(ii) and (h) to read as follows:

Sec. 414.610 Basis of payments.

* * * * *
(c) * * *
(1) Ground ambulance service levels. The CF is multiplied by the
applicable RVUs for each level of service to produce a service-level
base rate.
* * * * *
(ii) For services furnished during the period July 1, 2008 through
December 31, 2011, ambulance services originating in--
* * * * *
(5) * * *
(ii) For services furnished during the period July 1, 2004 through
December 31, 2011, the payment amount for the ground ambulance base
rate is increased by 22.6 percent where the point of pickup is in a
rural area determined to be in the lowest 25 percent of rural
population arrayed by population density. The amount of this increase
is based on CMS's estimate of the ratio of the average cost per trip
for the rural areas in the lowest quartile of population compared to
the average cost per trip for the rural areas in the highest quartile
of population. In making this estimate, CMS may use data provided by
the GAO.
* * * * *
(h) Treatment of certain areas for payment for air ambulance
services. Any area that was designated as a rural area for purposes of
making payments under the ambulance fee schedule for air ambulance
services furnished on December 31, 2006, must be treated as a rural
area for purposes of making payments under the ambulance fee schedule
for air ambulance services furnished during the period July 1, 2008
through December 31, 2011.

(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

Dated: June 16, 2011.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
Approved: June 20, 2011.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2011-16874 Filed 7-1-11; 4:15 pm]
BILLING CODE 4120-01-P