[Federal Register Volume 77, Number 133 (Wednesday, July 11, 2012)]
[Proposed Rules]
[Pages 40951-41000]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-16566]



[[Page 40951]]

Vol. 77

Wednesday,

No. 133

July 11, 2012

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 413 and 417





Medicare Program; End-Stage Renal Disease Prospective Payment System, 
Quality Incentive Program, and Bad Debt Reductions for All Medicare 
Providers; Proposed Rule

Federal Register / Vol. 77, No. 133 / Wednesday, July 11, 2012 / 
Proposed Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 413 and 417

[CMS-1352-P]
RIN 0938-AR13


Medicare Program; End-Stage Renal Disease Prospective Payment 
System, Quality Incentive Program, and Bad Debt Reductions for All 
Medicare Providers

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

ACTION: Proposed rule.

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SUMMARY: This rule proposes to update and make revisions to the End-
Stage Renal Disease (ESRD) prospective payment system (PPS) for 
calendar year (CY) 2013. This rule also proposes to set forth 
requirements for the ESRD quality incentive program (QIP), including 
for payment year (PY) 2015 and beyond. This proposed rule will 
implement changes to bad debt reimbursement for all Medicare providers, 
suppliers, and other entities eligible to receive bad debt. (See the 
Table of Contents for a listing of the specific issues addressed in 
this proposed rule.)

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. E.S.T. on August 31, 
2012.

ADDRESSES: In commenting, please refer to file code CMS 1352 P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1352-P, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1352-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4.By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786 9994 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:

Michelle Cruse or Terri Deutsch, (410) 786-4533, for issues related to 
ESRD.
Heidi Oumarou, (410) 786-7942, for issues related to the ESRD market 
basket.
Teresa Casey, (410) 786-7215, for issues related to the QIP.
Kellie Shannon, (410) 786-0416 for information regarding Medicare bad 
debt.

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

Electronic Access

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

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

    In the past, a majority of the Addenda referred to throughout the 
preamble of our proposed and final rules were available in the Federal 
Register. However, the Addenda of the annual proposed and final rules 
will no longer be available in the Federal Register. Instead, these 
Addenda to the annual proposed and final rules will be available only 
through the Internet on the CMS Web site. The Addenda to the End-Stage 
Renal Disease (ESRD) Prospective Payment System (PPS) rules are 
available at: http://www.cms.gov/ESRDPayment/PAY/list.asp. Readers who 
experience any problems accessing any of the Addenda to the proposed 
and final rules of the ESRD PPS that are posted on the CMS Web site 
identified above should contact Michelle Cruse at 410-786-7540.

Table of Contents

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

I. Executive Summary
    A. Purpose
    1. End-Stage Renal Disease (ESRD) Prospective Payment System 
(PPS)
    2. End-Stage Renal Disease (ESRD) Quality Incentive Program 
(QIP)
    3. Reductions to Bad Debt Payments for all Medicare Providers
    B. Summary of the Major provisions
    1. ESRD PPS
    2. ESRD QIP
    3. Reductions to Bad Debt Payments for all Medicare Providers
    C. Summary of Cost and Benefits
    1. Impacts of the Proposed ESRD PPS
    2. Impacts for ESRD QIP
    3. Impacts of Bad Debt Provisions

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II. Calendar Year (CY) 2013 End-Stage Renal Disease (ESRD) 
Prospective Payment System (PPS)
    A. Background on the End-Stage Renal Disease (ESRD) Prospective 
Payment System (PPS)
    B. Routine Updates and Proposed Policy Changes to the CY 2013 
ESRD PPS
    1. Composite Rate Portion of the ESRD PPS Blended Payment
    a. Proposed Update to the Drug Add-On to the Composite Rate 
Portion of the ESRD Blended Payment Rate
    i. Estimating Growth in Expenditures for Drugs and Biologicals 
in CY 2013
    ii. Estimating per Patient Growth
    iii. Applying the Proposed Growth Update to the Drug Add-On 
Adjustment
    iv. Proposed Update to the Drug Add-On Adjustment for CY 2013
    2. ESRD PPS Base Rate
    3. ESRD Bundled Market Basket
    a. Overview and Background
    b. Proposed Market Basket Update Increase Factor and Labor-
Related Share for ESRD Facilities for CY 2013
    c. Proposed Productivity Adjustment
    d. Calculation of the ESRDB Market Basket Update Adjusted for 
Multifactor Productivity for CY 2013
    4. Transition Budget-Neutrality Adjustment for CY 2013
    5. Proposed Updates to the Wage Index Values and Wage Index 
Floor for the Composite Rate Portion of the Blended Payment and the 
ESRD PPS Payment
    a. Reduction to the ESRD Wage Index Floor
    b. Policies For Areas With No Wage Data--Segment 1
    c. Proposed Wage Index Budget-Neutrality Adjustment
    d. ESRD PPS Wage Index Tables
    6. Proposed Drug Policy Changes
    a. Daptomycin
    b. Alteplase and Other Thrombolytics
    c. Part B Drug Pricing
    7. Proposed Revisions to the Outlier Policy
    a. Impact of Proposed Changes to the Outlier Policy
    b. Outlier Policy Percentage
    C. Clarifications Regarding the ESRD PPS
    1. Reporting Composite Rate Items and Services
    2. ESRD Facility Responsibilities for ESRD-Related Drugs and 
Biologicals
    3. Use of AY Modifier
III. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP) 
for Payment Year (PY) 2015
    A. Background
    B. Considerations in Updating and Expanding Quality Measures 
under the ESRD QIP for PY 2015 and Subsequent PYs
    1. Value-Based Purchasing (VBP) Overview
    2. Brief Overview of Proposed PY 2015 Measures
    3. PY 2014 Mineral Metabolism Measure
    4. Measures Application Partnership Review
    C. Proposed Measures for the PY 2015 ESRD QIP and Subsequent PYs 
of the ESRD QIP
    1. PY 2014 Measures Continuing for PY 2015 and Subsequent 
Payment Years
    2. Expansion of Two PY 2014 Measures for PY 2015 and Subsequent 
Payment Years
    a. Proposed Expanded NHSN Dialysis Event Reporting Measure
    b. Proposed Expanded Mineral Metabolism Reporting Measure
    3. New Measures Proposed for PY 2015 and Subsequent Payment 
Years of the ESRD QIP
    a. Proposed Kt/V Dialysis Adequacy Measure Topic
    b. Hypercalcemia
    c. Proposed Anemia Management Reporting Measure
    4. Measures Under Consideration for Future Payment Years of the 
ESRD QIP
    a. Standardized Hospitalization Ratio (SHR)
    b. Standardized Mortality Ratio (SMR)
    c. Public Reporting of SHR and SMR Measures
    5. Other Potential Future Measures Under Development
    a. Thirty-Day Hospital Readmissions
    b. Efficiency
    c. Population/Community Health
    6. Proposed Scoring for the PY 2015 ESRD QIP
    7. Proposed Performance Period for the PY 2015 ESRD QIP
    8. Proposed Performance Standards for the PY 2015 ESRD QIP
    a. Proposed Clinical Measure Performance Standards
    b. Estimated Performance Standards
    c. Proposed Performance Standards for PY 2015 Reporting Measures
    9. Proposed Scoring for the PY 2015 ESRD QIP Proposed Measures
    a. Proposals for Scoring Facility Performance on Clinical 
Measures Based on Achievement
    b. Proposals for Scoring Facility Performance on Clinical 
Measures Based on Improvement
    c. Proposals for Calculating the Reporting Measure Scores
    10. Proposals for Weighting the PY 2015 ESRD QIP Measures and 
Calculation of the PY 2015 ESRD QIP Total Performance Score
    a. Proposals for Weighting Individual Measures To Compute 
Measure Topic Scores for the Kt/V Dialysis Adequacy Measure Topic 
and the Vascular Access Type Measure Topic
    b. Proposals for Weighting the Total Performance Score
    c. Examples of the Proposed PY 2015 ESRD QIP Scoring Methodology
    11. Proposed Minimum Data for Scoring Measures for the PY 2015 
ESRD QIP
    a. Proposed Minimum Data for Scoring Measures for the PY 2015 
ESRD QIP
    i. Proposed Case Minimum for Clinical Measures
    ii. Proposed Adjustment Methodology
    b. Proposed Minimum Data Requirements for Reporting Measures 
From New Facilities
    12. Proposed Payment Reductions for the PY 2015 ESRD QIP
    13. Data Validation
    14. Proposals for Scoring Facilities Whose Ownership has Changed
    15. Proposals for Public Reporting Requirements
IV. Limitation on Payments to All Providers, Suppliers and Other 
Entities Entitled to Bad Debt
    A. Background
    B. Section 3201 of The Middle Class Tax Extension and Job 
Creation Act of 2012 (Pub. L. 112-96)
    C. Summary of Provisions of the Proposed Rule
    1. Section 3201 of the Middle Class Tax Extension and Job 
Creation Act of 2012 (Pub. L. 112-96)
    2. Remove and Reserve Sec.  413.178
    3. Technical Corrections
    D. Proposed Changes to Medicare Bad Debt Policy
    1. Proposed Changes to 42 CFR 413.89(h)
    2. Rationale for Removing 42 CFR 413.178
    3. Technical Corrections to 42 CFR 417.536(f)(1)
V. Collection of Information Requirements
    A. Legislative Requirement for Solicitation of Comments
    B. Requirements in the Regulation Text
    C. Additional Information Collection Requirements
    1. ESRD PPS
    2. QIP
VI. Response to Comments
VII. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impact
    B. Detailed Economic Analysis
    1. CY 2013 End-Stage Renal Disease (ESRD) Prospective Payment 
System (PPS)
    a. Effects on ESRD Facilities
    b. Effects on Other Providers
    c. Effects on the Medicare Program
    d. Effects on Medicare Beneficiaries
    e. Alternatives Considered
    2. QIP
    C. Accounting Statement
VIII. Regulatory Flexibility Act Analysis
IX. Unfunded Mandates Reform Act Analysis
X. Federalism Analysis--
XI. Files Available to the Public via the Internet
Regulations Text
Acronyms

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

AMCC Automated Multi-Channel Chemistry
ASP Average Sales Price
AV Arteriovenous
BLS Bureau of Labor Statistics
BMI Body Mass Index
BSA Body Surface Area
CBSA Core-Based Statistical Area
CCN CMS Certification Number
CDC Centers for Disease Control and Prevention
CLABSI Central Line Access Bloodstream Infections
CFR Code of Federal Regulations
CIP Core Indicators Project
CMS Centers for Medicare & Medicaid Services
CPM Clinical Performance Measure

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CPT Current Procedural Terminology
CROWNWeb Consolidated Renal Operations in a Web-Enabled Network
CY Calendar Year
DFC Dialysis Facility Compare
DFR Dialysis Facility Report
DME Durable Medical Equipment
ESA Erythropoiesis Stimulating Agent
ESRD End-Stage Renal Disease
ESRDB End-Stage Renal Disease Bundled
FDA Food and Drug Administration
FI/MAC Fiscal Intermediary/Medicare Administrative Contractor
FY Fiscal Year
GDP Gross Domestic Product
HAI Healthcare-Associated Infections
HCPCS Healthcare Common Procedure Coding System
HD Hemodialysis
HHD Home Hemodialysis
ICD-9-CM International Classification of Diseases, 9th Edition, 
Clinical Modifications
ICH CAHPS In-Center Hemodialysis Consumer Assessment of Healthcare 
Providers and Systems
IGI IHS Global Insight
IPPS Inpatient Prospective Payment System
KDIGO Kidney Disease: Improving Global Outcomes
KDOQI Kidney Disease Outcome Quality Initiative
Kt/V A measure of dialysis adequacy where K is dialyzer clearance, t 
is dialysis time, and V is total body water volume
LDO Large Dialysis Organization
MAP Medicare Allowable Payment
MCP Monthly Capitation Payment
MIPPA Medicare Improvements for Patients and Providers Act of 2008 
(Pub. L. 110-275)
MMA Medicare Prescription Drug, Improvement and Modernization Act of 
2003
MMEA Medicare and Medicaid Extenders Act of 2010 Pub. L. 111-309
MFP Multifactor Productivity
NHSN National Healthcare Safety Network
NQF National Quality Forum
PD Peritoneal Dialysis
PFS Physician Fee Schedule
PPS Prospective Payment System
PSR Performance Score Report
PY Payment Year
QIP Quality Incentive Program
REMIS Renal Management Information System
RFA Regulatory Flexibility Act
RUL Reasonable Useful Lifetime
SBA Small Business Administration
SIMS Standard Information Management System
SHR Standardized Hospitalization Ratio
SSA Social Security Administration
The Act Social Security Act
The Affordable Care Act The Patient Protection and Affordable Care 
Act
URR Urea Reduction Ratio
VBP Value Based Purchasing

I. Executive Summary

A. Purpose

1. End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)
    This rule proposes to update and make revisions to the End-Stage 
Renal Disease (ESRD) prospective payment system (PPS) for calendar year 
(CY) 2013. In accordance with section 1881(b)(14) of the Social 
Security Act (the Act), as added by section 153(b) of the Medicare 
Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 
110-275), Centers for Medicare & Medicaid Services (CMS) implemented a 
case-mix adjusted bundled PPS for Medicare outpatient ESRD dialysis 
services beginning January 1, 2011. The ESRD PPS replaced the basic 
case-mix adjusted composite payment system and the methodologies for 
the reimbursement of separately billable outpatient ESRD services.
    Also, section 1881(b)(14)(F) of the Act, as added by section 153(b) 
of MIPPA and amended by section 3401(h) of the Affordable Care Act 
(Pub. L. 111-148), established that beginning CY 2012, and each 
subsequent year, the Secretary shall reduce the market basket increase 
factor by a productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act. In addition, the application of the 
productivity adjustment may result in the increase factor being less 
than 0.0 percent for a year.
2. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP)
    This rule also proposes to set forth requirements for the ESRD 
Quality Incentive Program (QIP), including payment year (PY) 2015. The 
program is authorized under section 153(c) of MIPPA, which added 
section 1881(h) to the Social Security Act (the Act). The ESRD QIP is 
the most recent step in fostering improved patient outcomes by 
establishing incentives for dialysis facilities to meet performance 
standards established by CMS.
3. Reductions to Bad Debt Payments for All Medicare Providers
    This proposed rule would also implement the changes to the 
limitations on payments for bad debt reimbursement set forth in section 
3201 of The Middle Class Tax Extension and Job Creation Act of 2012 
(Pub. L. 112-96) by revising 42 CFR 413.89, Bad debts, charity, and 
courtesy allowances.

B. Summary of the Major Provisions

1. ESRD PPS
     Update to the composite and ESRD PPS base rate for CY 
2013: For CY 2013, we propose an ESRD PPS base rate of $240.88. This 
amount reflects the application of the ESRD bundled (ESRDB) market 
basket reduced by the productivity adjustment, or 2.5 percent, and the 
wage index budget-neutrality adjustment factor of 1.000826 to the CY 
2012 ESRD PPS base rate of $234.81. The proposed base rate is 
applicable to both the ESRD PPS portion of the blended payment under 
the transition and payments under the full PPS. For CY 2013, we propose 
a composite rate portion of the ESRD PPS blended payment of $145.49. 
This amount reflects the CY 2012 composite rate of $141.94, increased 
by the ESRDB market basket reduced by the productivity adjustment.
     Update to the composite rate drug add-on for CY 2013: We 
are not proposing any changes to the methodology used to compute the 
drug add-on for CY 2013; we are only updating the data used to 
calculate the drug add-on for CY 2013. Using 6 years of ASP drug 
expenditure data, and other data, we estimate a 3.0 percent decrease in 
aggregate drug expenditures and a 4.6 percent increase in enrollment. 
Using these estimates, we project a 7.3 percent decrease in per patient 
growth of drug expenditures for CY 2013. Thus, we are projecting that 
the combined growth in per patient utilization and pricing for CY 2013 
would result in a decrease to the drug add-on equal to 1.0 percentage 
points. We are, however, proposing to apply a zero update to the drug 
add-on adjustment and maintain the $20.33 per treatment drug add-on 
amount for CY 2013. Because the market basket minus productivity that 
is applied to the composite rate increases the composite rate, the add-
on adjustment of 14.3 percent is reduced to 14.0 percent to maintain 
the drug add-on at $20.33.
     Market basket and productivity adjustment: Under section 
1881(b)(14)(F) of the Act, beginning in CY 2012, ESRD PPS payment 
amounts and the composite rate portion of the transition blended 
payment amounts shall be annually increased by an ESRD market basket 
percentage increase factor reduced by a multi-factor productivity (MFP) 
adjustment. The proposed CY 2013 ESRDB market basket increase factor is 
3.2 percent. The current forecast of the proposed CY 2013 MFP 
adjustment is 0.7 percent. The resulting proposed CY 2013 MFP-adjusted 
ESRDB market basket update is equal to 2.5 percent.

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     The transition budget-neutrality adjustment factor: For CY 
2013, we are proposing to apply the transition budget neutrality 
adjustment methodology established in CY 2011. This results in a 0 
percent adjustment. Therefore, for CY 2013 we propose a 0 percent 
reduction to be applied to both the blended payments made under the 
transition and payments made under the 100 percent ESRD PPS for renal 
dialysis services furnished January 1, 2013 through December 31, 2013.
     Updates to the wage index and wage index floor: We adjust 
wage indices on an annual basis using the most current hospital wage 
data to account for differing wage levels in areas in which ESRD 
facilities are located. In CY 2013, we are not proposing any changes to 
the application of the wage index budget-neutrality adjustment factor 
and will continue to apply the budget-neutrality adjustment to the pre-
floor, pre-reclassified wage index values for the composite rate 
portion of the blended payment and to the base rate for the ESRD PPS. 
Over the past several years, we have been gradually decreasing the wage 
index floor by 0.05 in an effort to gradually phase out the floor and 
in CY 2013 will continue to do so. Therefore, in CY 2013, we are 
reducing the wage index floor from 0.55 to 0.50. We also applied the 
wage index budget-neutrality adjustment factor to the wage index floor 
of 0.500 which results in an adjusted wage index floor of 0.501 (0.500 
x 1.001538) for CY 2013.
     Update to the outlier policy: We are updating the outlier 
services fixed dollar loss amounts and Medicare Allowable Payments 
(MAPs) for CY 2013 using 2011 data. Based on the use of more current 
data, the fixed-dollar loss amount for pediatric patients would 
decrease from $71.64 to $50.15 and the MAP amount would decrease from 
$45.44 to $43.63 as compared to CY 2012 values. For adult patients, the 
fixed-dollar loss amount drops from $141.21 to $113.35 and the MAP 
amount drops from $78.00 to $61.06. Because of the decline in 
utilization associated with the implementation of the expanded bundle, 
the 1 percent target for outlier payments was not achieved in CY 2011. 
Use of 2011 data to recalibrate the thresholds, reflecting lower 
utilization of EPO and other outlier services, is expected to result in 
aggregate outlier payments close to the 1 percent target in CY 2013. We 
believe this update to the outlier MAP and fixed dollar loss amounts 
for CY 2013 will increase payments for ESRD beneficiaries requiring 
higher resource utilization in accordance with a 1 percent outlier 
policy.
     Policy reiteration (composite rate drugs and AY modifier): 
Under the composite and basic case-mix adjusted composite rate payment 
systems, certain drugs were included in the composite rate and were not 
eligible for separate payment. Our analyses of claims show that ESRD 
facilities are continuing to report composite rate drugs. In this 
proposed rule, we are reiterating that any item or service included in 
the composite rate should not be identified on ESRD claims.
     An AY modifier can be appended to claims for drugs and 
laboratory tests that are not ESRD-related to allow for separate 
payment. Our analyses of claims show that there are ESRD facilities and 
laboratories that are appending the AY modifier to drugs and laboratory 
tests that we believe are ESRD-related, resulting in separate payment. 
In this proposed rule, we are reiterating the purpose of the AY 
modifier and emphasizing that we are continuing our monitoring efforts. 
We are also indicating that we may consider eliminating the AY modifier 
in future rulemaking.
2. ESRD QIP
    This proposed rule proposes to implement new requirements for the 
ESRD QIP. It proposes to continue some of the previous ESRD QIP 
measures, add new measures, and expand the scope of some of the 
existing measures to cover the measure topics as follows:

 To evaluate anemia management:
    [cir] Hemoglobin Greater Than 12 g/dL, a clinical measure.
    [cir] Anemia Management, a reporting measure.*
 To evaluate dialysis adequacy:
    [cir] A clinical Kt/V measure for adult hemodialysis patients.*
    [cir] A clinical Kt/V measure for adult peritoneal dialysis 
patients.*
    [cir] A clinical Kt/V measure for pediatric hemodialysis patients.*
 To determine whether patients are treated using the most 
beneficial type of vascular access:
    [cir] Vascular Access Type, a clinical measure topic comprised of 
an arteriovenous fistula and catheter measure.
 To address effective bone mineral metabolism management:
    [cir] Hypercalcemia, a clinical measure.*
    [cir] Mineral Metabolism, a reporting measure.
 To address safety:
    [cir] NHSN Dialysis Event reporting measure.
 To assess patient and caregiver experience:
    [cir] ICH CAHPS survey reporting measure.

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

    It also proposes to establish CY 2013 as the performance period for 
the PY 2015 ESRD QIP, establish performance standards for each measure, 
and adopt scoring and payment reduction methodologies that are similar 
to those finalized for the PY 2014 ESRD QIP.
3. Reductions to Bad Debt Payments for all Medicare Providers
    This rule would also implement the statutory changes to the 
limitations on payments for bad debt reimbursement by revising 42 CFR 
413.89, Bad debts, charity, and courtesy allowances. We are also 
proposing to move 42 CFR 413.178(a) to 42 CFR 413.89(h)(3), and to move 
42 CFR 413.178(d)(2) to 42 CFR 413.89(i)(2) and to remove 42 CFR 
413.178(b), (c) and (d)(1), as they are duplicated and discussed at 42 
CFR 413.89. Additionally, we are making a technical correction to the 
cross reference in 42 CFR 417.536(f)(1) to Medicare bad debt 
reimbursement policy.

C. Summary of Costs and Benefits

    In section VII of this proposed rule, we set forth a detailed 
analysis of the impacts that the proposed changes would have on 
affected entities and beneficiaries. The impacts include the following:
1. Impacts of the Proposed ESRD PPS
    The impact chart in section VII.B.1.a of this proposed rule 
displays the estimated change in payments to ESRD facilities in CY 2013 
as compared to estimated payments in CY 2012. The overall impact of the 
CY 2013 changes is projected to be a 3.1 percent increase in payments. 
Hospital-based ESRD facilities have an estimated 3.7 percent increase 
in payments compared with freestanding facilities with an estimated 3.0 
percent increase. Urban facilities are expected to receive an estimated 
payment increase of 3.1 percent compared to an estimated 3.0 percent 
increase for rural facilities. We expect a 2.4 percent decrease in 
estimated payments as a result of wage index adjustments for Puerto 
Rico and the Virgin Islands. However, this is offset by the impact of 
the outlier policy, resulting in an estimated 0.4 percent increase in 
payment. The estimated 3.1 percent overall payment increase would 
result in a $250 million cost to Medicare and a $70 million cost to 
beneficiaries. In 2013, a 2.5 percent market basket increase would 
result in a $200 million

[[Page 40956]]

cost to Medicare and a $50 million cost to beneficiaries. The outlier 
fixed dollar loss and MAP adjustments in CY 2013 would result in a $30 
million cost to Medicare and a $10 million cost to beneficiaries.
2. Impacts for ESRD QIP
    The overall economic impact of the proposed ESRD QIP is an 
estimated $20.9 million for PY 2015. We expect the total payment 
reductions to be approximately $8.5 million, and the costs associated 
with the collection of information requirements for certain measures to 
be approximately $12.4 million.
    The estimated payment reduction will continue to incentivize 
facilities to provide higher quality care to beneficiaries. The 
reporting measures that result in costs associated with the collection 
of information are critical to better understanding the quality of care 
beneficiaries receive, particularly a patient's experience of care, and 
will be used to incentivize improvements in the quality of care 
provided.
3. Impacts of Bad Debt Provisions
    We are codifying the provisions of section 3201 of The Middle Class 
Tax Extension and Job Creation Act of 2012 that requires reductions in 
bad debt reimbursement to all providers eligible to receive bad debt 
reimbursement; these provisions are specifically prescribed by statute 
and thus, are self-implementing. There will be a $10.9 billion savings 
to the program over 10 years resulting from these self-implementing 
reductions in bad debt reimbursement.

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

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

    On August 12, 2010, we published in the Federal Register a final 
rule (75 FR 49030 through 49214) titled, ``End-Stage Renal Disease 
Prospective Payment System'', hereinafter referred to as the CY 2011 
ESRD PPS final rule. In the CY 2011 ESRD PPS final rule, we implemented 
a case-mix adjusted bundled PPS for Medicare outpatient ESRD dialysis 
services beginning January 1, 2011, in accordance with section 
1881(b)(14) of the Act, as added by section 153(b) of MIPPA.
    On November 10, 2011, we published in the Federal Register, a final 
rule (76 FR 70228 through 70316) titled, ``Medicare Program; End-Stage 
Renal Disease Prospective Payment System and Quality Incentive Program; 
Ambulance Fee Schedule; Durable Medical Equipment; and Competitive 
Acquisition of Certain Durable Medical Equipment, Prosthetics, 
Orthotics and Supplies (hereinafter referred to as the CY 2012 ESRD PPS 
final rule). In that final rule, for the ESRD PPS, we made a number of 
routine updates for CY 2012, implemented the second year of the 
transition to the ESRD PPS, made several policy changes and 
clarifications, and made technical changes with regard to the CY 2011 
ESRD PPS final rule. In that rule, we finalized the following:
     A composite rate of $141.94 per treatment for renal 
dialysis services that is used in the composite rate portion of the 
ESRD PPS payment for ESRD facilities receiving blended payments during 
the transition. The $141.94 reflected the addition of the CY 2011 Part 
D per treatment amount ($.49) for oral ESRD drugs with an injectable 
equivalent to the CY 2011 composite rate of $138.53, and the 
application of the ESRD Bundled (ESRDB) market basket update of 3.0 
percent minus a multifactor productivity adjustment of 0.9 percent, 
that is, a 2.1 percent increase.
     A zero update to the drug add-on adjustment and 
maintaining the $20.33 per treatment drug add-on amount for the 
composite rate portion of the ESRD PPS blended payment. This results in 
a 14.3 percent drug add-on adjustment to the composite rate portion of 
the ESRD PPS blended payment.
     An ESRD PPS base rate of $234.81 per treatment for renal 
dialysis services. The ESRD PPS base rate applies to the ESRD PPS 
portion of the blended payments during the transition and to the ESRD 
PPS payments. This amount reflected the CY 2012 ESRDB market basket 
update of 3.0 percent minus a multifactor productivity adjustment of 
0.9 percent, that is, a 2.1 percent increase. This amount also 
reflected the application of the wage index budget-neutrality 
adjustment of 1.001520.
     A zero percent transition budget-neutrality adjustment 
factor for claims for renal dialysis services furnished from April 1, 
2011 through December 31, 2011 and for CY 2012.
     The labor-related share of 41.737 percent for the CY 2012 
ESRD PPS payment and the labor-related share of 53.711 percent for the 
CYs 2012 and 2013 ESRD composite rate portion of the blended payment 
for those ESRD facilities receiving a blended payment during the 
transition.
     The methodology for CY 2012 and subsequent years for 
computing the wage index budget-neutrality adjustment factors. For CY 
2012, the wage index budget-neutrality adjustment factor for the 
composite portion of the ESRD PPS blended payment is 1.002830, and is 
applied to the wage index values. The wage index budget-neutrality 
adjustment factor for the ESRD PPS portion of the blended payment and 
for the ESRD PPS is 1.001520, and is applied to the ESRD PPS base rate.
     A 0.05 reduction to the wage index floor for CYs 2012 and 
2013 which resulted in a wage index floor of 0.550 and 0.500, 
respectively. For CY 2012, the wage index floor under the composite 
rate portion of the blended payment is 0.552 after the wage index 
budget-neutrality adjustment factor is applied to 0.550. The wage index 
floor under the ESRD PPS is 0.550.
     The methodologies used for CY 2012 and subsequent years of 
computing a wage index value for areas without hospital data for urban 
and rural geographic areas and for Puerto Rico.
     Using the ESRDB market basket forecasts for the ESRD PPS 
transition payment updates.
     The methodology for calculating and applying the 
multifactor productivity adjustment to the ESRDB market basket.
     An annual deadline of November 1st for ESRD facilities to 
submit an attestation if they believe that they are eligible for the 
low-volume payment adjustment.
     Changes to 42 CFR 413.232(b)(1) and (b)(2) to indicate 
that in the absence of an ESRD facility's final settled 12-consecutive 
month cost report, a fiscal intermediary (FI) or A/B Medicare 
Administrative Contractor (MAC) can review the ESRD facility's as-filed 
12-consecutive month cost report when determining if an ESRD facility 
meets the low-volume criteria.
     Eliminating the restriction on vancomycin to allow ESRD 
facilities to receive separate payment by appending the AY modifier on 
the claim for vancomycin when the diagnosis reported on the claim 
indicates the drug was used to treat a non-ESRD related condition.
     Incorporating the Part B drug overfill policy into our 
outlier policy and for purposes of the composite rate portion of the 
blended payment during the transition, that is, ESRD facilities may 
only report units and charges for drugs and biologicals actually 
purchased.
     Using a body surface area (BSA) national average of 1.87, 
which is the latest national average as the reference point for the 
computation of the BSA

[[Page 40957]]

adjustment for both the composite rate portion of the ESRD PPS blended 
payment and for the ESRD PPS. We will also review the BSA national 
average on the CY 2012 claims and every 5 years thereafter.
     Changes to the outlier provision which included: (1) 
Eliminating the issuance of a specific list of eligible outlier service 
drugs, (2) including antibiotics furnished in the home to treat 
catheter site infections or peritonitis associated with peritoneal 
dialysis as an eligible outlier service, (3) excluding thrombolytic 
drugs and biologicals from the outlier policy, (4) including 
testosterone and anabolic steroids that are used for anemia management 
as an eligible outlier service, and (5) excluding the laboratory tests 
that comprise the Automated Multi-Channel Chemistry panel from the 
definition of outlier services and revising Sec.  413.237 to indicate 
this change. Finally, in the CY 2012 ESRD PPS final rule (76 FR 70228), 
we clarified the following:
     For the low-volume payment adjustment, (1) ``payment 
year'' was defined as the period of time that we use for determining 
payment to ESRD facilities, which is a calendar year; (2) 
``eligibility'' years was defined as the 3 years preceding the payment 
year and are based on cost reporting years; (3) for the cost reporting 
years, ESRD facilities must report costs for 12-consectutive months; 
(4) in the absence of a final-settled cost report, an FI or A/B MAC can 
review the ESRD facility's as-filed cost report when verifying 
eligibility; and (5) if the FI or A/B MAC finds that the ESRD facility 
did not meet low-volume eligibility based on the final settled cost 
report, they should discontinue application of the low-volume 
adjustment and recoup the inappropriate payments.
     The ICD-9-CM diagnosis codes that are eligible for the co-
morbidity payment adjustments are subject to the annual ICD-9-CM coding 
changes that occur in the hospital inpatient PPS final rule and 
effective October 1st of every year.
     Laboratory tests that are performed for Medicare ESRD 
beneficiaries in an emergency room or emergency department as part of 
the general work-up of the patient necessary for diagnosis are not 
considered to be renal dialysis services.

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

1. Composite Rate Portion of the ESRD PPS Blended Payment
    Section 1881(b)(14)(E)(i) of the Act requires a 4-year transition 
under the ESRD PPS. This proposed rule would implement the third year 
of the transition period for those ESRD facilities going through the 
transition rather than electing to receive payment based on 100 percent 
of the payment amount under the ESRD PPS. For CY 2013, under 42 CFR 
Sec.  413.239(a)(3), facilities that go through the transition will 
receive a blended rate equal to the sum of 75 percent of the full ESRD 
PPS amount and 25 percent of the basic case-mix adjusted composite 
payment amount. Accordingly, as a result of the transition period under 
the ESRD PPS, we continue to update the composite rate portion of the 
blended payment during the 4-year transition, (that is, CY 2011 through 
2013), which would include updates to the drug add-on adjustment 
required by section 1881(b)(12)(F) of the Act, as well as the wage 
index values (which includes a budget-neutrality factor) used to adjust 
the labor component of the composite rate. The proposed updates to the 
drug add-on adjustment under the composite rate portion of the blended 
rate can be found in section II.B.1.a of this proposed rule and the 
wage index is discussed in section II.B.5 of this proposed rule. For CY 
2013, we are also proposing to update the second part of the transition 
budget-neutrality adjustment to reflect updated data. The transition 
budget-neutrality adjustment is applied to both the blended payments 
under the transition and payments under the ESRD PPS. The discussion 
regarding the proposed transition budget-neutrality adjustment can be 
found in section II.B.4 of this proposed rule.
    As discussed in section II.B.3 of this proposed rule, section 
1881(b)(14)(F)(ii) of the Act, as added by section 153(b) of MIPPA and 
amended by section 3401(h) of the Affordable Care Act, provides that, 
for years during which the transition applies, the composite rate 
portion of the blend shall be annually increased by the ESRDB market 
basket and, for CY 2012 and each subsequent year, the ESRDB market 
basket shall be reduced by the productivity adjustment described in 
section 1886(b)(3)(B)(xi)(II) of the Act. In sections II.B.3.b and 
II.B.3.c of this proposed rule, we describe the basis for the proposed 
CY 2013 ESRDB market basket increase of 3.2 percent, and the 
productivity offset of 0.7 percent, yielding a proposed forecasted rate 
of increase in the base rate of 2.5 percent.
    For CY 2013, the composite rate portion of the ESRD PPS blended 
payment would be $145.49. The $145.49 reflects the CY 2012 composite 
rate of $141.94 increased by the ESRDB market basket reduced by the 
productivity adjustment (3.2 percent minus 0.7 percent) of 2.5 percent.
a. Proposed Update to the Drug Add-on to the Composite Rate Portion of 
the ESRD Blended Payment Rate
    Section 1881(b)(14)(E)(i) of the Act requires a 4-year transition 
under the ESRD PPS. Under Sec.  413.239, ESRD facilities were permitted 
to make a one-time election by November 1, 2010, to be excluded from 
the transition and receive full payment under the ESRD PPS. Section 
413.239(a)(3) provides for ESRD facilities that elected to receive 
payment under the transition to be paid a blended amount that will 
consist of 25 percent of the basic case-mix adjusted composite payment 
system and 75 percent of the ESRD PPS payment in CY 2013. Thus, during 
the ESRD PPS transition, we must continue to update the composite rate 
portion of the blended payment amount which includes an update to the 
drug add-on.
    As required under section 1881(b)(12) of the Act, the basic case-
mix adjusted composite payment system includes services in the 
composite rate and an add-on to the composite rate to account for the 
difference between pre-MMA payments for separately billed drugs and the 
revised drug pricing specified in the statute. In this proposed rule, 
we are not proposing any changes to the drug add-on methodology in CY 
2013, but are merely updating the data used in computing the drug add-
on as described below.
i. Estimating Growth in Expenditures for Drugs and Biologicals in CY 
2013
    Section 1881(b)(12)(F) of the Act specifies that the drug add-on 
increase must reflect ``the estimated growth in expenditures for drugs 
and biologicals (including erythropoietin) that are separately billable 
* * *''. By referring to ``expenditures'', we believe the statute 
contemplates that the update would account for both increases in drug 
prices, as well as increases in utilization of those drugs.
    In order to account for increases in drug prices and utilization, 
since we now have 6 years of drug expenditure data based on ASP 
pricing, for CY 2013, we continue estimating growth in drug 
expenditures based on the trends in available data. We then removed 
growth in enrollment for the same time period

[[Page 40958]]

from the expenditure growth so that the residual reflects the per 
patient expenditure growth (which includes price and utilization 
combined).
    To estimate drug expenditure growth using trend analysis, for CY 
2013, we looked at the average annual growth in total drug expenditures 
between 2006 and 2011. First, we estimated the total drug expenditures 
for all ESRD facilities in CY 2011. We used the final CY 2006 through 
CY 2010 ESRD claims data and the latest available CY 2011 ESRD facility 
claims, updated through December 31, 2011 (that is, claims with dates 
of service from January 1 through December 31, 2011, that were 
received, processed, paid, and passed to the National Claims History 
File as of December 31, 2011). For the CY 2013 PPS final rule, we 
intend to use additional updated CY 2011 claims with dates of service 
for the same timeframe. This updated CY 2011 data file will include 
claims received, processed, paid, and passed to the National Claims 
History File as of June 30, 2012. While the CY 2011 claims file used in 
this proposed rule is the most current available, we recognize that it 
does not reflect a complete year, as claims with dates of service 
towards the end of the year have not all been processed. To more 
accurately estimate the update to the drug add-on, completed aggregate 
drug expenditures are required.
    Next, for CY 2013, based on analysis of the 2010 claims, we 
inflated the CY 2011 drug expenditures to estimate the June 30, 2012 
update of the 2011 claims file. We used the relationship between the 
December 2010 and the June 2011 versions of 2010 claims to estimate the 
more complete 2011 claims that will be available in June 2012 and 
applied that ratio to the 2011 claims data from the December 2011 
claims file. The net adjustment to the CY 2011 claims data is an 
increase of 9.7 percent to the 2011 expenditure data. This adjustment 
allows us to more accurately compare the 2010 and 2011 drug expenditure 
data to estimate per patient growth.
    Using the completed full-year 2011 drug expenditure figure, we 
calculated the average annual change in drug expenditures from 2006 
through 2011. This average annual change showed a decrease of 3.0 
percent in drug expenditures from 2006 through 2011. We used this 3.0 
percent decrease to project drug expenditures for both 2012 and 2013.
ii. Estimating per Patient Growth
    Once we had the projected growth in drug expenditures from 2012 to 
2013, we calculated per patient growth between CYs 2012 and 2013 by 
removing the estimated growth in enrollment data between CYs 2012 and 
2013. We estimate a 4.6 percent growth in fee for service Medicare 
dialysis beneficiary enrollment between CYs 2012 and 2013. To obtain 
the per-patient estimated growth in expenditures, we divided the total 
drug expenditure change of a 3 percent decrease between 2012 and 2013 
(0.97) by enrollment growth of 4.6 percent (1.046) for the same 
timeframe. The result is a per-patient growth factor equal to 0.927 
(0.97/1.046 = 0.927). Thus, we are projecting a 7.3 percent decrease (-
7.3% = - .073 = 0.927 - 1) in per patient growth in drug expenditures 
between 2012 and 2013.
iii. Applying the Proposed Growth Update to the Drug Add-On Adjustment
    In the CY 2012 ESRD PPS proposed and final rules, we provided an 
incorrect citation to the CY 2006 PFS final rule with comment in the 
discussion of the application of the projected growth update 
percentages. The correct citationto this discussion in the CY 2006 PFS 
final rule with comment is 70 FR 70166 and 70167. In that rule, we 
applied the projected growth percentage to the total amount of drug 
add-on dollars established for CY 2005 to establish a dollar amount for 
the CY 2006 growth. In addition, we projected the growth in dialysis 
treatments for CY 2006 based on the projected growth in ESRD 
enrollment. We divided the projected total dollar amount of the CY 2006 
growth by the projected total dialysis treatments to develop the per 
treatment growth update amount. This growth update amount, combined 
with the CY 2005 per treatment drug add-on amount, resulted in a 14.7 
percent adjustment to the composite rate for CY 2006.
    Subsequent to the publication of the CY 2006 PFS final rule with 
comment, the Deficit Reduction Act (DRA) of 2005 (Pub. L. 109-171) was 
enacted on February 8, 2006. Section 5106 of the DRA amended section 
1881(b)(12) of the Act to require the Secretary to increase the amount 
of the composite rate component of the basic case-mix adjusted system 
for dialysis services furnished on or after January 1, 2006 by 1.6 
percent above the amount of the composite rate for such services 
furnished on December 31, 2005. We issued Change Request (CR) 4291, 
Transmittal 849, entitled, ``Update to the ESRD Composite Payment 
Rates'' on February 10, 2006 to instruct contractors to implement this 
change. We stated in CR 4291 that because the drug add-on adjustment is 
determined as a percentage of the composite rate, it was necessary to 
adjust the drug add-on percentage to account for the 1.6 percent 
increase in the composite payment rate. Therefore, the total drug add-
on adjustment to the composite payment rate for 2006 was 14.5 percent 
instead of 14.7 percent.
    In the CY 2007 PFS final rule with comment period (71 FR 69683 and 
69684), we revised our update methodology by applying the growth update 
to the per treatment drug add-on amount. That is, for CY 2007, we 
applied the growth update factor of 4.03 percent to the $18.88 per 
treatment drug add-on amount resulting in an updated per treatment drug 
add-on amount of $19.64 per treatment (71 FR 69684). For CY 2008, the 
per treatment drug add-on amount was updated to $20.33. In the CYs 
2009, 2010, and 2011 PFS final rule with comment period (73 FR 69755 
through 69757, 74 FR 61923, 75 FR 73485, respectively) and the CY 2012 
ESRD PPS final rule (76 FR 70239), we applied a zero update to the per 
treatment drug add-on amount resulting in a per treatment drug add-on 
amount of $20.33. As discussed in detail below, for CY 2013, we are 
again proposing no update to the per treatment drug add-on amount of 
$20.33 established in CY 2008.
iv. Proposed Update to the Drug Add-On Adjustment for CY 2013
    As discussed above, we estimate a 3.0 percent decrease in drug 
expenditures between CYs 2012 and CY 2013. Combining this decrease with 
a 4.6 percent increase in enrollment, as described above, we are 
projecting a 7.3 percent decrease in per patient growth of drug 
expenditures between CYs 2012 and CY 2013. Therefore, we are projecting 
that the combined growth in per patient utilization and pricing for CY 
2013 would result in a decrease to the drug add-on equal to 1.0 
percentage points (out of the 14.3 percent add-on for 2012). This 
figure is derived by applying the 7.3 percent decrease to the CY 2012 
drug add-on of $20.33. This would result in a revised drug add-on of 
$18.85, which is 13.0 percent of the proposed CY 2013 base composite 
rate of $145.49. If we were to apply no decrease to the drug add-on of 
$20.33, this would result in a 14.0 percent drug add-on. However, 
similar to last year and as indicated above, we are proposing a zero 
update to the drug add-on adjustment. We believe this approach is 
consistent with the language under section 1881(b)(12)(F) of the Act 
which states in part that ``the Secretary shall annually increase'' the 
drug add-on amount based on the growth in expenditures for separately

[[Page 40959]]

billed ESRD drugs. Therefore, we propose to apply a zero update and 
maintain the $20.33 per treatment drug add-on amount for CY 2013. We 
are seeking comment on our proposed zero update to the drug add-on.
    The current $20.33 per treatment drug add-on reflected a 14.3 
percent drug add-on adjustment to the composite rate in effect for CY 
2012. As discussed in section II.B.3.a. of this proposed rule, section 
1881(b)(14)(F) of the Act requires that an ESRDB market basket minus 
productivity adjustment be used to update the composite rate portion of 
the ESRD PPS payment (proposed forecast of 2.5 percent in 2013 
effective January 1, 2013), resulting in a proposed decrease to the CY 
2013 drug add-on adjustment from 14.3 to 14.0 percent, to maintain the 
drug add-on at $20.33. This decrease occurs because the drug add-on 
adjustment is a percentage of the composite rate. Since the proposed CY 
2013 composite rate is higher than the CY 2012 composite rate, and 
since the drug add-on remains at $20.33, the percentage decreases. 
Therefore, we are proposing a drug add-on adjustment to the composite 
rate for CY 2013 of 14.0 percent.
2. ESRD PPS Base Rate
    In the CY 2012 ESRD PPS final rule (76 FR 70231), we discussed the 
development of the ESRD PPS per treatment base rate that is codified in 
the Medicare regulations at Sec.  413.220 and Sec.  413.230. We 
explained that the CY 2011 ESRD PPS final rule (75 FR 49071 through 
49082) provides a detailed discussion of the methodology used to 
calculate the ESRD PPS base rate and the computation of factors used to 
adjust the ESRD PPS base rate for projected outlier payments and 
budget-neutrality in accordance with sections 1881(b)(14)(D)(ii) and 
1881(b)(14)(A)(ii) of the Act, respectively. Specifically, the ESRD PPS 
base rate was developed from CY 2007 claims (that is, the lowest per 
patient utilization year), updated to CY 2011, and represented the 
average per treatment Medicare Allowable Payment (MAP) for composite 
rate and separately billable services. We further explained that in 
accordance with Sec.  413.230, the ESRD PPS base rate is adjusted for 
the patient-specific case-mix adjustments, applicable facility 
adjustments, geographic differences in area wage levels using an area 
wage index, as well as any outlier payment or training payments (if 
applicable). For CY 2012, the ESRD PPS base rate was $234.81 (76 FR 
70231).
    As discussed previously, section 1881(b)(14)(F)(i) of the Act, as 
added by section 153(b) of MIPPA and amended by section 3401(h) of the 
Affordable Care Act, provides that, beginning in 2012, the ESRD PPS 
payment amounts are required to be annually increased by the rate of 
increase in the ESRD market basket, reduced by the productivity 
adjustment. Accordingly, for this proposed rule, we applied the 2.5 
percent increase to the CY 2012 ESRD PPS base rate of $234.81, which 
results in a CY 2013 ESRD PPS base rate of $240.68 ($234.81 x 1.025 = 
$240.68). The proposed CY 2013 ESRD PPS base rate is applicable to both 
the ESRD PPS portion of the blended payment under the transition and 
payments under the full ESRD PPS.
    In addition, as discussed in section II.B.5.c. of this proposed 
rule, for CY 2013 we are applying the wage index budget-neutrality 
adjustment factor of 1.000826 to the CY 2013 ESRD PPS base rate (that 
is, $240.68), yielding a proposed CY 2013 ESRD PPS wage-index budget-
neutrality adjusted base rate of $240.88 ($240.68 x 1.000826 = 
$240.88).
3. ESRD Bundled Market Basket
a. Overview and Background
    In accordance with section 1881(b)(14)(F)(i) of the Act, as added 
by section 153(b) of MIPPA and amended by section 3401(h) of the 
Affordable Care Act, beginning in 2012, the ESRD bundled payment 
amounts are required to be annually increased by an ESRD market basket 
increase factor that is reduced by the productivity adjustment 
described in section 1886(b)(3)(B)(xi)(II) of the Act. The application 
of the productivity adjustment described may result in the increase 
factor being less than 0.0 for a year and may result in payment rates 
for a year being less than the payment rates for the preceding year. 
The statute further provides that the market basket increase factor 
should reflect the changes over time in the prices of an appropriate 
mix of goods and services used to furnish renal dialysis services. 
Under section 1881(b)(14)(F)(ii) of the Act, as added by section 153(b) 
of MIPPA and amended by section 3401(h) of the Affordable Care Act, the 
ESRDB rate market basket increase factor will also be used to update 
the composite rate portion of ESRD payments during the ESRD PPS 
transition period from CYs 2011 through 2013; though beginning in CY 
2012, such market basket increase factor will be reduced by the 
productivity adjustment. Therefore, a full market basket was applied to 
the composite rate portion of the blended payment in CY 2011 during the 
first year of the transition.
b. Proposed Market Basket Update Increase Factor and Labor-Related 
Share for ESRD Facilities for CY 2013
    As required under section 1881(b)(14)(F) of the Act, CMS developed 
an all-inclusive ESRDB input price index (75 FR 49151 through 49162). 
Although ``market basket'' technically describes the mix of goods and 
services used to produce ESRD care, this term is also commonly used to 
denote the input price index (that is, cost categories, their 
respective weights, and price proxies combined) derived from that 
market basket. Accordingly, the term ``ESRDB market basket,'' as used 
in this document, refers to the ESRDB input price index.
    For this proposed rule, we are proposing to use the same 
methodology described in the CY 2011 ESRD PPS final rule (75 FR 49151 
through 49162) to compute the CY 2013 ESRDB market basket increase 
factor and labor-related share based on the best available data (76 FR 
40503). Consistent with historical practice, we estimate the ESRDB 
market basket update based on IHS Global Insight (IGI), Inc.'s forecast 
using the most recently available data. IGI is a nationally recognized 
economic and financial forecasting firm that contracts with CMS to 
forecast the components of the market baskets.
    Using this methodology and the IGI forecast for the first quarter 
of 2012 of the CY 2008-based ESRDB market basket (with historical data 
through the fourth quarter of 2011), and consistent with our historical 
practice of estimating market basket increases based on the best 
available data, the proposed CY 2013 ESRDB market basket increase 
factor is 3.2 percent. For the CY 2013 ESRD payment update, we will 
continue to use a labor-related share of 41.737 percent for the ESRD 
PPS payment and the ESRD PPS portion of the blended payment, which was 
finalized in the CY 2011 ESRD final rule (75 FR 49161). We will also 
continue to use a labor-related share of 53.711 percent for the ESRD 
composite rate portion of the blended payment for all years of the 
transition. This labor-related share was developed from the labor-
related components of the 1997 ESRD composite rate market basket that 
was finalized in the CY 2006 Physician Fee Schedule (PFS) final rule 
(70 FR 70168), and is consistent with the mix of labor-related services 
paid under the composite rate, as well as the method finalized in the 
CY 2011 ESRD PPS final rule (75 FR 49116).

[[Page 40960]]

c. Proposed Productivity Adjustment
    The ESRDB market basket must be annually adjusted by changes in 
economy-wide productivity. Specifically, under section 
1881(b)(14)(F)(i) of the Act, as amended by section 3401(h) of the 
Affordable Care Act, for CY 2012 and each subsequent year, the ESRD 
market basket percentage increase factor shall be reduced by the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act. The statute defines the productivity adjustment to be equal to 
the 10-year moving average of changes in annual economy-wide private 
nonfarm business multifactor productivity (MFP) (as projected by the 
Secretary for the 10-year period ending with the applicable fiscal 
year, year, cost reporting period, or other annual period) (the ``MFP 
adjustment''). The Bureau of Labor Statistics (BLS) is the agency that 
publishes the official measure of private nonfarm business MFP. Please 
see http://www.bls.gov/mfp to obtain the BLS historical published MFP 
data.
    CMS notes that the proposed and final methodology for calculating 
and applying the MFP adjustment to the ESRD payment update is similar 
to the methodology used in other payment systems, as required by 
section 3401 of the Affordable Care Act.
    The projection of MFP is currently produced by IGI. The details 
regarding the methodology for forecasting MFP and how it is applied to 
the market basket was finalized in the CY 2012 ESRD PPS final rule (76 
FR 70232 through 70234). Using this method and the IGI forecast for the 
first quarter of 2012 of the 10-year moving average of MFP, the 
proposed CY 2013 MFP factor is 0.7 percent.
d. Calculation of the ESRDB Market Basket Update, Adjusted for 
Multifactor Productivity for CY 2013
    Under section 1881(b)(14)(F) of the Act, beginning in CY 2012, ESRD 
PPS payment amounts and the composite rate portion of the transition 
blended payment amounts shall be annually increased by an ESRD market 
basket percentage increase factor reduced by a productivity adjustment. 
We are proposing to follow the same methodology for calculating the 
ESRDB market basket updates adjusted for MFP that was finalized in the 
CY 2012 ESRD PPS final rule (76 FR 70234).
    Thus, in accordance with section 1881(b)(14)(F)(i) of the Act, the 
proposed market basket increase factor for CY 2013 for the ESRDB market 
basket is based on the 1st quarter 2012 forecast of the CY 2008-based 
ESRDB market basket update, which is estimated to be 3.2 percent. This 
market basket percentage is then reduced by the MFP adjustment (the 10-
year moving average of MFP for the period ending CY 2013) of 0.7 
percent, which is based on IGI's 1st quarter 2012 forecast. The 
resulting proposed MFP-adjusted ESRDB market basket update for CY 2013 
is equal to 2.5 percent, or 3.2 percent less 0.7 percentage point. If 
more recent data is subsequently available (for example, a more recent 
estimate of the market basket and MFP adjustment), we will use such 
data, if appropriate, to determine the CY 2013 market basket update and 
MFP adjustment in the CY 2013 ESRD PPS final rule.
4. Transition Budget-Neutrality Adjustment for CY 2013
    Section 1881(b)(14)(E)(i) of the Act requires the Secretary to 
provide a 4-year phase-in of the payments under the ESRD PPS for renal 
dialysis services furnished on or after January 1, 2011, with payments 
under the ESRD PPS fully implemented for renal dialysis services 
furnished on or after January 1, 2014. We use the term ``transition'' 
rather than ``phase-in'' to be consistent with other Medicare payment 
systems.
    Section 1881(b)(14)(E)(ii) of the Act permitted ESRD facilities to 
make a one-time election to be excluded from the transition. An ESRD 
facility that elected to be excluded from the transition receives 
payment for renal dialysis services furnished on or after January 1, 
2011, based on 100 percent of the payment rate under the ESRD PPS 
rather than a blended payment based in part on the payment under the 
basic case-mix adjusted composite payment system and in part on the 
payment under the ESRD PPS. Section 1881(b)(14)(E)(iii) of the Act also 
requires that we make an adjustment to payments during the transition 
so that the estimated total amount of payments under the ESRD PPS, 
including payments under the transition, equals the estimated total 
amount of payments that would otherwise occur under the ESRD PPS 
without such a transition. We refer to this provision as the transition 
budget-neutrality adjustment.
    In the CY 2012 ESRD PPS final rule (76 FR 70235), we discussed the 
methodology used to develop the transition budget-neutrality adjustment 
factor. We explained that there were two parts that comprised the 
adjustment. For the first part, we created a one-time payment 
adjustment to the composite rate portion of the blended payment during 
the transition to account for the per treatment costs of ESRD drugs 
with an injectable equivalent that were paid under Part D. We finalized 
the one-time addition of the CY 2011 Part D per treatment amount of 
$0.49 to the composite rate (76 FR 70231). For the second part, we 
computed a factor that would make the estimated total amount of 
payments under the ESRD PPS, including payments under the transition, 
equal to the estimated total amount of payments that would otherwise 
occur without such a transition. We finalized in the CY 2011 ESRD PPS 
final rule a transition budget-neutrality adjustment of 3.1 percent 
based on estimates of ESRD facilities that would elect to be excluded 
from the transition. On April 6, 2011, we published an interim final 
rule (76 FR 18930) in which we revised the transition budget-neutrality 
adjustment from 3.1 to 0.0 percent for treatments furnished from April 
1, 2011 through December 31, 2011. For CY 2012, we did not make any 
changes to our methodology for computing the second part of the 
transition budget-neutrality adjustment. In the CY 2012 ESRD PPS final 
rule (76 FR 70236), we finalized a zero percent reduction to all 
payments made to ESRD facilities for CY 2012 (that is, the zero percent 
adjustment was applied to both the blended payments under the 
transition and payments made under the 100 percent ESRD PPS).
    Given that the transition budget-neutrality adjustment required 
under section 1881(b)(14)(E)(iii) of the Act applies in each year of 
the transition, we must update the transition budget-neutrality 
adjustment for CY 2013, the third year of the transition. As discussed 
in detail below, and in accordance with section 1881(b)(14)(E)(iii) of 
the Act, an adjustment is made to payments so that estimated total 
payments under the transition equal estimated total payment amounts 
without such a transition. In this proposed rule, we are not proposing 
for CY 2013 to change the methodology used to calculate either part of 
the transition budget-neutrality adjustment factor. We are, however, 
proposing to use updated data. The first part, which was addressed and 
finalized in the CY 2012 ESRD PPS final rule, is the Part D payment 
amount added to the composite rate. Therefore, this amount is updated 
annually by the ESRDB market basket reduced by the productivity 
adjustment. The second part is updated as described below.
    For CY 2013, we started with 2011 utilization data from claims, as 
2011 is the latest complete year of claims data available. For this 
proposed rule, we used the December claims file. We updated the CY 2011 
utilization data to

[[Page 40961]]

CYs 2012 and 2013 payments by using the price growth factors for CYs 
2012 and 2013, as discussed in the impact analysis in section 
VII.B.1.a. of this proposed rule. We then took the estimated payments 
under the full CY 2013 ESRD PPS and the blended payments under the 
transition based on actual facility election data and compared these 
estimated payments to the total estimated payments in CY 2013 as if all 
facilities had elected to receive payment under the ESRD PPS. We then 
calculated the transition budget-neutrality factor to be 1 minus the 
ratio of estimated payments under the ESRD PPS if there were no 
transition to the total estimated payments under the transition, which 
results in 0 percent reduction factor for CY 2013. Therefore, for CY 
2013, we are proposing a 0 percent reduction to all payments made to 
ESRD facilities (that is, the 0 percent adjustment would be applied to 
both the blended payments made under the transition and payments made 
under the 100 percent ESRD PPS) for renal dialysis items and services 
furnished January 1, 2013 through December 31, 2013. We solicit 
comments on the proposed second part of CY 2013 transition budget-
neutrality adjustment.
5. Proposed Updates to the Wage Index Values and Wage Index Floor for 
the Composite Rate Portion of the Blended Payment and the ESRD PPS 
Payment
    Section 1881(b)(14)(D)(iv)(II) of the Act provides that the ESRD 
PPS may include such other payment adjustments as the Secretary 
determines appropriate, such as a payment adjustment by a geographic 
wage index, such as the index referred to in section 1881(b)(12)(D) of 
the Act. In the CY 2011 ESRD PPS final rule (75 FR 49117), we finalized 
the use of the OMB's CBSA-based geographic area designations to define 
urban/rural areas and corresponding wage index values. In the CY 2012 
ESRD PPS final rule (76 FR 70241), we finalized the wage index policy 
that is used under the ESRD PPS. Under the ESRD PPS, we have adopted 
the same method and source of wage index values used previously to 
compute the wage index values for the basic case-mix adjusted composite 
payment system. Specifically, we finalized our policies to continue to 
utilize the methodology established under the composite payment system 
for updating the wage index values using the OMB's CBSA-based 
geographic area designations to define urban and rural areas and 
corresponding wage index value values; the gradual reduction of the 
wage index floor during the transition; and the policies for areas with 
no hospital data. For CY 2013, we are not proposing any changes to the 
methodology finalized in the CY 2012 final rule and will update the 
wage index values using the FY 2013 IPPS pre-floor, pre-reclassified 
hospital wage data.
    In the CY 2012 ESRD PPS final rule (76 FR 70242), we explained that 
we would continue to use the labor-related share of 53.711 finalized in 
the 2005 PFS final rule (70 FR 70168) for the composite rate portion of 
the blended payment during the transition and continue to use a labor-
related share of 41.737 for the ESRD PPS payment for CY 2012. We also 
discussed that the wage data used to construct the wage index under the 
ESRD PPS is updated annually, based on the most current data available 
and based on OMB's urban and rural definitions and corresponding wage 
index values. Additional discussion on the labor-share can be found in 
section II.B.3.b. of this proposed rule. For CY 2013, we are not 
proposing to change the labor-related shares as finalized in the CY 
2012 rule and as discussed in section II.B.3.b of this proposed rule.
    In the CY 2012 ESRD PPS final rule (76 FR 70240), we discussed that 
during the transition we would continue to update the composite rate 
portion of the ESRD PPS blended payment, including adjusting payments 
for geographic differences in area wage levels, as noted above. We also 
discussed the application of the wage index budget-neutrality 
adjustment factor to the area wage index values for the composite rate 
portion of the ESRD PPS blended payment. In this proposed rule, for CY 
2013 we are not proposing any changes to the methodology for the wage 
index used to adjust the composite rate portion of the ESRD PPS blended 
payment.
a. Reduction to the ESRD Wage Index Floor
    In the CY 2012 ESRD PPS final rule (76 FR 70239 through 70241), we 
finalized that we will continue to reduce the wage index floor by 0.05 
for each of the remaining years of the transition. That is, we 
finalized the 0.05 reduction to the wage index floor for CYs 2012 and 
2013, resulting in a wage index floor of 0.550 and 0.500, respectively. 
The wage index floor value is used in lieu of wage index values below 
the floor. In CY 2013, the wage index floor only applies to areas 
located in Puerto Rico because those are the only areas that have wage 
index values below the wage index floor value of 0.500 in CY 2013. The 
wage index floor is applied to both the composite rate portion of the 
blend and to the ESRD PPS. In this proposed rule, we are not proposing 
any changes to the wage index floor methodology or reduction.
    Consequently for CY 2013, we will continue to reduce the wage index 
floor by 0.05 which will reduce the wage index value from 0.550 to 
0.500. The ESRD wage index floor value of 0.500 would be applied to 
areas that are below the wage index floor.
    In the CY 2012 ESRD PPS final rule (76 FR 70241), we explained that 
continuing to artificially adjust the wage index values after the 
transition by substituting a wage index floor is not an appropriate 
method to address low wages in certain geographic locations. Therefore, 
we would no longer apply a wage index floor beginning January 1, 2014 
because the wage index floor would be lower than areas with low wage 
index values.
b. Policies for Areas With No Wage Data
    In the CY 2012 ESRD PPS final rule (76 FR 70241), we explained that 
we adopted the CBSA designations for the basic case-mix adjusted 
composite rate payment system and for the ESRD PPS. We also discussed 
and finalized the methodologies we use to calculate wage index values 
for ESRD facilities that are located in urban and rural areas where 
there are no hospital data. That is, for urban areas with no hospital 
data we compute the average wage index value of all urban areas within 
the State and use that value as the wage index. For rural areas with no 
hospital data, we compute the wage index using the average wage index 
values from all contiguous CBSAs to represent a reasonable proxy for 
that rural area. For rural Puerto Rico, we use the wage index floor as 
the wage index value, since all rural Puerto Rico areas are subject to 
the floor.
    We further explained that for rural Massachusetts, we determined 
that the borders of Dukes and Nantucket Counties are contiguous with 
Barnstable and Bristol counties. Under the methodology, the values for 
these counties are averaged to establish the wage index value for rural 
Massachusetts. In the CY 2012 ESRD PPS final rule (76 FR 70241), we 
finalized that for CY 2012 and subsequent years, we will continue to 
follow these methodologies for computing a wage index value for areas 
without hospital data for urban and rural geographic areas and for 
Puerto Rico.
    Subsequent to the issuance of the CY 2012 ESRD PPS final rule, we 
determined that for CY 2012 there was a rural hospital with wage data 
to base

[[Page 40962]]

an area wage index on for rural Massachusetts. We note that the wage 
index value for rural Massachusetts was correctly identified on the 
wage index table for CY 2012 based on the wage data for that rural 
hospital. Consequently, in this proposed rule we are correcting the 
statement in the CY 2012 final rule that ``For rural Massachusetts, we 
determined that the borders of Dukes and Nantucket Counties are 
contiguous with Barnstable and Bristol counties. Under the methodology, 
the values for these counties are averaged to establish the wage index 
value for rural Massachusetts'' (76 FR 70241). Therefore, for CY 2012 
and subsequent years, the area wage index value for rural Massachusetts 
is based on wage index data of the rural hospital.
    For CY 2013, we will continue to use the statewide urban average 
based on the average of all urban areas within the state for urban 
areas without hospital data. We note that Yuba City, California now has 
hospital data to calculate a wage index. Therefore, the methodology for 
computing a wage index for urban areas without hospital data no longer 
applies to that area. The only urban area without wage index data is 
Hineville-Fort Stewart, GA.
c. Proposed Wage Index Budget-Neutrality Adjustment
    In the CY 2012 ESRD PPS final rule (76 FR 70241 and 70242), we 
explained that we have broad discretion under section 
1881(b)(14)(D)(iv)(II) of the Act to develop a geographic wage index. 
We explained that in addition to being given broad discretion, the 
section cites the wage index under the basic case-mix adjusted 
composite payment system as an example. We have previously interpreted 
the statutory requirement in section 1881(b)(12)(D) of the Act for the 
geographic adjustment for the basic case-mix adjusted composite payment 
system as requiring that the geographic adjustment be made in a budget-
neutral manner.
    In the CY 2012 ESRD PPS final rule (76 FR 70241 and 70242), we 
finalized the policy to apply the wage index in a budget-neutral manner 
under the ESRD PPS using a wage index budget-neutrality adjustment 
factor. We further explained that in the first year of the ESRD PPS, CY 
2011, we did not apply a wage index budget-neutrality adjustment factor 
under the ESRD PPS because budget-neutrality was achieved through the 
overall 98 percent budget-neutrality requirement in section 
1881(b)(14)(A)(ii) of the Act. In the CY 2012 ESRD PPS final rule (76 
FR 70242), we finalized that for CY 2012 and CY 2013 we will apply the 
wage index budget-neutrality adjustment to the wage index values for 
the composite rate portion of the blended payment and that for CY 2012 
and subsequent years we will apply the wage index budget-neutrality 
adjustment to the ESRD PPS base rate for purposes of the ESRD PPS 
portion of the blended payment during the transition and the ESRD PPS 
payment. We are not proposing any changes to the wage index budget-
neutrality adjustment methodology for CY 2013.
    In the CY 2012 ESRD PPS final rule (76 FR 70242), we also finalized 
the methodology for computing the wage index budget-neutrality 
adjustment factor for CY 2012 and subsequent years. For CY 2013, we are 
not proposing any changes to the methodology. Consequently, for CY 2013 
wage index budget-neutrality adjustment factors, we use the fiscal year 
(FY) 2013 pre-floor, pre-reclassified, non-occupational mix-adjusted 
hospital data to compute the wage index values, 2011 outpatient claims 
(paid and processed as of December 31, 2011), and geographic location 
information for each facility which may be found through Dialysis 
Facility Compare. Dialysis Facility Compare can be found at the 
Dialysis Facility Compare Web page on the CMS Web site at http://www.cms.hhs.gov/DialysisFacilityCompare/. The FY 2013 hospital wage 
index data for each urban and rural locale by CBSA may also be accessed 
on the CMS Web site at http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp. The wage index data are located in the section entitled, ``FY 
2013 Proposed Rule Occupational Mix Adjusted and Unadjusted Average 
Hourly Wage and Pre-Reclassified Wage Index by CBSA''.
    To compute the CY 2013 wage index budget-neutrality adjustment 
factor for this proposed rule, using treatment counts from the 2011 
claims and facility-specific CY 2012 payment rates, we computed the 
estimated total dollar amount that each ESRD facility would have 
received in CY 2012. The total of these payments became the target 
amount of expenditures for all ESRD facilities for CY 2013. Next, we 
computed the estimated dollar amount that would have been paid for the 
same ESRD facilities using the final ESRD wage index for CY 2013. The 
total of these payments becomes the new CY 2013 amount of wage-adjusted 
expenditures for all ESRD facilities.
    After comparing these two dollar amounts (target amount divided by 
the new CY 2013 amount), we calculated two wage index budget-neutrality 
adjustment factors that, when multiplied by the applicable CY 2013 
estimated payments, would result in aggregate payments to ESRD 
facilities that would remain budget-neutral when compared to the target 
amount of expenditures. The first factor was applied to the ESRD PPS 
base rate. The second factor would be applied to the wage index values 
for the composite rate portion of the blended payment. Therefore, we 
are proposing for CY 2013, a wage index budget-neutrality adjustment 
factor for the composite portion of the ESRD PPS blended payment of 
1.001538, which would be applied directly to the ESRD wage index 
values. For the ESRD PPS (that is, for the full ESRD PPS payments and 
the ESRD PPS portion of the blended payments during the transition), we 
are proposing a wage index budget-neutrality adjustment factor of 
1.000826 would be applied to the ESRD PPS base rate.
    Because we apply the wage index budget-neutrality adjustment factor 
to the wage index values to ensure budget-neutrality under the 
composite rate portion of the blended payment, we also apply the wage 
index budget-neutrality adjustment factor to the wage index floor. 
Therefore, for the composite rate portion of the blended payment, for 
CY 2013, we would apply the wage index budget-neutrality adjustment 
factor to the wage index floor of 0.500 which results in an adjusted 
wage index floor of 0.501 (1.001538 x 0.500). Under the ESRD PPS, the 
wage index floor for CY 2013 is 0.500 because the wage index budget-
neutrality adjustment factor is applied to the base rate.
d. ESRD PPS Wage Index Tables
    The CY 2013 ESRD proposed wage index tables, referred to as 
Addendum A (ESRD facilities located in urban areas), and Addendum B 
(ESRD facilities located in rural areas) are posted on the CMS 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 rate portion of the blended 
payment to which the wage index budget-neutrality adjustment factor has 
been applied. Another column lists the wage index values for the ESRD 
PPS, which does not reflect the application of the wage index budget-
neutrality adjustment factor, because we have finalized for CY 2012 and 
subsequent years, that we will apply the wage index budget-neutrality 
adjustment factor to the ESRD PPS base rate.

[[Page 40963]]

6. Proposed Drug Policy Changes
a. Daptomycin
    In the CY 2011 ESRD PPS final rule (75 FR 49050 through 49052), we 
stated that antibiotics used for the treatment of venous access 
infections and peritonitis are renal dialysis services under the ESRD 
PPS. Payments for anti-infective drugs in injectable forms (covered 
under Part B) and oral or other forms of administration (formerly 
covered under Part D) used in the treatment of ESRD, were included in 
computing the final ESRD PPS base rate and, therefore, would not be 
separately paid under the ESRD PPS. This policy also applies to any 
drug or biological that may be developed in the future.
    Subsequent to the publication of the CY 2011 ESRD PPS final rule, 
we received numerous comments indicating that vancomycin is indicated 
in the treatment of both ESRD and non-ESRD conditions, such as skin 
infections. In the CY 2012 ESRD PPS final rule (75 FR 70243), we 
eliminated the restriction on vancomycin to allow ESRD facilities to 
receive separate payment by placing the AY modifier on the claim for 
vancomycin when furnished to treat non-ESRD related conditions. We also 
stipulated that in accordance with ICD-9 guidelines as described in the 
CY 2011 ESRD PPS final rule (75 FR 49107), an ESRD facility must report 
the diagnosis code for which vancomycin is indicated. We also 
reiterated that treatment of any skin infection that is related to 
renal dialysis access management would be considered a renal dialysis 
service paid under the ESRD PPS, and that no separate payment would be 
made. Finally, in response to comments, we stated that we would 
consider removing the system edit for daptomycin in future rulemaking.
    After consultation with our medical experts, we are proposing to 
eliminate the restriction on daptomycin to allow ESRD facilities to 
receive separate payment by placing the AY modifier on the claim for 
daptomycin when furnished to treat non-ESRD related conditions for CY 
2013 and subsequent years. In accordance with ICD-9-CM coding 
guidelines, the ESRD facility would also be required to report the 
diagnosis code for which the daptomycin is indicated. We solicit public 
comments on our proposal to eliminate the restriction on daptomycin to 
allow ESRD facilities to receive separate payment for these drugs when 
furnished to treat non-ESRD related conditions. We will continue to 
monitor the use of anti-infectives furnished by ESRD facilities 
including those that are identified as non-ESRD related.
b. Alteplase and Other Thrombolytics
    Medicare regulations at 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 
discussion on the outlier policy is in section II.B.7. of this proposed 
rule.
    In the CY 2012 ESRD PPS final rule (76 FR 70246), we explained that 
subsequent to the publication of the CY 2011 ESRD PPS final rule, our 
clinical review of the 2007 ESRD claims used to develop the ESRD PPS 
revealed that dialysis facilities routinely used alteplase and other 
thrombolytic drugs for access management purposes. We explained that 
under the Medicare Benefit Policy Manual, Pub. 100-02, chapter 11, 
section 30.4.1, drugs used as a substitute for any of the listed items, 
or used to accomplish the same effect were covered under the composite 
rate. We further explained that because heparin is a composite rate 
drug and could be used for access management, any drug or biological 
used for the same purpose may not be separately paid. Section 
413.237(a)(1) provides the definition of ESRD outlier services. 
Specifically, Sec.  413.237(a)(1)(i) includes ``ESRD related drugs and 
biologicals that were or would have been, prior to January 1, 2011, 
separately billable under Medicare Part B.''
    Because outlier payments are restricted under Sec.  413.237(a) to 
those items or services that were or would have been considered 
separately billable prior to January 1, 2011, in the CY 2012 ESRD PPS 
final rule (76 FR 70249), we excluded thrombolytic drugs from the 
outlier policy and we recomputed the outlier MAP amounts to reflect 
this change. However, for CY 2012 we did not propose to exclude 
separate payment of thrombolytic drugs under the composite rate portion 
of the blended payment.
    For CY 2013, we are proposing that thrombolytic drugs would not be 
considered eligible for separate payment under the composite rate 
portion of the blended payment for those ESRD facilities that are 
receiving a blended payment under the transition. We believe that this 
proposal is consistent with the changes we made to our outlier policy 
regarding excluding thrombolytic drugs from outlier eligibility as 
discussed above. We solicit comment on our proposal to exclude 
thrombolytic drugs from separate payment under the composite rate 
portion of the blended payment during the transition.
c. Part B Drug Pricing
    In the CY 2011 ESRD PPS proposed rule (74 FR 49991), with respect 
to estimating the imputed MAP amounts of ESRD outlier services that are 
separately billable under Part B, we proposed to use Average Sales 
Price (ASP) data for Part B ESRD-related drugs (which is updated 
quarterly). We did not make any changes to this proposed methodology in 
the CY 2011 final rule. In the CY 2012 ESRD PPS final rule (76 FR 
70243), we explained that ESRD facilities receiving blended payments 
under the transition would receive payments based on ASP for separately 
billable ESRD drugs and biologicals for the composite rate portion of 
the blend. In the CY 2012 ESRD PPS final rule (76 FR 70244), we stated 
that under the outlier policy, we use the ASP methodology.
    We are proposing for CY 2013 and subsequent years to continue to 
use the ASP methodology, including any modifications finalized in the 
Physician Fee Schedule (PFS) final rules, to compute our outlier MAP 
amounts, the drug add-on, and any other policy that requires the use of 
payment amounts for drugs and biologicals that would be separately paid 
absent the ESRD PPS and for the composite rate portion of the blended 
payment during the transition. We also would use this methodology for 
payment analyses that CMS may perform. We are seeking comment on our 
proposal to apply the ASP methodology or any modifications to the ASP 
for these purposes, as updated from time to time in the PFS rule or in 
updating the ASP pricing.
7. Proposed Revisions to the Outlier Policy
    Section 1881(b)(14)(D)(ii) of the Act requires that the ESRD PPS 
include a payment adjustment for high cost outliers due to unusual 
variations in the type or amount of medically necessary care, including 
variability in the amount of erythropoiesis stimulating agents (ESAs) 
necessary for anemia management. Our regulations at 42 CFR 
413.237(a)(1) provides that ESRD outlier services include: (i) ESRD-
related drugs and biologicals that were or would have been, prior to 
January 1, 2011, separately billable under Medicare Part B; (ii) ESRD-
related laboratory tests that

[[Page 40964]]

were or would have been, prior to January 1, 2011, separately billable 
under Medicare Part B; (iii) medical/surgical supplies, including 
syringes used to administer ESRD-related drugs, that were or would have 
been, prior to January 1, 2011, separately billable under Medicare Part 
B; and (iv) renal dialysis service drugs that were or would have been, 
prior to January 1, 2011, covered under Medicare Part D, excluding 
ESRD-related oral-only drugs.
    In the CY 2011 ESRD PPS final rule, we stated that for purposes of 
determining whether an ESRD facility would be eligible for an outlier 
payment, it would be necessary for the facility to identify the actual 
ESRD outlier services furnished to the patient by line item on the 
monthly claim (75 FR 49142).
    Drugs, laboratory tests, and medical/surgical supplies that we 
would recognize as outlier services were specified in Attachment 3 of 
Change Request 7064, Transmittal 2033 issued August 20, 2010 rescinded 
and replaced by Transmittal 2094, dated November 17, 2010. With respect 
to the outlier policy, Transmittal 2094 identified additional drugs and 
laboratory tests that may be eligible for ESRD outlier payment. 
Transmittal 2094 was rescinded and replaced by Transmittal 2134, dated 
January 14, 2011 which was issued to correct the subject on the 
Transmittal page and made no other changes.
    In the CY 2012 ESRD PPS final rule (76 FR 70246), we finalized our 
proposal to eliminate the issuance of a specific list of eligible 
outlier service drugs which were or would have been separately billable 
under Medicare Part B prior to January 1, 2011. We stated in that rule, 
however, that we planned to use separate guidance to continue to 
identify renal dialysis service drugs which were or would have been 
covered under Part D for outlier eligibility purposes in order to 
provide unit prices for calculating imputed outlier services. We also 
plan to identify, through our monitoring efforts, items and services 
that are incorrectly being identified as eligible outlier services. Any 
updates to the list of renal dialysis items and services that qualify 
as outlier services will be made through administrative issuances, if 
necessary.
    Our regulations at 42 CFR 413.237(a)(2) through (a)(6), and (b) 
specify the methodology used to calculate outlier payments. An ESRD 
facility is eligible for an outlier payment if its actual or imputed 
Medicare Allowable Payment (MAP) amount per treatment for ESRD outlier 
services exceeds a threshold. The MAP amount represents the average 
incurred amount per treatment for services that were or would have been 
considered separately billable services prior to January 1, 2011. The 
threshold is equal to the ESRD facility's predicted ESRD outlier 
services MAP amount per treatment (which is case-mix adjusted) plus the 
fixed dollar loss amount. In accordance with Sec.  413.237(c) of the 
regulations, facilities are paid 80 percent of the per treatment amount 
by which the imputed MAP amount for outlier services (that is, the 
actual incurred amount) exceeds this threshold. ESRD facilities are 
eligible to receive outlier payments for treating both adult and 
pediatric dialysis patients.
    In the CY 2011 ESRD PPS final rule, using 2007 data, we established 
the outlier percentage at 1.0 percent of total payments (75 FR 49142 
through 49143). We also established the fixed dollar loss amounts that 
are added to the predicted outlier services MAP amounts. The outlier 
services MAP amounts and fixed dollar loss amounts are different for 
adult and pediatric patients due to differences in the utilization of 
separately billable services among adult and pediatric patients (75 FR 
49140).
    As we explained in the CY 2011 ESRD PPS final rule (75 FR 49138 and 
49139), the predicted outlier services MAP amounts for a patient would 
be determined by multiplying the adjusted average outlier services MAP 
amount by the product of the patient-specific case-mix adjusters 
applicable using the outlier services payment multipliers developed 
from the regression analysis to compute the payment adjustments. The 
average outlier services MAP amount per treatment for CY 2011 was based 
on payment amounts reported on 2007 claims and adjusted to reflect 
projected prices for 2011. For CY 2012, the outlier services MAP 
amounts and fixed dollar loss amounts were based on 2010 data (76 FR 
70250). That is, for CYs 2011 and 2012, the MAP and fixed dollar loss 
amounts were computed based on pre-ESRD PPS claims data and 
utilization.
a. Impact of Proposed Changes to the Outlier Policy
    For CY 2013, we are not proposing any changes to the methodology 
used to compute the MAP or fixed dollar loss amounts. Rather, in this 
proposed rule, we are updating the outlier services MAP amounts and 
fixed dollar loss amounts to reflect the utilization of outlier 
services reported on the 2011 claims using the December 2011 claims 
file. That is, for CY 2013, the MAP and fixed dollar loss amounts are 
based on ESRD PPS claims and utilization. The impact of this update is 
shown in Table 1 which compares the outlier services MAP amounts and 
fixed dollar loss amounts used for the outlier policy in CY 2012 with 
the updated estimates for this proposed rule. The estimates for the 
proposed outlier CY 2013 outlier policy, which are included in Column 
III of Table 1, were inflation adjusted to reflect projected 2013 
prices for outlier services.

               Table 1--Outlier Policy: Impact of Using Updated Data To Define the Outlier Policy
----------------------------------------------------------------------------------------------------------------
                                    Column I  Outlier policy     Column II  Updated        Column III Proposed
                                      for CY 2012 (based on    outlier estimates based    outlier policy for CY
                                        2010  data price         on 2011  data price    2013 (based on 2011 data
                                      inflated to  2012) *       inflated to  2012 *     price inflated to 2013)
                                   ----------------------------------------------------             *
                                                                                       -------------------------
                                      Age <18      Age >=18     Age <18      Age >=18     Age <18      Age >=18
----------------------------------------------------------------------------------------------------------------
Average outlier services MAP             $46.26       $81.73       $40.20       $60.58       $41.49       $62.95
 amount per treatment \1\.........
Adjustments:
    Standardization for outlier          1.0024       0.9738       1.0731       0.9898       1.0731       0.9898
     services \2\.................
    MIPPA reduction...............         0.98         0.98         0.98         0.98         0.98         0.98
    Adjusted average outlier             $45.44       $78.00       $42.27       $58.76       $43.63       $61.06
     services MAP amount \3\......
Fixed dollar loss amount that is         $71.64      $141.21       $46.70      $105.96       $50.15      $113.35
 added to the predicted MAP to
 determine the outlier threshold
 \4\..............................

[[Page 40965]]

 
Patient months qualifying for              5.7%         5.4%         7.6%         5.2%         7.4%         5.1%
 outlier payment..................
----------------------------------------------------------------------------------------------------------------
* The outlier services MAP amounts and fixed dollar loss amounts were inflation adjusted to reflect updated
  prices for outlier services (that is, 2012 prices in Columns I and II and projected 2013 prices in Column
  III).
\1\ Excludes patients for whom not all data were available to calculate projected payments under an expanded
  bundle. The outlier services MAP amounts are based on 2011 data. The medically unbelievable edits of 400,000
  units for EPO and 1,200 mcg for Aranesp that are in place under the ESA claims monitoring policy were applied.
\2\ Applied to the average outlier MAP per treatment. Standardization for outlier services is based on existing
  Case Mix Adjusters for adult and pediatric patient groups.
\3\ This is the amount to which the separately billable (SB) payment multipliers are applied to calculate the
  predicted outlier services MAP for each patient.
\4\ The fixed dollar loss amounts were calculated using 2011 data to yield total outlier payments that represent
  1% of total projected payments for the ESRD PPS.

     As seen in Table 1, the estimated fixed dollar loss amounts that 
determine the 2013 outlier threshold amounts (Column III) are lower 
than those used for the 2012 outlier policy (Column I). The main reason 
for these reductions is the lower utilization of epoetin and other 
outlier services in the first year of the PPS. This can be seen by 
comparing the outlier service MAP amounts in Column I (which are based 
on 2010 data) vs. Column II (which is based on 2011 data).
    The fixed dollar loss amounts which are added to the predicted MAP 
amounts per treatment to determine the outlier thresholds are being 
updated from $141.21 to $113.35 for adult patients and from $71.64 to 
$50.15 for pediatric patients compared with CY 2012 values. We estimate 
that the percentage of patient months qualifying for outlier payments 
under the current policy will be 5.1 percent and 7.4 percent for adult 
and pediatric patients, respectively, based on our use of 2011 data. 
The pediatric outlier MAP and fixed dollar loss amounts continue to be 
lower for pediatric patients than adults due to the continued lower use 
of outlier services (primarily reflecting lower use of epoetin and 
other injectable drugs).
b. Outlier Policy Percentage
    Section 413.220(b)(4) stipulates that the per treatment base rate 
is reduced by 1 percent to account for the proportion of the estimated 
total payments under the ESRD PPS that are outlier payments. Because of 
the decline in utilization associated with the implementation of the 
expanded bundle, the 1 percent target for outlier payments was not 
achieved in CY 2011. Based on the 2011 claims, outlier payments 
represented approximately 0.52 percent of total payments. That is, the 
historical data previously used to set the outlier thresholds for CY 
2011 overestimated the use of outlier services under the expanded ESRD 
PPS, leading to lower outlier payments than expected. Use of 2011 data 
to recalibrate the thresholds, reflecting lower utilization of EPO and 
other outlier services, is expected to result in aggregate outlier 
payments close to the 1 percent target in CY 2013. We believe this 
update to the outlier MAP and fixed dollar loss amounts for CY 2013 
will increase payments for ESRD beneficiaries requiring higher resource 
utilization in accordance with a 1 percent outlier policy.
    We note that recalibration of the fixed dollar loss amounts in this 
proposed rule for CY 2013 outlier payments results in no change in 
payments to ESRD facilities for beneficiaries with renal dialysis items 
and services that are not eligible for outlier payments, but raises 
payments to providers for beneficiaries with renal dialysis items and 
services that are eligible for outlier payments. Therefore, beneficiary 
co-insurance obligations would increase for renal dialysis services 
eligible for outlier services and would remain unchanged for those not 
eligible.

C. Clarifications Regarding the ESRD PPS

1. Reporting Composite Rate Items and Services
    In the CY 2011 ESRD PPS final rule (75 FR 49036), we explained that 
section 1881(b)(14)(B)(i) of the Act requires that the ESRD PPS payment 
bundle include composite rate services. The basic case-mix adjusted 
composite payment system represented a limited PPS for a bundle of 
routine outpatient maintenance renal dialysis services. We defined 
composite rate services at Sec.  413.171 as ``items and services used 
in the provision of outpatient maintenance dialysis for the treatment 
of ESRD and included in the composite payment system established under 
section 1881(b)(7) [of the Act] and the basic case-mix adjusted 
composite payment system established under section 1881(b)(12) of the 
Act.'' In Sec.  413.171 we also defined renal dialysis services as 
including, ``items and services included in the composite rate for 
renal dialysis services as of December 31, 2010.''
    The composite rate included a number of items and services beyond 
the dialysis treatment itself. In the CY 2011 ESRD PPS final rule (75 
FR 49173), we explained that currently services that are billed on the 
ESRD claim do not provide any detail of the composite rate items and 
services that are furnished to the patient. As we discussed in the 
Medicare Claims Processing Manual, Pub. 100-04, chapter 8, sections 
50.1 and 50.2., laboratory tests and drugs covered under the facility's 
composite rate may not be billed separately. As mentioned above, the 
composite rate represented the routine items and services provided to 
Medicare beneficiaries for outpatient maintenance dialysis, therefore 
was full payment for those items and services. It would not have been 
appropriate for ESRD facilities to bill for items and services in the 
composite rate because this would result in duplicate payments made by 
Medicare.
    In the CY 2011 ESRD PPS final rule (75 FR 49048), we also explained 
that in our analysis of the ESRD claims we identified drugs and 
biologicals that were included in the composite payment rate but for 
which ESRD facilities received separate payment in addition to the 
composite rate payment. Because these composite rate drugs and 
biologicals were listed separately on the ESRD claims, separate payment 
was

[[Page 40966]]

inadvertently made. We further explained that we excluded those 
payments from the final ESRD PPS base rate calculation. We also noted 
that the Medicare Benefit Policy Manual, Pub. 100-02, chapter 11, 
section 30.4.1 lists the drugs and fluids that were included under the 
composite payment system as heparin, antiarrythmics, protamine, local 
anesthetics, apresoline, dopamine, insulin, lidocaine, mannitol, 
saline, pressors, heparin antidotes, benadryl, hydralazine, lanoxin, 
solu-cortef, glucose, antihypertensives, antihistamines, dextrose, 
inderal, levophed, and verapamil. The Medicare Benefit Policy Manual, 
Pub. 100-02, chapter 11, section 30.4.1 also explicitly states, ``* * * 
drugs used in the dialysis procedure are covered under the facility's 
composite rate and may not be billed separately. Drugs that are used as 
a substitute for any of these items, or are used to accomplish the same 
effect, are also covered under the composite rate.'' The manual further 
provides that ``administration of these items (both the staff time and 
supplies) is covered under the composite rate and may not be billed 
separately'' (75 FR 49048). In the CY 2012 final rule (76 FR 70243), 
with regards to antibiotics, we provided for separate payment for 
vancomycin when furnished to treat non-ESRD related conditions. Also, 
in section II.B.6.a of this proposed rule, we proposed to provide for 
separate payment for daptomycin if furnished for non-ESRD-related 
conditions. We also eliminated the payment distinction for antibiotics 
furnished in an ESRD facility or in the home used to treat access 
infections or peritonitis. We finalized that antibiotics furnished in 
the home to treat access site infections and peritonitis would be 
eligible for outlier payment (76 FR 70246).
    As described at Sec.  413.239, there are ESRD facilities receiving 
reimbursement under the transition, that is, receiving a blended 
payment of the basic case-mix adjusted composite rate payment system 
and the ESRD PPS. If an ESRD facility receives payment under the 
transition and reports a drug, biological, or laboratory test that was 
included in the composite rate on the ESRD claim, it could receive 
separate payment for that item or service within the portion of the 
blended payment that is based on the basic case-mix adjusted composite 
payment system.
    As mentioned above and defined at Sec.  413.237, ESRD-related 
drugs, biologicals, and laboratory tests that were or would have been 
separately payable under the basic case-mix adjusted composite payment 
system qualify as eligible outlier services. In the CY 2012 ESRD PPS 
final rule (76 FR 70246), we finalized the elimination of the issuance 
of a specific list of eligible outlier service drugs which were or 
would have been separately billable under Medicare Part B prior to 
January 1, 2011. Therefore, if an ESRD facility reports a drug or 
biological that was included in the basic case-mix adjusted composite 
payment system on the ESRD claim, it would inappropriately be applied 
toward an outlier calculation. This is because all drugs and 
biologicals with a rate available on the ASP pricing file when the 
modifier AY is not present are eligible for outlier consideration.
    As a result of our monitoring efforts, we continue to see composite 
rate drugs reported on ESRD claims. Therefore, in this proposed rule we 
are reiterating that composite rate items and services are not to be 
reported on the ESRD facility claim. We are instituting measures to 
ensure that composite rate drugs will be prevented from being applied 
to the outlier payment. These measures will be discussed through 
administrative issuances. We are continuing to monitor the reporting of 
composite rate items and services on ESRD claims and plan to take 
actions to recoup inappropriate and duplicative payments. If the 
inclusion of composite rate items and services such as laboratory 
tests, drugs and supplies on claims will be required, we will discuss 
this requirement in future rulemaking.
2. ESRD Facility Responsibilities for ESRD-Related Drugs and 
Biologicals
    It has come to our attention that some ESRD facilities are 
requiring ESRD beneficiaries to purchase renal dialysis drugs and are 
informing beneficiaries not to use their Part D plan for their 
purchases.
    Section 1866(a)(1)(A) of the Act as codified in regulations at 42 
CFR 489.21 prohibits providers from billing beneficiaries for services 
for which the beneficiary would have been entitled to have payment made 
under Medicare if the provider appropriately filed claims. Furthermore, 
section 1881(b)(2)(A) of the Act states that payments shall be made to 
a renal dialysis facility only if it agrees to accept such payments as 
payment in full for covered services except for the beneficiary co-
insurance and deductible amounts.
    In the CY 2011 ESRD PPS final rule (75 FR 49045), we explained that 
the ESRD PPS bundled base rate reflects Medicare payment for the 
average ESRD patient. We stated that we had incorporated payments under 
the basic case-mix adjusted composite rate payment system as well as 
payments for separately billable items and services into the ESRD PPS 
base rate. As a result, we believe the ESRD PPS payments are sufficient 
and reflect the average cost of providing care to the average patient 
with ESRD and therefore, we expect that, on average, high cost patients 
would be offset by low cost patients. In the CY 2011 ESRD PPS final 
rule (75 FR 49045), we also explained that we had provided for higher 
acuity patients with patient case-mix adjusters and outlier payments 
for high-cost patients. We further cited 42 CFR Sec.  494.90 of the 
ESRD Conditions for Coverage which requires the development of an 
individualized patient plan of care to address patient needs and 
concluded that we believe ESRD facilities should make medical decisions 
based on patient needs and not solely on a financial basis.
    In the CY 2011 ESRD PPS final rule (75 FR 49050), we stipulated 
that any drug or biological (that is injectable, oral or other forms of 
administration) furnished for the purpose of access management, anemia 
management, vascular access or peritonitis, cellular management and 
bone and mineral metabolism would be considered renal dialysis services 
under the ESRD PPS. Any drug or biological used as a substitute for a 
drug or biological that was included in the ESRD PPS bundled base rate 
would also be a renal dialysis service and would not be eligible for 
separate payment. Antiemetics, anti-infectives, antipruritics, 
anxiolytic, excess fluid management, fluid and electrolyte management 
and pain management could be used for dialysis purposes and therefore, 
considered ESRD related. We indicated that we presumed these drugs and 
biologicals in whatever form they are furnished to be renal dialysis 
services unless indicated that they are used for non-ESRD related 
conditions. Drugs and biologicals paid under Part D that are furnished 
by an ESRD facility for ESRD-related purposes, would be considered 
renal dialysis services (75 FR 49050 and 49051).
    We are reiterating in this proposed rule that ESRD facilities are 
responsible for furnishing renal dialysis items and services that are 
required to meet patient needs. This would include oral or other forms 
of administration of injectable drugs and biologicals that are 
furnished for ESRD-related conditions. We would also expect that ESRD 
facilities would not restrict access to necessary drugs for financial 
purposes, requiring patients to purchase medically necessary drugs and 
biologicals. We expect that ESRD facilities would furnish drugs and 
biologicals that had been considered medically necessary

[[Page 40967]]

prior to the implementation of the ESRD PPS and not exclude them 
because the ESRD facility is now financially responsible for these 
drugs and biologicals. Because of the reasons cited above, ESRD 
facilities may not require, induce or coerce beneficiaries to purchase 
any renal dialysis item or service.
3. Use of AY Modifiers
    In response to comments received, in the CY 2011 ESRD PPS final 
rule, we stated that we had developed a mechanism to be used by ESRD 
facilities to identify and be paid separately for non-ESRD-related 
drugs and biologicals (75 FR 49052 and 75 FR 49168). We provided this 
mechanism in order to support a Medicare beneficiary's need for the 
furnishing of non-ESRD-related items and services (that is, 
predominantly drugs and laboratory tests) during a dialysis treatment 
to mitigate the need for the beneficiary to receive additional 
injections or health care visits. We further stated that in the event 
that supplies or equipment are not ESRD-related, ESRD facilities would 
be required to place a modifier for those supplies and equipment 
signifying that they were used for services that are not ESRD-related 
and eligible for separate payment (75 FR 49168). Change Request 7064, 
Transmittal 2033, entitled ``End Stage Renal Disease (ESRD) Prospective 
Payment System (PPS) and Consolidated Billing for Limited Part B 
Services, issued on August 20, 2010, re-issued November 17, 2010 under 
Transmittal 2094, and re-issued January 14, 2011 under Transmittal 
2134, provided instructions in the use of the modifier. In that Change 
Request, we indicated that the claim lines for laboratory tests and 
drugs provided to a beneficiary for reasons other than the treatment of 
ESRD, must be submitted with the AY modifier to allow for separate 
payment outside of the ESRD PPS. In the CY 2012 final rule, we provided 
for the use of the AY modifier with vancomycin, if used for non-ESRD-
related conditions with the requirement that the ESRD facilities 
include the diagnosis code of the condition (76 FR 70243). In this 
proposed rule, in section II.B.6.a, we are also proposing the use of 
the AY modifier with daptomycin for non-ESRD related conditions. ESRD 
facilities will also be required to indicate the ICD-9-CM code on the 
claim that reflects the condition requiring the use of daptomycin.
    Our monitoring activities have identified that there are ESRD 
facilities and clinical laboratories that are appending the AY modifier 
for items that we believe are ESRD-related. Additionally, some ESRD 
facilities and clinical laboratories appear to be appending the AY 
modifier on many items and services reported on the claims. We are 
reiterating in this proposed rule that the purpose of the AY modifier 
is to allow beneficiaries the convenience to receive non-ESRD-related 
items (that is, drugs and laboratory tests) during their dialysis 
treatment and to allow the ESRD facility to receive payment for 
furnishing those items. The AY modifier is also intended to allow 
separate payment to laboratories in the event an ESRD-related 
laboratory test was required for non-ESRD conditions. The AY modifier 
is not intended to be used to receive separate payment for items that 
are ESRD-related and therefore are included in the ESRD PPS base rate. 
We are continuing to monitor the use of the AY modifier and intend to 
take steps to recoup inappropriate payments. In the event that we 
believe that the AY modifier is not being used for the purpose 
intended, we may be forced to discontinue the AY modifier and cease to 
provide separate payment for any non-ESRD-related drug or laboratory 
test furnished.

III. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP) for 
Payment Year (PY) 2015

A. Background

    For over 30 years, monitoring the quality of care provided to end-
stage renal disease (ESRD) patients by dialysis providers or facilities 
(hereinafter referred to collectively as ``facility'' or 
``facilities'') has been an important component of the Medicare ESRD 
payment system. The ESRD quality incentive program (QIP) is the most 
recent step in fostering improved patient outcomes by establishing 
incentives for dialysis facilities to meet or exceed performance 
standards established by CMS. The ESRD QIP is authorized by section 
153(c) of MIPPA, which added section 1881(h) to the Act. CMS 
established the ESRD QIP for PY 2012, the initial year of the program 
in which payment reductions are being made, in two rules published in 
the Federal Register on August 12, 2010 and January 5, 2011 (75 FR 
49030 and 76 FR 628, respectively). On November 10, 2011, CMS published 
a rule in the Federal Register outlining the PY 2013 and PY 2014 ESRD 
QIP (76 FR 70228).
    Section 1881(h) of the Act requires the Secretary to establish an 
ESRD QIP by (i) selecting measures; (ii) establishing the performance 
standards that apply to the individual measures; (iii) specifying a 
performance period with respect to a year; (iv) developing a 
methodology for assessing the total performance of each facility based 
on the performance standards with respect to the measures for a 
performance period; and (v) applying an appropriate payment reduction 
to facilities that do not meet or exceed the established Total 
Performance Score. This proposed rule discusses each of these elements 
and our proposals for their application to PY 2015 and future years of 
the ESRD QIP.

B. Considerations in Updating and Expanding Quality Measures Under the 
ESRD QIP for PY 2015 and Subsequent PYs

1. Value-Based Purchasing (VBP) Overview
    Throughout the past decade, Medicare has been transitioning from a 
program that pays for healthcare based solely on the number of services 
furnished to a beneficiary to a program that ties portions of payments 
to providers and suppliers to the quality of services they deliver. By 
paying for the quality of care, rather than merely the quantity of 
care, we believe we are strengthening the healthcare system while also 
advancing the National Quality Strategy and the three part aim which 
promote (i) better care for the individual thereby (ii) advancing the 
health of the entire population while also (iii) reducing costs. CMS 
specifies the domains and specific measures of quality for our value-
based purchasing (VBP) programs and we are working to link the aims of 
the National Quality Strategy with our payment policies on a national 
scale.
    There are currently six domains of measurement for our VBP 
programs, based on the six priorities of the National Quality Strategy: 
(i) Care coordination; (ii) population/community health; (iii) 
efficiency and cost reduction; (iv) safety; (v) patient- and caregiver-
centered experience and outcomes; and (vi) clinical care. Together 
these domains not only encourage better care at the facility level, but 
also encourage different care settings to interface to comprehensively 
improve healthcare. Although currently none of the VBP programs measure 
quality across all of the six domains, we are working to ensure that 
each program considers measures supporting the six national priorities 
where feasible. Furthermore, we are working in partnership with 
facilities, beneficiaries, the National Quality Forum (NQF), the 
Measures Application Partnership, sister agencies in the Department of 
Health and Human Services (HHS), and other stakeholders to develop new

[[Page 40968]]

measures where gaps exist, refine measures requiring adjustment, and 
remove measures when appropriate. We are also working with stakeholders 
to ensure that the ESRD QIP serves the needs of our beneficiaries and 
also advances the goals of the National Quality Strategy.
    We believe that the development of an ESRD QIP that is successful 
in promoting the delivery of high quality healthcare services in 
dialysis facilities is paramount. We seek to adopt measures for the 
ESRD QIP that promote better, safer, and more efficient care. Our 
measure development and selection activities for the ESRD QIP take into 
account national priorities, such as those established by the National 
Priorities Partnership (http://www.nationalprioritiespartnership.org/), 
HHS Strategic Plan (http://www.hhs.gov/secretary/about/priorities/priorities.html), the National Strategy for Quality Improvement in 
Healthcare (http://www.healthcare.gov/center/reports/quality03212011a.html), and the HHS National Action Plan to Prevent 
Healthcare Associated Infections (HAIs) (http://www.hhs.gov/ash/initiatives/hai/esrd.html). To the extent practicable, we have sought 
to adopt measures that have been endorsed by a national consensus 
organization, recommended by multi-stakeholder organizations, and 
developed with the input of facilities, purchasers/payers, 
beneficiaries, and other stakeholders.
2. Brief Overview of Proposed PY 2015 Measures
    Thus far, we have adopted measures for the ESRD QIP that fall under 
three of the six National Quality Strategy measure priority domains:
     Safety: National Healthcare Safety Network (NHSN) Dialysis 
Event reporting;
     Patient- and Caregiver-Centered Experience: In-Center 
Hemodialysis Consumer Assessment of Healthcare Providers and Systems 
(ICH CAHPS) survey reporting; and
     Clinical Quality of Care: (i) Hemoglobin Greater Than 12 
g/dL; (ii) Hemodialysis Adequacy (Urea Reduction Ratio (URR)); (iii) 
Vascular Access Type; (iv) and Mineral Metabolism reporting (76 FR 
70228).
    For PY 2015, we are proposing to add new measures in the clinical 
quality of care domain and to expand the scope of the NHSN Dialysis 
Event reporting measure (safety domain) and the Mineral Metabolism 
reporting measure (clinical quality of care domain). We believe that 
the PY 2015 ESRD QIP not only further promotes the health of ESRD 
patients, but also strengthens the goals of the National Quality 
Strategy. To that end, and as proposed and further discussed below, we 
are proposing to include 11 measures in the PY 2015 ESRD QIP. We also 
propose to include these measures and measure topics in subsequent 
payment years. The following measures seek to evaluate facilities on 
the clinical quality of care which they deliver.

 For purposes of evaluating anemia management:
    [cir] Hemoglobin Greater Than 12 g/dL, a clinical measure.
    [cir] Anemia Management, a reporting measure.*
 To evaluate dialysis adequacy:
    [cir] A clinical Kt/V measure for adult hemodialysis patients.*
    [cir] A clinical Kt/V measure for adult peritoneal dialysis 
patients.*
    [cir] A clinical Kt/V measure for pediatric hemodialysis patients.*
 To determine whether patients are treated using the most 
beneficial type of vascular access:
    [cir] An arteriovenous fistula measure.
    [cir] A catheter measure.
 To address effective bone mineral metabolism management:
    [cir] Hypercalcemia, a clinical measure.*
    [cir] Mineral Metabolism, a reporting measure (expansion proposed).
    Additionally, we are proposing to expand a previously adopted 
reporting measure addressing safety:
 NHSN Dialysis Event reporting measure.
    We are also proposing to continue using a previously adopted 
reporting measure assessing patient- and caregiver-centered experience:
 ICH CAHPS survey reporting measure.

    * Indicates that the measure is new to the ESRD QIP.

    Although, at this time, we are not proposing to adopt measures that 
address care coordination, population/community health, or efficiency 
and cost of care, we are soliciting comments in this proposed rule on 
potential measures that would fall into each of these areas. We also 
discuss below the following measures that are under consideration for 
future adoption: a 30-Day Hospital Readmission measure to address care 
coordination; an access to care measure to address population/community 
health; and an efficiency measure. We also discuss below the 
Standardized Hospitalization Ratio Admissions (SHR) measure and the 
Standardized Mortality Ratio (SMR) measure that we are considering for 
program adoption in future years. We welcome further comments on these 
and the other potential measures for future program years.
3. PY 2014 Mineral Metabolism Measure
    As noted above, in the CY 2012 ESRD PPS final rule, we adopted the 
Mineral Metabolism reporting measure which requires each facility to 
attest that it monitored serum calcium and serum phosphorus at least 
once a month for each Medicare ESRD patient (76 FR 70271). We have 
since realized, however, that it may be difficult for some facilities 
to make this attestation if, for example, a patient is seen at the 
beginning of the month, his or her blood is not drawn, and then he or 
she is hospitalized or transient for the remainder of the month. While 
it is our intention to encourage facilities to put systems and 
processes into place to ensure at least monthly serum calcium and 
phosphorus monitoring, we believe it is reasonable to give 
consideration to situations where the monthly blood draw does not 
happen within the dialysis facility given these scenarios. Therefore, 
for PY 2014, we propose to change the Mineral Metabolism reporting 
requirement.
    We considered proposing to require facilities to report the 
required information for less than 100 percent of their patients. 
Specifically, we considered lowering the threshold to require that a 
facility attest that it monitored on a monthly basis the serum calcium 
and serum phosphorus levels for 98 percent of its patients. We 
ultimately decided that a facility should be required to take and 
report these values for every patient at least once per month so that 
each beneficiary receives the highest standard of care. We realize, 
however, that there are circumstances beyond a facility's control 
wherein it may not be able to draw a sample for this patient. 
Therefore, for purposes of scoring the measure, we propose to now 
require that, in order for a facility to receive 10 points on the PY 
2014 Mineral Metabolism measure, it must attest that it monitored on a 
monthly basis the serum calcium and serum phosphorus levels for every 
Medicare ESRD patient provided that: (i) The patient is alive for the 
entirety of the applicable month; (ii) if the patient is treated in-
center, that patient was treated at that facility at least twice during 
the claim month; and (iii) if the patient receives dialysis at home, a 
facility must report this information regardless of the number of 
treatments, provided that a claim is submitted for that patient. 
Additionally, we propose that if a patient is hospitalized or transient 
during a claim month, the facility may monitor the serum calcium

[[Page 40969]]

and serum phosphorus readings for that patient for the month if a 
patient has labs drawn by another provider/facility, those labs are 
evaluated by an accredited laboratory (a laboratory that is accredited 
by, for example, Joint Commission, College of American Pathologists, 
AAB (American Association of Bioanalysts), or State or Federal agency), 
and the dialysis facility reviews the serum calcium and serum 
phosphorus readings. We believe that these proposals will provide more 
flexibility for facilities and will also prevent facilities from 
drawing blood, even when not necessary, each time a patient visits for 
fear that he or she will fail to come to the facility again during that 
month. We request comment on this proposal. We also request comment on 
our consideration to lower the attestation to monthly monitoring of 98 
percent of Medicare ESRD patients. We chose 98 percent in order to 
encourage improvement, and to ensure that we do not undermine the 
current level of high-reporting (based on the CrownWeb pilot data). We 
recognize that 100 percent might not be appropriate due to some 
individual cases that may not fit specified criteria.
    Additionally, for purposes of clarification, we note that the PY 
2014 attestations for both the Mineral Metabolism and ICH CAHPS 
measures will become available in CROWNWeb in December. As noted in the 
CY 2011 ESRD PPS final rule, these attestations must be made before 
January 31, 2013 (76 FR 70269, 70271).
4. Measures Application Partnership Review
    In addition to the considerations discussed above, in selecting 
measures for the PY 2015 ESRD QIP, we considered input from the multi-
stakeholder group, the Measures Application Partnership (http://www.qualityforum.org.map/). Section 1890A(a)(1) of the Act, as added by 
section 3014(b) of the Affordable Care Act, requires the entity with a 
contract under section 1890(a) of the Act, currently NQF, to convene 
multi-stakeholder groups to provide input to the Secretary on the 
selection of quality and efficiency measures for use in certain 
programs. Section 1890A(a)(2) of the Act requires the Secretary, not 
later than December 1 of each year, to make available to the public a 
list of quality and efficiency measures that are under consideration 
for use in certain programs. Section 1890A(a)(3) of the Act requires 
the entity with a contract under section 1890(a) of the Act to transmit 
the input of the multi-stakeholder groups to the Secretary not later 
than February 1 of each year, beginning in 2012. Section 1890A(a)(4) of 
the Act requires the Secretary to take into consideration the input of 
the multi-stakeholder groups in selecting quality and efficiency 
measures. The Measures Application Partnership is the public-private 
partnership comprised of multi-stakeholder groups convened by NQF for 
the primary purpose of providing input on measures as required by 
sections 1890A(a)(1) and (3) of the Act. The Measures Application 
Partnership's input on the quality and efficiency measures under 
consideration for adoption in CY 2012 was transmitted to the Secretary 
on February 1, 2012 and is available at (http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=69885). As required by 
section 1890A(a)(4) of the Act, we considered these recommendations in 
selecting quality and efficiency measures for the ESRD QIP.
    Four proposed measures for the PY 2015 ESRD QIP (that is, three for 
dialysis adequacy and one for hypercalcemia) were made publicly 
available in accordance with section 1890A(a)(2) of the Act and were 
reviewed by the Measures Application Partnership. The Measures 
Application Partnership gave support to two of the proposed measures, 
NQF 1454: Proportion of patients with hypercalcemia and NQF 
1423: Minimum spKt/V for Pediatric Hemodialysis Patients. The 
Measures Application Partnership supported the direction of a proposed 
composite measure comprised of two NQF-endorsed measures, NQF 
0249: Hemodialysis Adequacy Clinical Performance Measure III: 
Hemodialysis Adequacy--HD Adequacy--Minimum Delivered Hemodialysis Dose 
and NQF 0318: Peritoneal Dialysis Adequacy Clinical 
Performance Measure III--Delivered Dose of Peritoneal Dialysis Above 
Minimum. The Measures Application Partnership recommended that the 
composite measure comprised of the two NQF dialysis adequacy measures 
be tested to ensure feasibility. We have taken these comments into 
consideration for the PY 2015 ESRD QIP. We will further discuss these 
considerations and our proposals for the PY 2015 ESRD QIP measures in 
the section below.

C. Proposed Measures for the PY 2015 ESRD QIP and Subsequent PYs of the 
ESRD QIP

    Similar to our other quality reporting and pay for performance 
programs, we are proposing that once a quality measure is selected and 
finalized for the ESRD QIP through rulemaking, the measure would 
continue to remain part of the program for all future years, unless we 
remove or replace it through rulemaking or notification. We believe 
that this will streamline the rulemaking process, provide continuity of 
quality measurement, and allow ESRD facilities to plan both quality 
reporting and quality improvement activities. In general, we anticipate 
considering quality measures for removal or replacement if: (1) Measure 
performance among the majority of ESRD facilities is so high and 
unvarying that meaningful distinctions in improvements or performance 
can no longer be made; (2) performance or improvement on a measure does 
not result in better or the intended patient outcomes; (3) a measure no 
longer aligns with current clinical guidelines or practice; (4) a more 
broadly applicable (across settings, populations, or conditions) 
measure for the topic becomes available; (5) a measure that is more 
proximal in time to desired patient outcomes for the particular topic 
becomes available; (6) a measure that is more strongly associated with 
desired patient outcomes for the particular topic becomes available; or 
(7) collection or public reporting of a measure leads to negative 
unintended consequences. If there is reason to believe that a measure 
raises potential safety concerns, we are proposing that we would take 
immediate action to remove the measure from the ESRD QIP and not wait 
for the annual rulemaking cycle. Such measures would be promptly 
removed from the measure set, and we would confirm the removal in the 
next ESRD QIP rulemaking cycle. ESRD facilities and the public would be 
immediately notified of our decision to remove a measure that raises 
potential safety concerns through the usual ESRD program communication 
channels, including memos, email notification, and web postings.
    Many of the quality measures used in different Medicare and 
Medicaid reporting programs are endorsed by NQF. As part of its regular 
maintenance process for endorsed performance measures, the NQF requires 
measure stewards to submit annual measure maintenance updates and 
undergo maintenance of endorsement review every 3 years. Under the 
measure maintenance process, the measure steward (owner/developer) is 
responsible for updating and maintaining the currency and relevance of 
the measure and confirming specification changes to NQF on an annual 
basis. NQF solicits information from measure stewards for annual 
reviews in order to review measures for

[[Page 40970]]

continued endorsement in a specific 3-year cycle. Non-NQF-endorsed 
measures may also go through similar maintenance by their measure 
stewards; such maintenance includes reviewing and updating measures.
    Through the measure maintenance process, measures are sometimes 
updated to incorporate changes that we believe do not substantially 
change the nature of the measures. Examples could be changes to 
exclusions to the patient population, changes to definitions, or 
extension of the measure endorsement to apply to other settings. We 
believe these types of maintenance changes are distinct from more 
substantive changes to measures that result in what are considered new 
or different measures, and that they do not trigger the same agency 
obligations under the Administrative Procedure Act.
    In this proposed rule, we are proposing that if a measure that we 
have adopted for the ESRD QIP is updated in a manner that we consider 
to not substantially change the nature of the measure, we would use a 
subregulatory process to incorporate those updates to the measure 
specifications that apply to the program. Specifically, we would revise 
our previously adopted measure specifications to clearly identify the 
updates made by the NQF or other measure steward and either post the 
updates directly on the CMS Web site or provide links to where the 
updates can be found. We would also provide sufficient lead time for 
facilities to implement the changes where changes to the data 
collection systems would be necessary.
    We would continue to use the rulemaking process to adopt changes to 
a measure that we consider to substantially change the nature of the 
measure. We believe that this proposal adequately balances our need to 
incorporate updates to ESRD QIP measures in the most expeditious manner 
possible, while preserving the public's ability to comment on updates 
that so fundamentally change an endorsed measure that it is no longer 
the same measure that we originally adopted. We invite public comment 
on this proposal and on our proposal that once a quality measure is 
adopted, it is retained for use in the subsequent ESRD QIP payment 
years unless we remove or replace it as discussed above.
    Consistent with these goals and policies, we previously finalized 
six measures (including one measure with two measure sub-components) 
(Table 2) for the PY 2014 ESRD QIP (76 FR 70228). We propose to 
continue to use five of these measures for the PY 2015 ESRD QIP; 
however, we propose to augment two (NHSN Dialysis Event reporting and 
Mineral Metabolism reporting) of these five measures used in PY 2014 to 
continue to promote improvement in the PY 2015 ESRD QIP. We are 
proposing to remove the PY 2014 URR Dialysis Adequacy measure. In 
addition, we are proposing to add three new measures of dialysis 
adequacy, an anemia management reporting measure, and a hypercalcemia 
clinical measure.

                               Table 2--Measures Adopted for the PY 2014 ESRD QIP
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
               NQF No.                                               Measure title
----------------------------------------------------------------------------------------------------------------
N/A..................................  Percent of Patients with Hemoglobin Greater Than 12 g/dL*
N/A..................................  URR Hemodialysis Adequacy
                                      --------------------------------------------------------------------------
N/A for composite measure............  Vascular Access Type...  Hemodialysis Vascular Access- Maximizing
                                                                 Placement of Arterial Venous Fistula (AVF)*
                                                                 (NQF0257).
                                                                Hemodialysis Vascular Access- Minimizing use of
                                                                 Catheters as Chronic Dialysis Access*
                                                                 (NQF0256).
                                      --------------------------------------------------------------------------
N/A\1\...............................  NHSN Dialysis Event Reporting*\+\
                                       Enroll and report 3 months of dialysis event data.
                                      --------------------------------------------------------------------------
N/A\2\...............................                           In-Center Hemodialysis Consumer Assessment of
                                                                 Healthcare Providers and Systems (ICH CAHPS)
                                                                 Survey Reporting*
                                                                Facilities are required to attest that they
                                                                 administered the ICH CAHPS survey via a third
                                                                 party during the performance period.
N/A\3\...............................                           Mineral Metabolism Reporting.
                                                                Facilities are required to attest that they have
                                                                 monitored each of their Medicare patient's
                                                                 phosphorus and calcium levels monthly
                                                                 throughout the performance period.*\+\
----------------------------------------------------------------------------------------------------------------
\1\ We note that an NQF-endorsed bloodstream infection measure (NQF1460) exists, and data for this
  measure is collected as part of dialysis event reporting in NHSN. It is our intention to use this measure in
  future years of the ESRD QIP. We believe that a reporting measure is a necessary step in reaching our goal to
  use NQF1460.
\2\ We note that a related measure utilizing the results of this survey has been NQF-endorsed (0258),
  and it is our intention to use this measure in future years of the ESRD QIP. We believe that a reporting
  measure is a necessary step in reaching our goal to use NQF0258.
\3\ We note that the NQF has previously endorsed phosphorus and calcium monitoring measures (0261 and
  0255) upon which this measure is based.
\*\ Indicates a measure we are proposing for PY 2015 and future years of the ESRD QIP.
\+\ Indicates a measure we are proposing to augment for PY 2015 and future years of the ESRD QIP.

    Along with the measures that have been previously adopted and which 
we propose to continue for use in the PY 2015 ESRD QIP as well as 
subsequent years of the program, Table 3, below, lists the new measures 
that are being proposed for the PY 2015 ESRD QIP and subsequent years 
of the program. Table 4 lists the measures we are considering for 
future years of the ESRD QIP.

[[Page 40971]]



             Table 3--New Measures Proposed for the ESRD QIP PY 2015 and Future Years of the Program
----------------------------------------------------------------------------------------------------------------
                   NQF No.                                               Measure title
----------------------------------------------------------------------------------------------------------------
N/A..........................................  Anemia Management Reporting.
0249.........................................  Hemodialysis Adequacy Clinical Performance Measure III:
                                                Hemodialysis Adequacy--HD Adequacy--Minimum Delivered
                                                Hemodialysis Dose.
0318.........................................  Peritoneal Dialysis Adequacy Clinical Performance Measure III--
                                                Delivered Dose of Peritoneal Dialysis Above Minimum.
1423.........................................  Minimum spKt/V for Pediatric Hemodialysis Patients.
1454.........................................  Proportion of Patients with Hypercalcemia.
----------------------------------------------------------------------------------------------------------------


                     Table 4--Measures Under Consideration for Future Years of the ESRD QIP
----------------------------------------------------------------------------------------------------------------
                   NQF No.                                               Measure title
----------------------------------------------------------------------------------------------------------------
1463.........................................  Standardized Hospitalization Ratio for Admissions (SHR).
0369.........................................  Dialysis Facility Risk-Adjusted Standardized Mortality Ratio
                                                (SMR).
----------------------------------------------------------------------------------------------------------------

1. PY 2014 Measures Continuing for PY 2015 and Subsequent Payment Years
    We are proposing to continue using two measures and one measure 
topic adopted in PY 2014 for the PY 2015 ESRD QIP and future years of 
the program. Proposals for scoring these measures are discussed below. 
For the reasons stated in the CY 2012 ESRD PPS final rule (76 FR 70262, 
70264 through 65, 70269), we propose to continue using: (i) The 
Hemoglobin Greater than 12 g/dL measure; (ii) the Vascular Access Type 
measure topic comprised of two measures, (a) the Hemodialysis Vascular 
Access-Maximizing Placement of AVF (NQF 0257) measure, and (b) 
the Hemodialysis Vascular Access- Minimizing use of Catheters as 
Chronic Dialysis Access (NQF 0256) measure; and (iii) the ICH 
CAHPS survey reporting measure. The technical specifications for these 
measures can be found at http://www.dialysisreports.org/pdf/esrd/public-measures/AnemiaManagement-HGB-2015-NPRM.pdf; http://www.dialysisreports.org/pdf/esrd/public-measures/VascularAccess-Catheter-2015-NPRM.pdf; http://www.dialysisreports.org/pdf/esrd/public-measures/VascularAccess-Fistula-2015-NPRM.pdf; and http://www.dialysisreports.org/pdf/esrd/public-measures/ICHCAHPS-2015-NPRM.pdf. We request comment on the proposed continuation of these 
measures.
2. Expansion of Two PY 2014 Measures for PY 2015 and Subsequent Payment 
Years
    As stated earlier, we believe it is important to continue using 
measures from one payment year to the next payment year of the program 
to encourage continued improvements in patient care. Since we believe 
that continued improvement in patient care is important, we are 
proposing to expand the requirements under two reporting measures that 
we adopted for the PY 2014 ESRD QIP. These proposed expanded 
requirements would apply to the measures for PY 2015 and future payment 
years of the ESRD QIP.
a. Proposed Expanded NHSN Dialysis Event Reporting Measure
    HAIs are a leading cause of preventable mortality and morbidity 
across different settings in the healthcare sector, including dialysis 
facilities. In a national effort to reduce this outcome, HHS agencies, 
including CMS, are partnering with the Centers for Disease Control and 
Prevention (CDC) to encourage facilities to report to the NHSN as a way 
to track and facilitate action intended to reduce HAIs. The NHSN is 
currently a secure, internet-based surveillance system that integrates 
patient and healthcare personnel safety surveillance systems managed by 
the Division of Healthcare Quality Promotion at the CDC. NHSN has been 
operational since 2006 and tracks data from acute care hospitals, long-
term care hospitals, psychiatric hospitals, rehabilitation hospitals, 
outpatient dialysis centers, ambulatory surgery centers, and long term 
care facilities. We believe that reporting dialysis events to the NHSN 
by all facilities supports national goals for patient safety, 
particularly goals for the reduction of HAIs.
    For the reasons stated above, we are proposing to retain the NHSN 
Dialysis Event reporting measure that we adopted for the PY 2014 ESRD 
QIP (76 FR 70268 through 70269), but with an expanded reporting period. 
For PY 2014, ESRD QIP facilities were required to: (i) Enroll in the 
NHSN and complete any training required by the CDC related to reporting 
dialysis events via the NHSN system; and (ii) submit three or more 
consecutive months of dialysis event data to the NHSN. For the PY 2015 
ESRD QIP and future payment years, we propose to retain the NHSN 
measure and expand the reporting period to a full 12 months of dialysis 
event data. Although we expect most facilities to have enrolled and 
trained in the NHSN dialysis event system by the end of CY 2012, we 
note that facilities that have not done so by January 1, 2013 or 
facilities that receive a CMS certification number (CCN) during 2013 
must enroll and complete this training before reporting the data in 
order to fulfill the requirements of this reporting measure. The 
information reported to NHSN would be provided by the CDC to CMS for 
use in the ESRD QIP.
    As discussed in more detail below, we are proposing that the 
performance period for the PY 2015 ESRD QIP would be CY 2013. We 
propose that facilities must report dialysis event data monthly to the 
NHSN. We also propose that facilities be granted a ``grace period'' of 
one month to report this data. For example, a facility's dialysis event 
data for January 2013 must be reported on or before February 28, 2013. 
The final month of data from the performance period would be reported 
on or before January 31, 2014. For further information regarding the 
NHSN's dialysis event reporting protocols, please see http://www.cdc.gov/nhsn/psc_da_de.html. This link provides general 
information and links to more detailed, specialized information.
    We note that this proposed measure only applies to facilities 
treating in-center patients. For purposes of the NHSN Dialysis Event 
reporting measure, we determine whether a facility treats in-center 
patients by referencing the facility's information in CMS data sources 
(that is, SIMS and CROWNWeb). Facilities report the types of patients 
that they serve in these data sources. If a facility lists in-center

[[Page 40972]]

services, we are proposing that the facility would be required to 
comply with the NHSN dialysis event reporting measure.
    Section 1881(h)(2)(B)(i) of the Act requires that, unless the 
exception set forth in section 1881(h)(2)(B)(ii) of the Act applies, 
the measures specified for the ESRD QIP under section 
1881(h)(2)(A)(iii) of the Act must have been endorsed by the entity 
with a contract under section 1890(a) of the Act (which is currently 
NQF). Under the exception set forth in 1881(h)(2)(B)(ii) of the Act, in 
the case of a specified area or medical topic determined appropriate by 
the Secretary for which a feasible and practical measure has not been 
endorsed by the entity with a contract under section 1890(a) of the 
Act, the Secretary may specify a measure that is not so endorsed so 
long as due consideration is given to measures that have been endorsed 
or adopted by a consensus organization identified by the Secretary.
    An NQF-endorsed bloodstream infection measure (NQF1460) 
exists and is collected by the CDC as part of dialysis event reporting 
in NHSN. This measure assesses the number of hemodialysis patients with 
positive blood cultures. This measure differs from the dialysis event 
reporting measure that we adopted for the PY 2014 ESRD QIP and are 
proposing to expand beginning with the PY 2015 program because it 
evaluates the number of hemodialysis outpatients with positive blood 
cultures over a specified time period. By contrast, the proposed NHSN 
Dialysis Event reporting measure assesses facilities based on whether 
they enroll and report dialysis event data to the NHSN, not based on 
what the data reported are. We intend to propose to adopt NQF 
1460 once facilities have reported enough data to enable us to 
compute performance standards, achievement thresholds, improvement 
thresholds, and benchmarks for the measure.
    For the reasons stated in the CY 2012 ESRD PPS final rule (76 FR 
70268 through 69), we propose to retain the measure and expand the 
reporting period for PY 2015 and future years of the program. We 
request comment on this proposal. The technical specifications for this 
measure are located at http://www.dialysisreports.org/pdf/esrd/public-measures/NHSNDialysisReporting-2015-NPRM.pdf.
b. Proposed Expanded Mineral Metabolism Reporting Measure
    Undertreatment of bone mineral metabolism disease can cause severe 
consequences for ESRD patients. For PY 2014, it was not yet feasible to 
adopt a clinical measure evaluating facilities based on their patients' 
bone mineral metabolism rates because facilities did not report serum 
phosphorus and serum calcium values during the baseline and performance 
periods that we finalized with respect to that year. Instead, for PY 
2014, we finalized a measure assessing whether facilities routinely 
monitored the serum calcium and serum phosphorus levels in their 
patients. For PY 2015, we propose to expand this measure by requiring 
facilities to report a serum calcium and serum phosphorus level for 
each qualifying patient each month according to the requirements in 
CROWNWeb. Facilities would be required to enter these values into 
CROWNWeb on a monthly basis. Facilities would be granted a ``grace 
period'' of one month to enter the data. For example, we would require 
a facility to report serum calcium and serum phosphorus data for 
January 2013 on or before February 28, 2013. The final month of data 
from the performance period would be reported on or before January 31, 
2014.
    We do not intend for this proposed measure to encourage unnecessary 
testing or unduly burden a facility. Consequently, for purposes of 
scoring the measure, we considered proposing to require facilities to 
report the required information for less than 100 percent of their 
patients. Specifically, we considered lowering the threshold to 
reporting 98 percent of patients for a month in order to receive credit 
for that month. We chose 98 percent in order to encourage improvement, 
and to ensure that we do not undermine the current level of high-
reporting (based on the CrownWeb pilot data). We recognize that 100 
percent might not be appropriate due to some individual cases that may 
not fit specified criteria. We ultimately decided that a facility 
should be required to take and report these values for every patient at 
least once per month so that each beneficiary receives the highest 
standard of care. We realize, however, that there are circumstances 
beyond a facility's control wherein it may not be able to draw a sample 
for this patient. Therefore, we are not proposing that the facility 
itself must draw the serum phosphorus and serum calcium levels. If, for 
example, a patient is hospitalized or transient during a claim month, 
the facility may report the serum calcium and serum phosphorus readings 
for the patient for a month if a patient has labs drawn by another 
provider/facility and those labs are evaluated by an accredited 
laboratory (a laboratories that is accredited by, for example, the 
Joint Commission, the College of American Pathologists, the AAB 
(American Association of Bioanalysts), or State or Federal agency), and 
the dialysis facility obtains the serum calcium and serum phosphorus 
readings. Additionally, we propose to only consider a patient qualified 
for this measure (i) if the patient is alive at the end of the month; 
(ii) if the patient is treated in-center, that patient was treated at 
that facility at least twice during the claim month; and (iii) if the 
patient receives dialysis at home, a claim is submitted for that 
patient. We believe that these proposals will provide more flexibility 
for facilities and will also discourage facilities from drawing blood, 
even when not necessary, for fear that the patient will fail to come to 
the facility again during that month. We request comment on this 
proposal. We also request comment on whether facilities should only 
have to report data for 98 percent of their patients.
    Section 1881(h)(2)(B)(i) of the Act requires that, unless the 
exception set forth in section 1881(h)(2)(B)(ii) applies, the measures 
specified for the ESRD QIP under section 1881(h)(2)(A)(iii) of the Act 
must have been endorsed by the entity with a contract under section 
1890(a) of the Act (which is currently NQF). Under the exception set 
forth in 1881(h)(2)(B)(ii) of the Act, in the case of a specified area 
or medical topic determined appropriate by the Secretary for which a 
feasible and practical measure has not been endorsed by the entity with 
a contract under section 1890(a) of the Act, the Secretary may specify 
a measure that is not so endorsed so long as due consideration is given 
to measures that have been endorsed or adopted by a consensus 
organization identified by the Secretary.
    An NQF-endorsed measure assessing hypercalcemia exists (NQF 
1454) and we are proposing to adopt this measure for the PY 
2015 ESRD QIP and subsequent payment years, as further discussed below. 
The NQF-endorsed hypercalcemia measure, however, does not score 
facilities based only on whether or not that facility reported serum 
calcium values. The Mineral Metabolism reporting measure, unlike the 
Hypercalcemia measure, would assess only whether facilities report 
serum calcium and serum phosphorus values. It would not score 
facilities based on the actual values that they report. We believe it 
is important to continue to encourage reporting independent of a 
measure that scores based on the actual values reported because we need 
such values to monitor

[[Page 40973]]

aspects of bone mineral metabolism, for example phosphorus management, 
independent of hypercalcemia; this information will allow us to develop 
comprehensive bone mineral metabolism measures for use in future years 
of the ESRD QIP.
    In the CY 2012 ESRD PPS final rule, we discussed the basis for the 
Mineral Metabolism reporting measure (76 FR 70270 through 71). We 
stated that ``the NQF has previously endorsed phosphorus and calcium 
monitoring measures (NQF 0261 and NQF 0255) and, in 
2008, we adopted serum calcium and serum phosphorus monitoring as 
Clinical Performance Measures (http://www.dialysisreports.org/ESRDMeasures.aspx).'' The NQF measures referenced above call for 
monitoring these serum calcium and serum phosphorus values, but they do 
not require actual reporting of these values, as is the intent of the 
Mineral Metabolism reporting measure.
    For these reasons, we propose to expand the Mineral Metabolism 
reporting measure for PY 2015 and subsequent payment years under 
1881(h)(2)(B)(ii) of the Act. The technical specifications for this 
measure can be found at http://www.dialysisreports.org/pdf/esrd/public-measures/MineralMetabolism-Reporting-2015-NPRM.pdf. We further note 
that requiring the reporting of serum calcium and serum phosphorus 
levels for the PY 2015 ESRD QIP will allow us to develop mineral 
metabolism measures based on clinical data in the future. We request 
comment on this proposal to expand the Mineral Metabolism reporting 
measure.
3. New Measures Proposed for PY 2015 and Subsequent Payment Years of 
the ESRD QIP
    As the program evolves, we believe it is important to continue to 
evaluate and expand the measures selected for the ESRD QIP. Therefore, 
for the PY 2015 ESRD QIP and subsequent payment years, we are proposing 
to adopt five new measures. The proposed new measures include: three 
measures of dialysis adequacy (together comprising one dialysis 
adequacy measure topic); one measure of hypercalcemia, and one 
reporting measure involving hemoglobin and ESA dosages for all 
patients.
a. Proposed Kt/V Dialysis Adequacy Measure Topic
    Section 1881(h)(2)(A)(i) states that the ESRD QIP must evaluate 
facilities based on measures of ``dialysis adequacy''. For PYs 2012-
2014, the ESRD QIP included a hemodialysis adequacy measure evaluating 
the number of patients with a URR of at least 65 percent. For the PY 
2015 ESRD QIP, and future payment years, we are proposing to remove the 
URR Hemodialysis Adequacy measure. In its place, we are proposing to 
adopt three measures of dialysis adequacy (together comprising one 
dialysis adequacy measure topic) based on Kt/V (K = clearance, t = 
dialysis time, and V = volume of distribution) for the PY 2015 ESRD QIP 
and future payment years of the program. Kt/V is a widely accepted 
measure of dialysis adequacy in the ESRD community because it takes 
into account the amount of urea removed with excess fluid. Further, 
while the URR Hemodialysis Adequacy measure only applies to in-center 
hemodialysis patients, the proposed Kt/V measures will allow us to 
evaluate dialysis adequacy in adult hemodialysis (HD) patients (in-
center and home hemodialysis (HHD)) receiving three treatments weekly, 
adult peritoneal dialysis (PD) patients, and pediatric HD patients 
receiving three to four treatments weekly. We are proposing to adopt 
the following NQF-endorsed Kt/V measures of dialysis adequacy, each one 
applicable to a different patient population:
    (i) NQF 0249: Hemodialysis Adequacy Clinical Performance 
Measure III: Hemodialysis Adequacy--HD Adequacy--Minimum Delivered 
Hemodialysis Dose;
    (ii) NQF 0318: Peritoneal Dialysis Adequacy Clinical 
Performance Measure III--Delivered Dose of Peritoneal Dialysis Above 
Minimum; and
    (iii) NQF 1423: Minimum spKt/V for Pediatric Hemodialysis 
Patients.
    The proposed measures assess whether Medicare dialysis patients 
(PD, HD, and pediatric hemodialysis) meeting the modality specific Kt/V 
threshold. Performance on the measures are expressed as a proportion of 
patient-months meeting the measure threshold.
    For the reasons stated above, we are proposing to use Kt/V as the 
measure of dialysis adequacy for the PY 2015 ESRD QIP and future 
payment years of the program. Kt/V would be measured for adult HD 
patients using NQF 0249, adult PD patients using NQF 
0318, and pediatric hemodialysis patients using NQF 
1423. Additionally, we are proposing to remove the URR 
Hemodialysis Adequacy measure; we request comments on these proposals. 
The technical specifications for this measure can be found at http://www.dialysisreports.org/pdf/esrd/public-measures/PediatricHemodialysisAdequacy-ktv-2015-NPRM.pdf; http://www.dialysisreports.org/pdf/esrd/public-measures/PeritonealDialysisAdequacy-ktv-2015-NPRM.pdf; and http://www.dialysisreports.org/pdf/esrd/public-measures/HemodialysisAdequacy-ktv-2015-NPRM.pdf. We request comment on these proposals. The proposed 
scoring and weighting of the Kt/V Dialysis Adequacy measure topic is 
discussed below.
b. Hypercalcemia
    Section 1881(h)(2)(A)(iii) of the Act states that the measures 
specified for the ESRD QIP shall include other measures as the 
Secretary specifies, including, to the extent feasible, measures of 
bone mineral metabolism. Abnormalities of bone mineral metabolism are 
exceedingly common and contribute significantly to morbidity and 
mortality in patients with advanced Chronic Kidney Disease (CKD). 
Numerous studies have associated disorders of mineral metabolism with 
morbidity, including fractures, cardiovascular disease, and mortality. 
Therefore, we believe it is necessary to adopt a clinical measure that 
encourages proper bone mineral metabolism management.
    One indicator of bone mineral metabolism management is 
hypercalcemia. We are, therefore, proposing to use the NQF-endorsed 
measure, NQF 1454: Proportion of patients with hypercalcemia, 
to evaluate ESRD facilities for the PY 2015 and future payment years of 
the ESRD QIP. This measure assesses the number of patients with 
uncorrected serum calcium greater than 10.2 mg/dL for a 3-month rolling 
average. ``Uncorrected'' means not corrected for serum albumin 
concentration. Performance on this measure is expressed as a proportion 
of patient-months for which the 3-month rolling average exceeds the 
measure threshold. Because the NQF-endorsed measure calls for a 3-month 
rolling average, we are proposing that the first measure rate for this 
measure would be calculated using the first 3 months of data collected 
during the proposed performance period (that is, there would be no 
measure rate for the first 2 months of the performance period; we would 
calculate the first measure rate for the performance period using the 
first 3 months of data and would then calculate a rate each successive 
month, dropping the oldest month and adding the newest month). Because 
we are proposing to adopt this measure not only for PY 2015, but also 
subsequent payment years, we also propose that, beginning with the PY 
2016 program, we would measure hypercalcemia beginning in January of 
the applicable

[[Page 40974]]

performance period. This will allow us to have a 3-month rolling 
average for all months in the performance period. We propose that the 
3-month rolling average rate for January would be calculated using the 
rates from November and December of the previous year as well as 
January of that year. Likewise, we propose that the rate for February 
would be calculated using the rates from December, January and February 
to calculate the 3-month rolling average, and so on. Technical 
specifications for this measure can be found at http://www.dialysisreports.org/pdf/esrd/public-measures/MineralMetabolism-Hypercalcemia-2015-NPRM.pdf. We welcome comments on these proposals.
c. Proposed Anemia Management Reporting Measure
    Section 1881(h)(2)(A)(i) requires ``measures on anemia management 
that reflect the labeling approved by the Food and Drug Administration 
(FDA) for such management.'' Although the current FDA-approved label 
for Erythropoiesis-Stimulating Agents (ESAs) only specifically 
addresses hemoglobin levels greater than 11 g/dL, previous FDA-approved 
labels suggested patients on ESAs maintain a hemoglobin level of 10-12 
g/dL. As we noted in the CY 2012 ESRD PPS final rule, upon further 
research, the FDA determined that there is no evidence suggesting a 
lower target level at which hemoglobin does not cause increased risks 
of death, serious adverse cardiovascular reactions, and stroke and, 
therefore, changed its approved label on June 24, 2011 (76 FR 70257).
    As a result of the changes in the FDA approved-label and the 
implementation of the ESRD QIP, we are monitoring trends and indicators 
of anemia management for the Medicare ESRD population. We have found 
that the average monthly blood transfusion rate increased from 2.7 
percent in 2010 to 3.2 percent in 2011. We are working through our ESRD 
QIP monitoring and evaluation program to further assess this issue. We 
believe that it is important that we continue monitoring hemoglobin 
levels in patients to ensure that anemia is properly treated, and we 
are proposing to adopt a measure for PY 2015, and future payment years, 
which requires facilities to report ESA dosage (if applicable) and 
hemoglobin and/or hematocrit levels for patients on at least one 
monthly claim. In addition to this measure, proposed below, we plan to 
continue to monitor the rate of transfusions and may consider the 
adoption of relevant quality measures through future rulemaking if 
necessary.
    Since January 1, 2012, facilities have been required to report 
hemoglobin or hematocrit\1\ levels for each patient on every claim (CR 
7640). Beginning April 1, 2012, if a hemoglobin or hematocrit value is 
not included in the claim, the claim is returned to the facility (CR 
7593). If a hemoglobin or hematocrit value is not available for a 
patient, a facility can enter a default value of 99.99 on the claim and 
the claim will not be returned, provided the facility is not billing 
for an ESA. The default value is not acceptable when the claim includes 
an ESA, in such a case, the claim will be returned to the provider.
---------------------------------------------------------------------------

    \1\ Hematocrit values are used to calculate hemoglobin levels by 
taking the hematocrit value and dividing by three.
---------------------------------------------------------------------------

    We are concerned that our current policy of paying claims that 
include a default hemoglobin or hematocrit value of 99.99 could lead to 
the under-reporting of patients' hemoglobin or hematocrit levels and 
ESA dosage by facilities; we are specifically concerned that we will 
not receive complete and accurate hemoglobin/hematocrit readings for 
those patients not receiving ESAs because a default value of 99.99 can 
be reported on claims, and these claims will be paid, if no ESA is 
administered to the patient. Additionally, we believe that facilities 
might choose to strategically not report certain patients' hemoglobin 
or hematocrit levels on certain claims--those where the patient's 
hemoglobin levels are greater than 12 g/dL--in order to make the 
performance rate of their Hemoglobin Greater Than 12 g/dL measure seem 
better and reduce the likelihood of a payment reduction under the ESRD 
QIP.
    Because it is possible that facilities could under-report 
hemoglobin or hematocrit levels, we are proposing to adopt an Anemia 
Management reporting measure for the PY 2015 ESRD QIP, and future 
payment years of the program. For this measure, we propose to require 
facilities to report a hemoglobin or hematocrit value and, as 
applicable, an ESA dosage for all Medicare patients at least once per 
month via claims. We propose to consider claims with 99.99 values as 
not meeting the requirements of this measure (that is, claims reporting 
99.99 will be counted as if the hemoglobin or hematocrit value were 
left blank).
    We do not intend for this proposed measure to encourage unnecessary 
testing or unduly burden a facility. Consequently, for purposes of 
scoring the measure, we considered proposing to require facilities to 
report the required information for less than 100 percent of their 
patients. Specifically, we considered lowering the threshold to 
reporting 98 percent of patients for a month in order to receive credit 
for that month. We ultimately decided that a facility should be 
required to take and report these values for every patient at least 
once per month so that each beneficiary receives the highest standard 
of care. We realize, however, that there are circumstances beyond a 
facility's control wherein it may not be able to draw a sample for this 
patient. Therefore, we are not proposing that the facility itself must 
draw blood for each patient. If, for example, a patient is hospitalized 
or transient during a claim month, the facility may report the 
hemoglobin/hematocrit readings and ESA dosage (if applicable) for the 
patient for a month if a patient has labs drawn by another provider/
facility and those labs are evaluated by an accredited laboratory (a 
laboratories that is accredited by, for example, the Joint Commission, 
the College of American Pathologists, the AAB (American Association of 
Bioanalysts), or State or Federal agency), and the dialysis facility 
obtains the hemoglobin/hematocrit readings and ESA dosage. 
Additionally, we propose to only consider a patient qualified for this 
measure (i) if the patient is alive at the end of the month; (ii) if 
the patient is treated in-center, that patient was treated at that 
facility at least twice during the claim month; and (iii) if the 
patient receives dialysis at home, a claim is submitted for that 
patient. We believe that these proposals will provide more flexibility 
for facilities and will also discourage facilities from drawing blood, 
even when not necessary, for fear that the patient will fail to come to 
the facility again during that month. We request comment on this 
proposal. We also request comment on whether facilities should only 
have to report data for 98 percent of their patients.
    The proposed Anemia Management reporting measure was not included 
in the list of measures under consideration in accordance with section 
1890A(a)(2) of the Act because we had not yet fully assessed the impact 
of the new FDA-endorsed ESA label on the ESRD population. We have since 
received and analyzed more, but still incomplete, anemia management 
data; we believe it is necessary to require facilities to provide 
complete data so that we may fully understand the effect of the FDA 
guidance and other factors. The proposed Anemia Management reporting 
measure will play a critical role in patient safety. As noted above, 
our monitoring activities indicate that

[[Page 40975]]

there has been a slight but noticeable increase in transfusions since 
the adoption of the ESRD PPS. Additionally, a United States Renal Data 
System analysis presented in May 2012 found an increase in blood 
transfusion rates among ESRD patients concurrent with the 
implementation of the ESRD PPS. Although the association of changes in 
transfusion rates with the ESRD PPS, FDA label changes, and other 
factors are not yet known, we believe proactive facility engagement in 
regular monitoring of patient hemoglobin or hematocrit levels 
regardless of ESA use is critical to maintaining safe care, protecting 
the safety of beneficiaries, and monitoring the program effectively. We 
further believe that the data collected from the proposed measure are 
necessary for measure development in a clinical area of critical 
significance to patient safety--anemia and transfusion. Delay in 
proposing to adopt this reporting measure may prevent us from creating 
clinical measures for use in future years of the program and pose a 
risk to patients. Finally, we note that section 1881(h) of the Act 
specifically highlights the importance of anemia management measures, 
and we do not believe it would be in the best interest of the program 
to wait an additional year to propose this measure.
    For the reasons stated above, we propose to adopt an Anemia 
Management reporting measure for the PY 2015 ESRD QIP and subsequent 
payment years. For the technical specifications for this measure, see 
http://www.dialysisreports.org/pdf/esrd/public-measures/AnemiaManagement-Reporting-2015-NPRM.pdf. We request public comment on 
this proposal.
4. Measures Under Consideration for Future Payment Years of the ESRD 
QIP
    In addition to the PY 2015 ESRD QIP, we are also considering 
measures for future payment years of the program. We are specifically 
considering whether we should propose in future rulemaking to adopt the 
following two measures,
     NQF 1463: Standardized Hospitalization Ratio for 
Admissions (SHR) and
     NQF 0369: Dialysis Facility Risk-adjusted 
Standardized Mortality Ratio (SMR).
    We intend to adopt these measures for future payment years of the 
ESRD QIP, possibly beginning with the PY 2018 program. We are notifying 
facilities of our intent and soliciting comments on incorporating these 
measures into future payment years of the ESRD QIP.
a. Standardized Hospitalization Ratio (SHR)
    Hospitalizations are an important indicator of patient quality of 
life and morbidity. The SHR is an NQF-endorsed (1463), risk-
adjusted measure of hospitalization for dialysis patients. The measure 
is claims-based and describes, as a ratio, the number of ESRD Medicare 
patient actual admissions versus expected hospitalizations adjusted for 
the facility's Medicare patient case mix. Please refer to the NQF 
Measures Web site (www.qualityforum.org) to obtain more detail about 
this measure.
b. Standardized Mortality Ratio (SMR)
    The SMR measure is an NQF-endorsed (0396) critical 
patient-centered, outcome measure of overall patient care furnished by 
facilities. We believe that the SMR measure would encourage appropriate 
overall patient care by facilities and incentivize facilities to 
examine the holistic health of the patient rather than treating the 
patient based on an individual measure-by-measure basis. The SMR 
measure describes, as a ratio, the number of ESRD Medicare patient 
actual deaths versus expected deaths adjusted for the facility's 
Medicare patient case mix. Please refer to the NQF Measures Web site 
(www.qualityforum.org) to obtain more detail about this measure.
c. Public Reporting of SHR and SMR Measures
    Although the SHR and SMR measures may not be adopted for the ESRD 
QIP until a future payment year, we intend to publicly report these 
measure rates/ratios to the public via Dialysis Facility Compare (DFC) 
to encourage facilities to improve their care. Section 4558(b) of the 
Balanced Budget Act of 1997 (Pub. L. 105-33) (BBA) directs the 
Secretary to develop, not later than January 1, 1999, and implement, 
not later than January 1, 2000, a method to measure data reflective of 
the quality of renal dialysis services provided under the Medicare 
program. Under this authority, we began reporting the SMR measure on 
DFC in January, 2001 as a survival measure and used three categories to 
rate facility performance: ``as expected,'' ``worse than expected,'' 
and ``better than expected.'' The SMR measure that we are considering 
adopting for the ESRD QIP was developed in 1999 and facilities are 
required to submit this data via form 2746. The SHR measure that we are 
considering adopting for the ESRD QIP was developed in 1995, presented 
to a Technical Expert Panel after modifications to risk adjustment and 
statistical modeling in 2007, and received NQF-endorsement in 2011. The 
data needed to calculate the SHR measure have been regularly reported 
to DFR since 1995 and have been used by facilities for quality 
improvement activities. We plan to add the SHR data to the DFC 
effective January 2013; additionally we will report the actual SMR 
rates/ratio on the DFC beginning January 2013.
    We originally proposed to adopt the SHR measure for the PY 2014 
program, but did not finalize the proposal, in part, because commenters 
voiced concerns regarding accuracy of the co-morbidity data used in the 
calculation of the measures. Details on public comments and why we did 
not adopt the SHR measure are articulated in the CY 2012 ESRD PPS final 
rule (76 FR 70267). Since that time, we have identified that the claim 
form UB 92 with the type of bill (TOB) field 72X allows a facility to 
input up to 17 co-morbid conditions per claim submission. We 
acknowledge that patient co-morbidities can change with time and since 
the capability already exists on the UB 92 TOB, we believe the best 
means for facilities to update patient co-morbidities is through the 
ESRD 72x claims form. Details on this form can be found in the Medicare 
Claims Processing Manual, Chapter 8--Outpatient ESRD Hospital, 
Independent Facility, and Physician/Supplier Claims (https://www.cms.gov/manuals/downloads/clm104c08.pdf).
    In addition, because the NQF-endorsed SHR and SMR measures are 
risk-adjusted for ESRD patients that reside in nursing homes, in order 
to calculate the measure rates on DFC, we will utilize data from the 
Minimum Data Set (MDS) to identify those individuals in nursing homes. 
We would use this data not only for reporting the measure rates on DFC 
at present, but also for calculating the measures if we adopted them 
for us in future years of the ESRD QIP. The Omnibus Budget 
Reconciliation Act (OBRA) of 1987 requires that all Medicare and 
Medicaid certified nursing homes complete MDS assessments on all of 
their patients.
    We request comment regarding the feasibility of adopting these 
measures for future payment years of the ESRD QIP.
5. Other Potential Future Measures Under Development
    As part of our effort to continuously improve the ESRD QIP, we are 
working on developing additional, robust measures that provide valid 
assessments of the quality of care furnished to ESRD beneficiaries by 
facilities. Some areas of measure development are discussed

[[Page 40976]]

below. In addition, we are considering the feasibility of developing 
quality measures in other areas such as kidney transplantation, quality 
of life, health information technology for quality improvement at the 
point of care and the electronic exchange of information for care 
coordination, and transfusions. We request comment on these potential 
areas of future measurement and welcome suggestions on other topics for 
measure development.
a. Thirty-Day Hospital Readmissions
    One of the major areas our VBP programs seek to promote is care 
coordination. Care coordination measures assess caregivers not only on 
the care directly under their control, but also on their success in 
coordinating care with other providers and suppliers. Hospital 
readmission is often the outcome of uncoordinated care. Care 
coordination measures encourage primary caregivers, ESRD facilities, 
physicians, and hospitals to work together to improve the quality of 
care. A 30-day hospital readmissions measure is a primary example of 
care coordination. This measure is currently under development for 
ESRD, and we request comment regarding our use of such a measure in 
future payment years.
b. Efficiency
    One of the main goals of our VBP programs is not only to enhance 
quality of care but also efficiency in providing that care. At present, 
we are not aware of an efficiency measure that is appropriate for the 
ESRD population. We are, however, interested in receiving comments 
regarding this concept.
c. Population/Community Health
    We are aware that unintended consequences, specifically those 
involving access to care, may result from the ESRD QIP. To address 
these concerns, we are currently monitoring access to care and 
exploring the development of new measures or adjustments to existing 
measures that would mitigate the unintended consequences and/or 
incentivize facilities caring for patients who may, generally, 
contribute to lower facility measure rates. We request comment on 
developing such a measure or adjustments to measures, specifically with 
regard to access to care issues.
6. Proposed Scoring for the PY 2015 ESRD QIP
    Section 1881(h)(3)(A)(i) of the Act requires the Secretary to 
develop a methodology for assessing the total performance of each 
facility based on the performance standards established with respect to 
the measures selected for the performance period. For the PY 2014 ESRD 
QIP, we adopted a performance scoring methodology that assessed 
facilities on both their achievement and improvement on clinical 
measures. We stated that we believe that this scoring methodology will 
more accurately reflect a facility's performance on the measures 
because it will enable us to differentiate between facilities that 
simply meet the performance standards, those that exceed the 
performance standards by varying amounts, and those that fall short of 
the performance standards. We also stated that we believe that the PY 
2014 methodology appropriately incentivizes facilities to both achieve 
high Total Performance Scores and improve the quality of care they 
provide (76 FR 70272). We believe that the methodology set forth for PY 
2014 continues to incentivize facilities to meet the goals of the ESRD 
QIP; therefore, with the exception of the proposed changes further 
discussed in the applicable section below, we propose to adopt a 
scoring methodology for the PY 2015 ESRD QIP that is nearly identical 
to the PY 2014 ESRD QIP.
7. Proposed Performance Period for the PY 2015 ESRD QIP
    Section 1881(h)(4)(D) of the Act requires the Secretary to 
establish the performance period with respect to a year. For the PY 
2014 ESRD QIP, we finalized a performance period of CY 2012. We stated 
that we believe that, at this point, a 12-month performance period is 
the most appropriate for the program because this period accounts for 
any potential seasonal variations that might affect a facility's score 
on some of the measures, and also provides adequate incentive and 
feedback for facilities and Medicare beneficiaries (76 FR 70271). We 
continue to believe that a 12-month performance period will best meet 
these policy objectives, and we considered what 12-month period would 
be closest in time to the payment year but would still allow us to time 
to operationalize the program, calculate scores, and grant facilities a 
period of time to preview and ask questions regarding these scores 
before they are published and impact payment. We have determined that 
CY 2013 is the latest period of time during which we can collect a full 
12 months of data and still implement the payment reductions beginning 
with January 1, 2015 services. Therefore, for the PY 2015 ESRD QIP, we 
propose to establish CY 2013 as the performance period for all of the 
measures. We request comments on this proposal.
8. Proposed Performance Standards for the PY 2015 ESRD QIP
    Similar to the PY 2014 ESRD QIP, we propose to adopt performance 
standards for the PY 2015 ESRD QIP measures under section 1881(h)(4)(A) 
of the Act. This section provides that ``the Secretary shall establish 
performance standards with respect to measures selected * * * for a 
performance period with respect to a year.'' Section 1881(h)(4)(B) of 
the Act further provides that the ``performance standards * * * shall 
include levels of achievement and improvement, as determined 
appropriate by the Secretary.'' We use the performance standards to 
establish the minimum score a facility must achieve to avoid a payment 
reduction.
a. Proposed Clinical Measure Performance Standards
    With respect to the seven proposed clinical measures, we propose to 
set the PY 2015 improvement performance standard and achievement 
performance standard (collectively, the ``performance standard'') for 
each measure at the national performance rate (which we would define as 
the 50th percentile) of all facilities' performance on the measure 
during CY 2011 (the proposed comparison period--discussed in more 
detail below).
    For the PY 2014 ESRD QIP, we set the performance standards at the 
national performance rate during a baseline period of July 1, 2010-June 
30, 2011. This period of time, however, did not allow us to publish the 
numerical values for the performance standards concurrently with the 
final rule because of the length of time needed for us to compile 
claims-based measure data at the individual facility level and 
calculate the measure rates. Instead, we included an estimate of the 
numerical values for the performance standards in the final rule, using 
nine months of data, and posted the numerical values of the performance 
standards based on the full 12 months of data on http://www.dialysisreports.org/pdf/esrd/public-measures/UpdatedBaseline-2014-FR.pdf by the end of December 2011. In order to ensure that we have 
enough time to calculate and assign numerical values to the proposed 
performance standards for the PY 2015 program, we are proposing to set 
the performance standards based on the national performance rate (that 
is, the 50th percentile) of facility performance in CY 2011. By 
choosing this time period for PY 2015, however, the data on which we 
base the performance standards would only capture 6 months of more 
recent data when compared to

[[Page 40977]]

PY 2014 and would also overlap with 6 months of the data used to 
calculate the PY 2014 performance standards. We are also concerned that 
if we finalize this period of time, we would not be adequately 
addressing stakeholder requests that we take steps to minimize the 
length of ``data lag'' between the dates used to calculate the 
performance standards and the payment year. We recognize that 
stakeholders might prefer that we base performance standards on data as 
close in time to PY 2015 as possible.
    The period of time closest to the payment year that would allow us 
to post the numerical values for the performance standards before the 
end of the first month of the performance period is parallel to that of 
PY 2014, from July 1, 2011 through June 30, 2012. As with PY 2014, 
selecting this time period for purposes of calculating numerical values 
for the performance standards would not allow us to publish these 
numerical values until late 2012 or early 2013, which is closer in time 
and may possibly be during the performance period. However, as in PY 
2014, we would still be able to provide estimates for the numerical 
values of the performance standards at the time of final rule 
publication and post the actual numbers as soon as they are available 
in December 2012 or January 2013.
    Based on these considerations, we are proposing CY 2011 as the 
basis for the performance standards (that is, the national performance 
rates). We do, however, request comment concerning whether we should 
instead use data closer in time to the payment year and set the 
performance standards using July 1, 2011 through June 30, 2012 data.
    For two of the PY 2015 measure topics, Kt/V Dialysis Adequacy and 
Hypercalcemia, we do not possess data for the entirety of CY 2011, the 
year on which we propose to base the performance standards. We did not 
begin collecting uniform data on the Kt/V hemodialysis adequacy measure 
until January 1, 2012 (see Change Request 7460), and, under the 
conditions for coverage, facilities were not required to report serum 
calcium values that will be used to calculate the Hypercalcemia 
clinical measure until their submission of May 2012 data with the June 
2012 national implementation of CROWNWeb. Despite these issues, we do 
have data on which we can base performance standards. Although 
facilities are not yet required to report serum calcium levels, 
approximately 63 percent of facilities, which treat approximately 80 
percent of the Medicare ESRD patient population, have been voluntarily 
reporting this data via CROWNWeb piloting since July 2008. 
Additionally, we have compared the serum calcium values reported by 
facilities in 2010 as part of a clinical data reporting program called 
ELab,\2\ to values that have been voluntarily reported by facilities in 
2010 through CROWNWeb, and the values are significantly similar. We 
believe that these similarities will also extend to data reported in 
2011. Therefore, we propose to calculate performance standards for the 
Hypercalcemia measure using the data that we collected via CROWNWeb 
Pilots collected during CY 2011.
---------------------------------------------------------------------------

    \2\ http://www.esrdnet11.org.
---------------------------------------------------------------------------

    Uniform Kt/V reporting for hemodialysis patients did not begin 
until January 1, 2012 (CR 7640). Before this time, facilities could use 
a number of different methodologies to calculate Kt/V values, with the 
result that the values could be different depending on which 
methodology was used. We have analyzed the data collected during the 
CROWNWeb pilot and found that 88 percent of facilities that reported to 
CROWNWeb had reported Kt/V values using a NQF specified calculation 
method (this method is also specified in Change Request 7640) that 
yields consistent results and that is part of the specifications for 
each of the hemodialysis Kt/V measures that we are proposing to adopt 
for the PY 2015 program. Though we are not able to tell what 
calculation method a facility used by reviewing a claim, we believe it 
is reasonable to assume that roughly the same percentage of facilities 
reported Kt/V on their claims prior to 2012 using the same formula that 
they used to report it under the CROWNWeb pilot. For this reason, we 
propose to calculate the performance standards for the three proposed 
Kt/V measures using CY 2011 claims data. This is the best data we have 
available at this time to set reliable performance standards for Kt/V. 
We understand, however, that stakeholders may be concerned about the 
nuances of the data and we invite public comment on this proposal.
    If, after consideration of the comments, we decide to not adopt the 
adult, hemodialysis Kt/V measure for PY 2015, we propose to continue to 
use URR as a measure of hemodialysis adequacy for this population. As 
we have noted, Kt/V is preferred over URR. Because the pediatric 
hemodialysis measure faces the same methodological issues as the adult 
hemodialysis measure, we propose that if we do not adopt the Kt/V 
measure for adult hemodialysis patients, we would also not adopt the 
Kt/V measure for pediatric hemodialysis patients. We note that the NQF 
endorsed measure for Kt/V measure for peritoneal dialysis adequacy does 
not specify the body surface area formulas or the total body water 
formulas to utilize; and we would accept the submission of peritoneal 
adequacy Kt/V values that utilize the methods currently in use as 
industry standards. We believe it is important to include peritoneal 
dialysis patients in the ESRD QIP and are soliciting comments on the 
inclusion of the peritoneal dialysis Kt/V adequacy measure. We propose 
that, were we to retain the URR measure for adult hemodialysis, we 
would still adopt the Kt/V peritoneal dialysis measure. We propose that 
these measures would still comprise a Dialysis Adequacy measure topic 
and would be scored in the same manner as we propose for the Kt/V 
measures, below.
    Even with the challenges outlined above, we believe that the 
advantages of adopting the Kt/V hemodialysis measure for PY 2015 
outweigh the disadvantages. Therefore, we propose Kt/V as the measure 
for hemodialysis adequacy for PY 2015, but we specifically solicit 
comments regarding whether we should continue to use URR for adult 
hemodialysis patients for PY 2015.\3\
---------------------------------------------------------------------------

    \3\ Note that, as further explained below, the issue we have 
discussed with respect to the reporting of Kt/V values prior to CY 
2012 would not be an issue for the calculation of improvement scores 
because we are proposing CY 2012 as the period used to calculate the 
improvement threshold; beginning January 1, 2012, all facilities are 
required to report Kt/V uniformly on their claims.
---------------------------------------------------------------------------

    We also considered calculating performance standards for the Kt/V 
Dialysis Adequacy measure topic based on data from January 1, 2012-June 
30, 2012, to ensure that the data was calculated consistently. We are, 
however, aware that a shortened data period may affect the measure 
rates' reliability. Therefore, we are proposing to calculate 
performance standards based on the data from CY 2011 discussed above, 
but we invite comment on an alternative 6 month period beginning on or 
after the date on which uniform reporting began, January 1, 2012.
b. Estimated Performance Standards
    At this time, we do not have the necessary data to assign numerical 
values to the proposed performance standards for the clinical measures 
because we do not yet have all of the data from CY 2011. However, we 
are able to estimate these numerical values based on the latest full 
year of data

[[Page 40978]]

available. In Table 5, we have provided the estimated performance 
standards for all of the measures, except for the Hypercalcemia 
measure, based on data from October 1, 2010-September 30, 2011. For the 
Hypercalcemia measure, we currently have only 6 months of data based on 
approximately 63 percent of facilities reporting; the estimate, 
therefore, is based on data from April 2011-October 2011.

  Table 5--Estimated Numerical Values for the Performance Standards for
the PY 2015 ESRD QIP Clinical Measures Using the Most Recently Available
                                  Data
------------------------------------------------------------------------
                                                            Performance
                         Measure                           standard (%)
------------------------------------------------------------------------
Hemoglobin >12 g/dL.....................................               2
Vascular Access Type:
  %Fistula..............................................              59
  %Catheter.............................................              13
Kt/V:
  Adult Hemodialysis....................................              93
  Adult, Peritoneal Dialysis............................              83
  Pediatric Hemodialysis................................              90
Hypercalcemia...........................................           \1\ 3
------------------------------------------------------------------------
\1\ As noted above, the performance standard for the Hypercalcemia
  measure is based on approximately 63 percent of facilities (accounting
  for approximately 80 percent of the Medicare ESRD population)
  reporting serum calcium values in CROWNWeb.

    In accordance with our statements in the CY 2012 ESRD PPS final 
rule (76 FR 70273), if the final numerical values for the PY 2015 
performance standards are worse than PY 2014 for a measure, we propose 
to substitute the PY 2014 performance standard for that measure. We 
believe that the ESRD QIP should not have lower standards than previous 
years. We request comments on this proposal.
c. Proposed Performance Standards for PY 2015 Reporting Measures
    We established the performance standards for the reporting measures 
for PY 2014 based upon whether facilities met certain reporting 
requirements rather than achieved or improved on specific clinical 
values. We propose to establish the same performance standard for the 
ICH CAHPS reporting measure for PY 2015 that we established for PY 
2014. Under this proposed performance standard, facilities would be 
required to provide an attestation that they successfully administered 
the ICH CAHPS survey via a third party in accordance with the measure 
specifications. We propose that this attestation must be completed in 
CROWNWeb by January 31, 2014.
    For the NHSN Dialysis Event reporting measure we propose to set the 
performance standard as successfully reporting 12 months of data from 
CY 2013. If a facility has not yet enrolled and trained in the NHSN 
dialysis event system, we are proposing that the performance standard 
for that facility would also include completion of these requirements.
    For the Mineral Metabolism reporting measure we propose to set the 
performance standard as successfully reporting serum phosphorus and 
calcium values for all 12 months of the performance period for (i) in-
center hemodialysis patients the facility treats at least twice during 
the applicable month and (ii) all peritoneal and home hemodialysis 
patients that the facility treats.
    For the Anemia Management reporting measure we propose to set the 
performance standard as successfully reporting hemoglobin or hematocrit 
and ESA dosage (if applicable) for all 12 months of the performance 
period for (i) in-center hemodialysis patients the facility treats at 
least twice during the applicable month and (ii) all peritoneal and 
home hemodialysis patients that the facility treats.
    Further information regarding the reporting requirements is found 
in sections III.C.2.a, III.C.2.b, III.C.3.c, and III.C.9.c of this 
proposed rule. We request comment on these proposals.
9. Proposed Scoring for the PY 2015 ESRD QIP Proposed Measures
    In order to assess whether a facility has met the performance 
standards, we finalized a methodology for the PY 2014 program under 
which we separately score each clinical and reporting measure. We score 
facilities based on an achievement and improvement scoring methodology 
for purposes of assessing their performance on the clinical measures. 
Under the PY 2014 ESRD QIP scoring methodology, a facility's 
performance on each of the clinical measures is determined based on the 
higher of (i) an achievement score or (ii) an improvement score (76 FR 
70273). We propose to use a similar methodology for purposes of scoring 
facilities performance on each of the clinical measures for the PY 2015 
ESRD QIP.
    As in PY 2014, in determining a facility's achievement score for 
the PY 2015 program, we propose that facilities would, based on their 
performance in CY 2013 (the proposed performance period), receive 
points along an achievement range, which we would define as a scale 
that runs from the achievement threshold to the benchmark. We propose 
to define the achievement threshold for each of the proposed clinical 
measures as the 15th percentile of national facility performance during 
CY 2011. We believe that this achievement threshold will provide an 
incentive for facilities to continuously improve their performance 
while not reducing the incentives to facilities that score at or above 
the national performance rate for the clinical measures (76 FR 70276). 
We propose to define the benchmark as the 90th percentile of the 
national facility performance during CY 2011 because it represents a 
demonstrably high but achievable standard of excellence that the best 
performing facilities reached. We further propose that, for the 
proposed Kt/V Dialysis Adequacy measures and the proposed Hypercalcemia 
measure, we would use the same data we proposed above to use to 
calculate the performance standards for purposes of calculating the 
achievement thresholds and the benchmarks for these measures. We 
request comment on these proposals.
    In determining an improvement score for the clinical measures, we 
propose that facilities receive points along an improvement range, 
defined as a scale running between the improvement threshold and the 
benchmark. We propose to define the improvement threshold as the 
facility's rate on the measure during CY 2012. The facility's 
improvement score would be calculated by comparing its performance on 
the measure during CY 2013 (the proposed performance period) to its 
performance on the measure during CY 2012. We are proposing to base the 
improvement threshold on data from CY 2012 rather than CY 2011 (the 
period of time we have proposed to use to calculate the performance 
standards, achievement thresholds, and benchmarks) because, as we 
explain above, we do not have complete facility level CY 2011 data that 
we can use to calculate an improvement threshold for every facility on 
the Kt/V Dialysis Adequacy measures and the Hypercalcemia measure. 
Rather than proposing to adopt a policy under which no facility could 
receive an improvement score on these measures, we are proposing to use 
data from CY 2012 to calculate the improvement thresholds. 
Additionally, we believe by using CY 2012 to calculate the improvement 
thresholds, we will more closely align timing of the payment reduction 
with the period of time we use to calculate improvement thresholds. 
Note that, for the proposed Hypercalcemia measure, we did not require 
data collection via CROWNWeb until June 2012, and, therefore, the data 
we are proposing to use to set the

[[Page 40979]]

improvement threshold for each facility would only include May 2012-
December 2012 data.
    Our proposals for the time periods used for the various 
calculations for clinical measures are depicted below in Table 6. We 
request comments on our proposal to use data from CY 2012 to calculate 
improvement thresholds.
    When considering the time period we would use to calculate 
improvement thresholds, we sought to mitigate data lag issues as much 
as possible by selecting a period in time as close as possible to the 
performance period. However, to entirely mitigate this data lag, we 
also considered a period that would take place during the performance 
period. Using this approach, to calculate an improvement score, we 
would derive an improvement threshold from either the first quarter of 
CY 2013 or the first 6 months of CY 2013 and compare it to the 
facility's measure rate in the last quarter of CY 2013 or the last 6 
months of CY 2013, respectively. We ultimately decided not to propose 
this approach because, when possible, we prefer to use 12 months of 
data to calculate measure rates to ensure more reliable rates, 
particularly for low-volume facilities. Additionally, using this 
approach, part of the performance period for purposes of calculating 
the facility's performance rate and achievement score (all of CY 2013) 
could overlap with the data we use to calculate the improvement 
threshold (first quarter or 6 months of CY 2013). Although we are 
proposing to calculate improvement thresholds based on data from CY 
2012, we also request comment regarding use of these alternative 
periods for purposes of calculating the improvement threshold.

         Table 6--Proposed Periods Used for PY 2015 Calculations
------------------------------------------------------------------------
                               Proposed period of
                                  time used in
                                   calculating       Proposed period of
                                   achievement          time used in
           Measure                 thresholds,           calculating
                                 benchmarks, and         improvement
                                   performance           thresholds
                                    standards
------------------------------------------------------------------------
Hemoglobin >12 g/dL.........  CY 2011.............  CY 2012.
Vascular Access Type:
    %Fistula................  CY 2011.............  CY 2012.
    %Catheter...............  CY 2011.............  CY 2012.
Kt/V:
    Adult Hemodialysis......  CY 2011 (data from    CY 2012.
                               facilities using
                               all methods to
                               calculate Kt/V).
    Adult, Peritoneal         CY 2011 (data from    CY 2012.
     Dialysis.                 facilities using
                               all methods to
                               calculate Kt/V).
    Pediatric Hemodialysis..  CY 2011 (data from    CY 2012.
                               facilities using
                               all methods to
                               calculate Kt/V).
    Hypercalcemia...........  CY 2011 (data from    CROWNWeb--May 1,
                               CROWNWeb Pilot        2012 to December
                               reporting).           31, 2012.
------------------------------------------------------------------------

    Like the performance standards, at this time, we do not have the 
necessary data to assign numerical values to the proposed achievement 
thresholds and benchmarks for the clinical measures. However, we are 
able to estimate them based on the latest full year of data available. 
In Table 7, we have provided the estimated achievement thresholds and 
benchmarks for all of the measures, except for Hypercalcemia, based on 
data from October 1, 2010-September 30, 2011. For the Hypercalcemia 
measure, we currently have only 7 months of data; the estimate, 
therefore, is based on data from April 2011-October 2011.

  Table 7--Estimated Proposed Achievement Thresholds and Benchmarks for
 the Proposed PY 2015 ESRD QIP Clinical Measures Using the Most Recently
                             Available Data
------------------------------------------------------------------------
                                            Achievement
                 Measure                  threshold  (%)  Benchmark  (%)
------------------------------------------------------------------------
Hemoglobin >12 g/dL.....................               7               0
Vascular Access Type:
    %Fistula............................              46              74
    %Catheter...........................              23               5
Kt/V:
    Adult Hemodialysis..................              86              97
    Adult, Peritoneal Dialysis..........              58              94
    Pediatric Hemodialysis..............              78              96
Hypercalcemia...........................           \1\ 6           \1\ 0
------------------------------------------------------------------------
\1\ As noted above, the performance standard for the Hypercalcemia
  measure is based on approximately 63 percent of facilities (accounting
  for approximately 80 percent of the Medicare ESRD population)
  reporting serum calcium values in CROWNWeb.

    In accordance with our statements in the CY 2012 ESRD PPS final 
rule (76 FR 70273), if the final PY 2015 numerical values for the 
achievement thresholds and benchmarks are worse than PY 2014 for a 
measure, we propose to substitute the PY 2014 achievement thresholds 
and benchmarks for that measure. We believe that the ESRD QIP should 
not have lower standards than previous years. We request comments on 
this proposal.
a. Proposals for Scoring Facility Performance on Clinical Measures 
Based on Achievement
    We propose to award between 0 and 10 points for each of the 
clinical measures. As noted, we propose that this score be based upon 
the higher of

[[Page 40980]]

an achievement or improvement score on the measure. For purposes of 
scoring achievement for the measures, we propose to base the score on 
where a facility's performance falls relative to the achievement 
threshold and the benchmark for that measure. We propose that, 
identical to PY 2014, if a facility's measure rate during the 
performance period is:
     Equal to or greater than the benchmark, the facility would 
receive 10 points for achievement;
     Less than the achievement threshold, the facility would 
receive 0 points for achievement; or
     Equal to or greater than the achievement threshold, but 
below the benchmark, the following formula would be used to derive the 
achievement score: [9 * ((Facility's performance period rate - 
achievement threshold)/(benchmark - achievement threshold))] + .5, with 
all scores rounded to the nearest integer, with half rounded up.

Using this formula, a facility would receive a score of 1 to 9 points 
based on a linear scale disturbing all points proportionately between 
the achievement threshold and the benchmark so that the interval in 
performance between the score needed to receive a given number of 
achievement points and one additional achievement point is the same 
throughout the range of performance from the achievement threshold to 
the benchmark.
b. Proposals for Scoring Facility Performance on Clinical Measures 
Based on Improvement
    We propose that facilities would earn between 0 and 9 points for 
each of the clinical measures based on how much their performance on 
the measure during CY 2013 improved from their performance on the 
measure during CY 2012. A unique improvement range for each measure 
would be established for each facility. We propose that if a facility's 
measure rate during the performance period is:
     Less than the improvement threshold, the facility would 
receive 0 points for improvement; or
     Equal to or greater than the improvement threshold, but 
below the benchmark, the following formula would be used to derive the 
improvement score: [10 * ((Facility performance period rate - 
Improvement threshold)/(Benchmark - Improvement threshold))] - .5, with 
all scores rounded to the nearest integer, with half rounded up.

Note that if the facility score is equal to or greater than the 
benchmark, it would receive 10 points on the measure per the 
achievement score methodology discussed above.
c. Proposals for Calculating the Reporting Measure Scores
    As noted, reporting measures differ from clinical measures in that 
they are not scored based on clinical values, but rather, are scored 
based on whether facilities are successful in achieving the reporting 
requirements associated with each of these proposed measures. The 
proposed criteria that would apply to each reporting measure is 
discussed below.
    With respect to the proposed Anemia Management, Mineral Metabolism, 
and NHSN Dialysis Event reporting measures, we propose, for each 
measure, to award facilities:

    (i) 5 points for meeting the reporting requirements for at least 
6-consecutive months during the performance period;
    (ii) 10 points for meeting the reporting requirements for all 12 
months of the performance period; and
    (iii) 0 points for meeting the reporting requirements for less 
than 6-consecutive months during the performance period.

    We believe that requiring 6-consecutive months of data rather than 
6 non-consecutive months of data for a facility to receive points on 
these measures will hold facilities to the highest level of quality; 
facilities will be encouraged to continue to improve their reporting 
mechanisms throughout the performance period. We are concerned that 
awarding points for 6 non-consecutive months of reporting may cause 
facilities to be less diligent in their reporting efforts overall. We 
specifically request comment regarding whether the proposed 6-
consecutive month reporting requirement will improve quality more than 
a non-consecutive month reporting requirement. We also propose, as 
discussed in more detail below, that facilities would need to receive a 
CCN prior to July 1, 2013 in order to receive a score on a reporting 
measure. Finally, for purposes of the NHSN Dialysis Event reporting 
measure, we propose that to be awarded 5 or 10 points, any facility 
that has not yet enrolled and trained in the NHSN dialysis event system 
must do so and must agree to the required consent (http://www.cdc.gov/nhsn/PDFs/PurposesEligibilityRequirementsConfidentiality.pdf).
    With respect to the proposed ICH CAHPS reporting measure, we 
propose to retain the PY 2014 scoring methodology for the PY 2015 ESRD 
QIP. An in-center hemodialysis facility will receive a score of 10 
points if it attests that it successfully administered the ICH CAHPS 
survey via a third party during the performance period according to the 
specification found at https://www.cahps.ahrq.gov/Surveys-Guidance/ICH.aspx. Eligible facilities (facilities providing adult, in-center 
hemodialysis) that do not provide such an attestation would receive 0 
points on the measure. We propose that this attestation must be entered 
via CROWNWeb by January 31, 2014. We note that the ICH CAHPS survey is 
only available to adult patients who are treated in-center. For 
purposes of the ICH CAHPS reporting measure, we determine whether a 
facility treats adult, in-center patients by referencing the facility's 
information in CMS data sources (that is, SIMS and CROWNWeb). 
Facilities report the types of patients that they serve in these data 
sources. If a facility lists adult in-center services, we are proposing 
that the facility would be required to comply with the ICH CAHPS 
reporting measure.
    We request comment on the proposed methodology for scoring the PY 
2015 ESRD QIP reporting measures. We also request comment regarding 
whether facilities should receive points for partially reporting data 
and whether such reporting need be for consecutive months.
10. Proposals for Weighting the PY 2015 ESRD QIP Measures and 
Calculation of the PY 2015 ESRD QIP Total Performance Score
    Section 1881(h)(3)(A)(iii) of the Act provides that the methodology 
for assessing facility total performance shall include a process to 
weight the performance scores with respect to individual measures to 
reflect priorities for quality improvement such as weighting the scores 
to ensure that facilities have strong incentives to meet or exceed 
anemia management and dialysis adequacy performance standards, as 
determined appropriate by the Secretary. In determining how to 
appropriately weight the PY 2015 ESRD QIP measures for purposes of 
calculating Total Performance Scores, we considered two criteria. 
Specifically, we considered the number of measures we have proposed to 
include in the PY 2015 ESRD QIP as well as the National Quality 
Strategy priorities.
a. Proposals for Weighting Individual Measures To Compute Measure Topic 
Scores for the Kt/V Dialysis Adequacy Measure Topic and the Vascular 
Access Type Measure Topic
    Because the Kt/V Dialysis Adequacy measure topic and the Vascular 
Access Type measure topic are comprised of multiple measures, it is 
necessary for us

[[Page 40981]]

to discuss how we will derive an overall score for each measure topic. 
For these measure topics, we propose that each measure be scored 
separately for each facility using the achievement and improvement 
methodology discussed above. After calculating the individual measure 
scores within a measure topic, we propose to calculate a measure topic 
score using the following steps: (1) Dividing the number of patients in 
the denominator of each measure by the sum of the denominators for all 
of the applicable measures in the measure topic; (2) multiplying that 
figure by the facility's score on the measure; (3) summing the results 
achieved for each measure; and (4) rounding this sum (with half rounded 
up). We are proposing that, if a facility does not have enough patients 
to receive a score on one of the measures in the measure topic (this 
proposal is discussed below), that measure would not be included in the 
measure topic score for that facility. Only one measure within the 
measure topic need have enough cases to be scored in order for the 
measure topic to be scored and included in the calculation of the Total 
Performance Score. We believe it is important to proportionately weight 
the measures within a measure topic because we seek to give equal 
importance to each patient. Finally, we are proposing that the measure 
topic score would be equal to one clinical measure in the calculation 
of the Total Performance Score.
    For additional explanation of our proposal to calculate measure 
topic scores, please see the following examples:

    Example 1:  Facility X serves hemodialysis (HD), peritoneal 
dialysis (PD), and pediatric patients. For HD patients, Facility X's 
Kt/V measure rate is 50/60. For PD patients, Facility's X's Kt/V 
measure rate is 15/20. For pediatric patients, Facility X's Kt/V 
measure rate is 10/20. There are 100 patients included in the 
measure topic (60 + 20 + 20). Assume that the facility's measure 
rates lead to the following measure scores: HD--7; PD--8; 
pediatric--5. To compute the Kt/V Dialysis Adequacy measure topic 
score for Facility X, we would calculate the following: (7 * 60/100) 
+ (8 * 20/100) + (5 * 20/100) = 6.8, which we would round to 7. The 
Kt/V Dialysis Adequacy measure topic score would then be treated as 
one clinical measure when calculating the Total Performance Score.
    Example 2:  Facility Y serves HD patients and PD patients. For 
HD patients, Facility Y's Kt/V measure rate is \50/60\; assume that 
this rate leads to a score of 6. For PD patients, Facility Y's Kt/V 
measure rate is \4/7\. Facility Y has no Kt/V measure rate for 
pediatric patients because it does not serve this population. Assume 
that the minimum case number for scoring a measure is 11. Because 
there are only seven cases in Facility Y's denominator, Facility Y 
would not receive a PD Kt/V measure score. Furthermore, Facility Y 
did not treat any pediatric patients, so it would not receive a 
pediatric Kt/V measure score. Therefore, the Kt/V Dialysis Adequacy 
measure topic score for Facility Y would be 6. The Kt/V Dialysis 
Adequacy would then be treated as one clinical measure when 
calculating the Total Performance Score.

    We request comment on the proposed method of weighting individual 
measure scores to derive a measure topic score.
b. Proposals for Weighting the Total Performance Score
    We believe that weighting the finalized clinical measures/measure 
topics equally will incentivize facilities to improve and achieve high 
levels of performance across all of the measures, resulting in overall 
improvement in the quality of care provided to ESRD patients. We also 
believe that, while the reporting measures are valuable, the clinical 
measures value actual patient outcomes and therefore justify a higher 
combined weight. We do, however, propose to weight the clinical 
measures slightly less for the PY 2015 ESRD QIP than we did for the PY 
2014 ESRD QIP. For the PY 2015 ESRD QIP, we believe it is important to 
begin to more rigorously incentivize reporting, specifically since for 
three of the four reporting measures, we now require actual data 
submission. We intend to use these data for purposes of developing and 
creating clinical measures in the future; thus, complete and correct 
data submission in these areas is essential to the program's overall 
goal of continued and improved ESRD quality care. For these reasons, we 
propose to equally weight the clinical measures/measure topics for 
which a facility receives a score equal to 80 percent of the Total 
Performance Score; we also propose to equally weight the reporting 
measures for which a facility receives a score as 20 percent of the 
Total Performance Score. We request comment on this proposed 
methodology for weighting the clinical and reporting measures.
    We have also considered the issue with awarding a Total Performance 
Score to facilities that do not report data on the proposed minimum 
number of cases with respect to one or more of the finalized measures/
measure topics. As we stated in the CY 2012 ESRD PPS final rule, we 
believe it is important to include as many facilities as possible in 
the ESRD QIP. We have, however, revisited our policy of including any 
facility that receives a score on one measure, whether that measure is 
a clinical or reporting measure, and we have decided to propose a 
different approach for PY 2015. We believe it is preferable to require 
a facility to have at least one clinical and one reporting measure to 
receive a Total Performance Score. By requiring this minimum, we ensure 
that a facility is not included in the program unless it meets the 
minimum case requirement for at least one clinical measure/measure 
topic. In the case of a facility that has sufficient data (11 cases, as 
proposed below) from the performance period, but lacks sufficient data 
(11 cases, as proposed below) to calculate the improvement threshold, 
we propose to only calculate its achievement score, because it would 
not be possible to calculate its improvement score. We request comment 
on our proposals to require a facility to qualify for a score on at 
least one reporting and one clinical measure in order to receive a 
Total Performance Score.
    Finally, we propose that all Total Performance Scores be rounded to 
the nearest integer, with half being rounded up, and we request comment 
on this proposal. For further examples regarding measure and Total 
Performance Score calculations, we refer readers to the figures below.
c. Examples of the Proposed PY 2015 ESRD QIP Scoring Methodology
    Below, we provide examples to illustrate the proposed scoring 
methodology for PY 2015. Figures 1-3 illustrate the scoring for a 
clinical measure. Figure 1 shows Facility A's performance on an example 
clinical measure. Note that for this example clinical measure, the 
facility is attempting to achieve a high rate (that is, the higher the 
measure rate, the higher the measure score). The example benchmark 
(which is the 90th percentile of performance nationally in CY 2011) 
calculated for this measure is 74 percent, and the example achievement 
threshold (which is the 15th percentile of performance nationally in CY 
2011) is 46 percent. Facility A's performance rate of 86 percent during 
the performance period meets or exceeds the benchmark of 76 percent, so 
Facility A would earn 10 points (the maximum) for achievement for this 
measure. (Because, in this example, Facility A has earned the maximum 
number of points possible for this measure, its improvement score is 
irrelevant.)

[[Page 40982]]

[GRAPHIC] [TIFF OMITTED] TP11JY12.000

    Figure 2 shows the scoring for another facility, Facility B. As 
illustrated below, the facility's performance on the example clinical 
measure improved from 26 percent in CY 2012 to 54 percent during the 
performance period. The achievement threshold is 46 percent, the 
performance standard is 58 percent, and the benchmark is 74 percent.
[GRAPHIC] [TIFF OMITTED] TP11JY12.001

    Because the facility's performance during the performance period is 
within both the achievement range and the improvement range, we must 
calculate both the improvement and achievement score to find the 
example clinical measure score. To calculate the achievement score, we 
would employ the formula discussed above.
[GRAPHIC] [TIFF OMITTED] TP11JY12.002

    The result of this formula for this example is [9 * ((54 - 46)/(74 
- 46))] + .5, which equals 3.07 and we round to 3.
    Likewise, to calculate the improvement score, we employ the 
improvement formula discussed above.

[[Page 40983]]

[GRAPHIC] [TIFF OMITTED] TP11JY12.003

    The result of this formula for this example is [10 * ((54 - 26)/(74 
- 26))] - .5, which equals 5.33 and we round to 5. Therefore, for this 
example clinical measure, Facility B's achievement score is 3, and its 
improvement score is 5. We award Facility B the higher of the two 
scores. Thus, Facility B's score on this example measure is 5.
    In Figure 3 below, Facility C's performance on the example clinical 
measure drops from 53 percent in CY 2012 to 40 percent in CY 2013, a 
decline of 13 percent.
[GRAPHIC] [TIFF OMITTED] TP11JY12.004

    Because Facility C's performance during the performance period 
falls below the achievement threshold of 46 percent, it receives 0 
points for achievement. Facility C also receives 0 points for 
improvement because its performance during the performance period was 
lower than its performance during CY 2012. Therefore, in this example, 
Facility C would receive 0 points for the example clinical measure.
    The method illustrated above would be applied to each clinical 
measure in order to obtain a score for each measure. Scores for 
reporting measures are calculated based upon their individual criteria, 
as proposed.
    After calculating the scores for each measure, we would calculate 
the Total Performance Score. As an example, applying the weighting 
criteria to a facility that receives a score on all finalized measures, 
we would calculate the facility's Total Performance Score using the 
following formula:

Total Performance Score = [(.200 * Hemoglobin Greater Than 12g/dL 
Measure) + (.200 * Kt/V Dialysis Adequacy Measure Topic) + (.200 * 
Vascular Access Type Measure Topic) + (.200 * Hypercalcemia Measure) 
+ (.05 * NHSN Dialysis Event Reporting Measure) + (.05 * ICH CAHPS 
Survey Reporting Measure) + (.05 * Mineral Metabolism Reporting 
Measure) + (.05 * Anemia Management Reporting Measure)] * 10.

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

Total Performance Score = [(.267 * Hemoglobin Greater Than 12g/dL 
Measure) + (.267 * Kt/V Dialysis Adequacy Measure Topic) + (.267 * 
Vascular Access Type Measure Topic) + (.05 * NHSN Dialysis Event 
Reporting Measure) + (.05 * ICH CAHPS Survey Reporting Measure) + 
(.05 * Mineral Metabolism Reporting Measure) + (.05 * Anemia 
Management Reporting Measure)] * 10.

Again, the Total Performance Score would be rounded to the nearest 
integer (and any individual measure values ending in .5 would be 
rounded to the next higher integer).
    Finally, if, for example, a facility qualified for only two of the 
reporting measures, the facility's Total Performance Score would be 
calculated as follows:

Total Performance Score = [(.200 * Hemoglobin Greater Than 12g/dL 
Measure) + (.200 * Kt/V Dialysis Adequacy Measure Topic) + (.200 * 
Vascular Access Type Measure Topic) + (.200 * Hypercalcemia Measure) 
+ (.100 * Mineral Metabolism Reporting Measure) + (.100 * Anemia 
Management Reporting Measure)] * 10.

Again, the Total Performance Score would be rounded to the nearest 
integer (and any individual measure values ending in .5 would be 
rounded to the next higher integer).
11. Proposed Minimum Data for Scoring Measures for the PY 2015 ESRD QIP
    We are proposing to only score facilities on clinical measures for 
which they have a minimum number of cases during the performance 
period. We have assessed how reliable each proposed clinical measure is 
using the currently available data. Specifically, we studied the degree 
the measures assess the actual differences in performance

[[Page 40984]]

among facilities as opposed to the variation within a facility. Thus, 
in order for a facility to be scored on any clinical measure, we are 
proposing that the facility must report a minimum number of cases 
qualifying for that measure over the course of the 12-month performance 
period. This proposed minimum seeks to ensure that facilities are being 
evaluated based on the care they provide.
a. Proposed Minimum Data for Scoring Measures for the PY 2015 ESRD QIP
    Dialysis facilities tend to have a small, relatively stable patient 
census, with each facility reporting on an average of 50-60 cases per 
measure. In previous rules, commenters have asked that we consider the 
effect of case size on measure reliability in the context of the ESRD 
QIP. We recognize that as a general principle, reliability improves 
with increasing case size; that is, the reliability of a measure or 
score describes numerically to what extent that measure or score 
assesses the actual differences in performance among facilities as 
opposed to the random variation within facilities. Furthermore, we wish 
to be responsive to public comment and to ensure that dialysis 
facilities with extremely small numbers of patients are not penalized 
by the ESRD QIP due to random variation in their patient samples. Thus, 
we have developed and propose here a new methodology to make favorable 
adjustments to the clinical measure rates of facilities with very small 
numbers of patients. We also propose a case minimum for clinical 
measures to protect patient privacy, which we believe could be 
compromised if the publicly reported data for a facility is based on a 
small patient population.
i. Proposed Case Minimum for Clinical Measures
    Given the ESRD QIP's potential to encourage quality improvement, 
our goal is to ensure the full participation of as many facilities as 
possible in the program. However, we must ensure that all measure rates 
capture a large enough number of patients so that the privacy of each 
patient is protected. A case minimum allows us to achieve these policy 
objectives of measurement reliability and patient privacy.
    For the first 3 payment years of the ESRD QIP, we set the minimum 
number of cases to be scored on a clinical measure at 11. Eleven cases 
has historically been the case minimum for displaying measures on DFC. 
We have determined that in the context of DFC, 11 cases will meet the 
requirement that individual patients are not identifiable in the 
aggregate measure rate. Given that we believe that 11 cases is 
sufficient to address privacy concerns and that our policy objective is 
to maximize the number of facilities that participate in the ESRD QIP, 
we propose to set a proposed case minimum threshold of 11 cases. Under 
this proposal, facilities must report at least 11 qualifying cases over 
the course of the 12-month performance period to be scored on a given 
clinical measure. We seek public comment on this proposal.
ii. Proposed Adjustment Methodology for Clinical Measures
    We indicated in the CY 2012 ESRD PPS final rule that we would 
continue to assess the reliability of our measures in future payment 
years of the program (76 FR 70259). To further explore this issue in 
response to comments, we evaluated the reliability of measure rates and 
the Total Performance Score for facilities of various sizes using the 
PY 2014 program clinical measures. Specifically, we performed a 
simulation of the PY 2014 QIP to calculate the Inter-Unit Reliability 
(IUR) stratified by facility size. The IUR is a statistic commonly 
adopted for assessing the reliability of measures or scores, and is the 
ratio of the between-facility variance to the sum of the between-
facility variance and the within-facility variance.
    We found the reliability of the Total Performance Score to be 
acceptable for all strata (IUR>0.6). However, we recognize that 
facilities with very small numbers of patients are more likely to have 
a lower IUR. In a facility with a low IUR, the case mix might 
potentially shift its measure rate higher or lower than the rate the 
same facility would report if it were treating an ``average'' ESRD 
population. In the context of the ESRD QIP, a favorable skew would not 
have a negative effect on facility payment, but an unfavorable skew 
potentially could result in the facility receiving a payment reduction. 
We cannot identify which specific facilities will have a low IUR until 
after the performance period has concluded. However, in performing the 
stratification analysis, we found that a favorable adjustment to the 
two strata with the lowest number of cases would reduce the risk of 
penalizing facilities in those strata for random within-facility 
variation. The average number of cases contributing to the Total 
Performance Score in the second stratum is 25. Accordingly, we have 
developed and propose below a favorable adjustment to the measure rates 
for facilities with at least the minimum case threshold of 11 and fewer 
than the adjustment threshold of 26 cases. This methodology would give 
facilities ``the benefit of the doubt'' and ensure that any error in 
measure rates due to a small number of cases will not adversely affect 
payment.
Specifically, if a facility reports at least a proposed adjustment 
threshold of 26 cases during the 12-month performance period on a 
measure, it would be scored based on its raw performance rate on the 
measure. If the facility reports between 11 and 25 cases during the 12-
month performance period, it would be scored based on its raw 
performance rate plus a favorable reliability adjustment to account for 
a possible unfavorable skew in the measure rate due to small sample 
size.
    We propose the following methodology to adjust the measure rate 
used to score facilities with 11-25 cases for a given measure. The 
adjustment factors in facility size and the standard error of the 
measure, which can be estimated using an analysis of variance (ANOVA). 
This analysis allows us to estimate how much better the measure rate 
could have been if that facility were treating an ``average'' 
population of patients and make a favorable adjustment to the 
facility's score in that amount. For example, as a facility treats more 
patients, the reliability of the measure rate improves, and the 
difference between the facility's measure rate and the measure rate we 
statistically would expect to see if the facility were treating an 
``average'' panel of patients decreases. Thus, the magnitude of the 
adjustment factor increases as the number of cases decreases from 25 to 
11.
    Because the adjustment factor takes into account a facility's 
performance (standard error of the measure) and the number of cases for 
the measure, it is computed separately for each measure. The specific 
methodology we propose follows:

 ANOVA provides an estimate sw of the square root of within 
facility variance, given by the within subject mean square.
 Then for the ith facility, the standard error of the average 
measure (denoted by xi) is given by
[GRAPHIC] [TIFF OMITTED] TP11JY12.005

where ni is the number of patients in the ith facility. Now denote C as 
the minimum case number. We propose the following adjustment for the 
original score by introducing a weight depending on facility size.

 Let
[GRAPHIC] [TIFF OMITTED] TP11JY12.006


[[Page 40985]]


and wi = 0 if ni >= C, where C is the lower bound of cases for 
facilities that will not receive any adjustment.
 For measures where large values of xi are good (i.e., for the 
PY 2015 ESRD QIP, the fistula measure and the Kt/V Dialysis Adequacy 
measure topic):
    [cir] The new score is: ti = xi + wi * SE(xi). (If ti > 100%, we 
set ti = 100%).

 In cases where lower values of xi are better (i.e., for the PY 
2015 ESRD QIP, the Hemoglobin Greater Than 12g/dL, catheter, and 
Hypercalcemia measures):
    [cir] The new score is: ti = xi - wi * SE(xi). (If ti < 0%, we set 
ti = 0%).

This approach gives facilities an allowance to account for the 
uncertainty in the estimatexi by accounting for the size of the patient 
population in both weights and standard errors. As explained above, 
this allowance decreases when the case size increases (from 11 to 26 or 
more)--the larger the case size, the smaller the allowance. For 
example, when [Cusc]=26, this implies that for measures with 26 cases 
and above, no allowance is made. We seek public comment on this 
methodology and the proposed adjustment threshold.
    In summary, based on these analyses, we propose for PY 2015 a new 
approach to account for facilities with low case numbers. A facility 
would fall into one of three categories with respect to each clinical 
measure.
     If the facility reported at least the adjustment threshold 
for a clinical measure (that is, at least 26 cases meeting the measure 
specifications), we would calculate the measure score with no 
adjustment.
     If the facility reported fewer cases than the case minimum 
for a clinical measure (that is, fewer than 11 cases meeting the 
measure specifications), we would not calculate a score for the 
measure.
     If the facility reported at least the case minimum, but 
fewer than the adjustment threshold for a measure (that is, at least 11 
but fewer than 26 cases meeting the measure specifications), we would 
use an adjustment to calculate a score for the measure.
    We believe that this proposal balances the competing interests of 
privacy, measure and Total Performance Score reliability, and allows 
for the inclusion of as many facilities in the ESRD QIP as possible. We 
request public comment on the case minimum proposals.
    While one model is presented above, we invite comment on 
alternative approaches that are consistent with our intent to include 
as many facilities as possible in the ESRD QIP and at the same time 
address concerns from stakeholders regarding the reliability of 
measures where there are small numbers of cases. We believe that this 
adjustment is appropriate for the ESRD QIP considering the particular 
measure set and scoring methodology for PY 2015. As the program grows 
and evolves, we will continue to assess reliability based on the 
measures and scoring methodology for that payment year.
b. Proposed Minimum Data Requirements for Reporting Measures by New 
Facilities
    For purposes of the PY 2014 ESRD QIP, we stated that a facility 
that receives a CCN on or after July 1, 2012 has the option to choose 
whether or not it is scored on each reporting measure (76 FR 70275). We 
considered using the same approach for PY 2015 as we did in PY 2014 
(that is, allowing new facilities to choose whether or not they will be 
scored on each reporting measure). Under that approach, if a new 
facility reports enough information to receive 10 points on a reporting 
measure, the facility is scored on that measure. If a new facility 
scores zero or 5 points on a reporting measure, it is not scored on 
that measure. As the program evolves, we believe it is important to 
continuously push improvement in all facilities--both old and new. 
Additionally, we wish to incentivize new facilities to put reporting 
mechanisms in place as soon as possible. For these reasons, we propose 
to modify the reporting measure minimum data requirement from that of 
PY 2014.
    For PY 2015, we propose that any facility receiving a CCN before 
July 1, 2013 be scored on the reporting measures. However, since a 
facility receiving a CCN after January 1, 2013 would not be able to 
report a full 12 months of data, we do not believe it is appropriate to 
require it to do so in order to receive a full 10 points on the 
reporting measures. Instead, we propose to score these facilities 
proportionately for the time for which they have a CCN during the 
performance period. To earn 10 points on the ICH CAHPS reporting 
measure, we propose to require that a facility receiving a CCN between 
January 1, 2013 and June 30, 2013 attest that it successfully 
administered the survey during the time for which it had a CCN during 
the performance period. For purposes of the Anemia Management, NHSN 
Dialysis Event, and Mineral Metabolism reporting measures, we propose 
that if a facility receives a CCN on or after January 1, 2013, but 
before July 1, 2013, it would receive 10 points for reporting for all 
months for which it has a CCN and 5 points for consecutively reporting 
half of the months for which it has a CCN during the performance 
period. If a facility has a CCN for an odd number of months, we would 
round down to calculate the number of months for which it must report 
to receive 5 points. Finally, we propose to begin counting the number 
of months for which a facility is open on the first day of the month 
after the facility receives a CCN. For example, assume a facility 
receives a CCN on March 15, 2013. In order for this facility to receive 
10 points on the applicable reporting measure, it must report data from 
April 1, 2013--December 31, 2013 (or 9 months of data). In order for it 
to receive 5 points, it must report half of the months for which it is 
open, consecutively. For this facility to receive 5 points, it would 
need to report 4.5 months of data. Since we have proposed to round 
down, this facility would be required to report 4 months of data to 
receive 5 points.
    We realize that facilities receiving a CCN on or after July 1, 
2013, may have difficulty meeting the requirements of the reporting 
measures, such as enrolling and training for the NHSN Dialysis Event 
reporting measure or hiring a third-party to administer the ICH CAHPS 
survey, because of the short period of time left in the performance 
period. We also do not believe it is appropriate to reduce payment for 
a one year period based on less than 6 months of performance. 
Therefore, we propose to exclude facilities receiving a CCN on or after 
July 1, 2013 from the requirements of the reporting measures. Because 
we have proposed, as discussed above, that a facility will not receive 
a Total Performance Score unless it receives a score on at least one 
clinical and one reporting measure, finalizing this proposal would 
result in facilities not being eligible for a payment reduction if they 
receive a CCN on or after July 1, 2013. We request comment regarding 
these proposals. We also elicit comments regarding whether there would 
be a more appropriate way to score these new facilities on reporting 
measures so that they may be eligible for inclusion in the ESRD QIP.
12. Proposed Payment Reductions for the PY 2015 ESRD QIP
    Section 1881(h)(3)(A)(ii) of the Act requires the Secretary to 
ensure that the application of the scoring methodology results in an 
appropriate distribution of payment reductions across facilities such 
that facilities achieving the lowest Total Performance Scores receive 
the

[[Page 40986]]

largest payment reductions. For PY 2014, we adopted an approach under 
which a facility did not have to meet or exceed the performance 
standards with respect to each of the finalized clinical measures to 
avoid receiving a payment reduction under the ESRD QIP. Rather, even if 
a facility failed to meet or exceed the performance standards with 
respect to one or more of these measures, the facility could avoid a 
payment reduction if it achieved a minimum Total Performance Score that 
is equal to or greater than the minimum Total Performance Score it 
would receive if it had met the performance standards for each of the 
clinical measures or, in the case of the Vascular Access Type Measure, 
for the two subcomponent measures.
    For PY 2014, in calculating this minimum Total Performance Score, 
we excluded the reporting measures because we believed this approach 
best underscored the importance of the clinical measures. For PY 2015, 
we propose to retain the same approach as in PY 2014. We discuss the 
methodology for deriving the performance standards for the measure 
topics, above. We request comments on these proposals.
    Alternately, in order to better incentivize compliance with 
reporting measures, we also considered raising the minimum Total 
Performance Score to include 50 percent of the total points a facility 
could have received had it met all of the reporting requirements for 
each measure. In other words, because a facility could receive up to 40 
points in PY 2015 for meeting all of the reporting measure 
requirements, we considered raising the minimum Total Performance Score 
by 20 points (one-half of 40). This approach would ensure that 
facilities receiving a CCN before August 1, 2013 could still achieve 
the minimum Total Performance Score by meeting, on average, the 
performance standards for the clinical measures and achieving as many 
points on the reporting measures as is possible. We request comment 
regarding whether the reporting measures should be scored at greater 
than 0 when calculating the minimum Total Performance Score.
    Section 1881(h)(3)(A)(ii) of the Act requires that facilities 
achieving the lowest Total Performance Scores receive the largest 
payment reductions. For PY 2014, we adopted an approach we intend to 
continue for PY 2015. We believe that this consistency will allow the 
program to be more understandable to both facilities and the general 
public. Therefore, we propose that the payment reduction scale be the 
same as the PY 2014 program. Therefore, for each 10 points a facility 
falls below the minimum Total Performance Score, it would receive an 
additional 0.5 percent payment reduction on its ESRD payments for PY 
2015, with a maximum reduction of 2.0 percent. As we stated in the CY 
2012 ESRD PPS final rule, we believe that such a sliding scale will 
incentivizes facilities to meet the performance standards and continue 
to improve their performance because even if a facility fails to 
achieve the minimum Total Performance Score, such facility will still 
be incentivized to strive for, and attain, better performance rates in 
order to reduce the amount of its payment reduction (76 FR 70281). We 
request comments on the proposed payment reduction scale.
    Because we are not yet able to calculate the performance standards 
for each of the clinical measures, we are also not able to calculate 
the minimum Total Performance Score. Based on the estimated performance 
standards listed above, we estimate that a facility must meet or exceed 
a minimum Total Performance Score of 52 to avoid a payment reduction. 
Facilities failing to meet this minimum will receive payment reductions 
in the estimated amounts indicated in the Table 8 below.


  Table 8--Estimated Payment Re- duction Scale for PY 2015 Based on the
                      Most Recently Available Data
------------------------------------------------------------------------
                  Total performance score                    Reduction %
------------------------------------------------------------------------
100-52 *...................................................            0
51-42......................................................          0.5
41-32......................................................          1.0
31-22......................................................          1.5
21-0.......................................................          2.0
------------------------------------------------------------------------

13. Proposed Data Validation
    One of the critical elements of the ESRD QIP's success is ensuring 
that the data submitted to calculate measure scores and Total 
Performance Scores is accurate. To that end, we have procured the 
services of a data validation contractor who will be tasked with 
validating a national sample of facilities' records as they report data 
under the ESRD QIP. Beginning in CY 2013, we propose to begin a pilot 
data validation program for the ESRD QIP. Because data validation for 
the ESRD QIP is new to both facilities as well as CMS, we believe that 
the first year of validation should result in no payment reductions to 
facilities. Accordingly, we propose that, beginning in CY 2013, we 
would randomly sample the records of approximately 750 facilities. We 
anticipate that a CMS-designated contractor would request approximately 
10 records from each of these facilities. We propose that the facility 
must comply with this request for records within 60-days of receiving 
notice. The contractor would review these records to ensure accuracy 
and reliability of the data reported by the facility for purposes of 
the ESRD QIP.
    As noted above, we propose that, in the first year of this program, 
no facility will receive a payment reduction resulting from the data 
validation process. In future years of the program, we intend to evolve 
our pilot program into a full, data validation effort. We are also 
discussing a data validation measure whereby facilities would be scored 
based on the accuracy of their records. Finally, we are contemplating 
increasing a facility's payment reduction by one tier (for example, 
from 0.5 percent to 1.0 percent) if its data is incorrect beyond a 
certain threshold. In future years, we intend to propose more detailed 
procedures regarding data validation process that may result in 
penalties. We request comment on our data validation proposals for PY 
2015 and the methods we are considering for PY 2016.
14. Proposals for Scoring Facilities Whose Ownership Has Changed
    During our first year of implementation of the ESRD QIP, PY 2012, 
facilities requested guidance regarding how a change in ownership 
affects any applicable ESRD QIP payment reduction. We propose that, for 
all future years of the ESRD QIP, the application of an ESRD QIP 
payment reduction would depend on whether the facility retains its CCN 
after the ownership transfer. If the facility's CCN remains the same 
after the facility is transferred, for purposes of the ESRD QIP, we 
would consider the facility to be the same facility (despite the change 
in ownership) and we would apply any ESRD QIP payment reduction for the 
transferor to the transferee. Likewise, as long as the facility retains 
the same CCN, we would calculate the measure scores using the data 
submitted during the applicable period regardless of whether the 
ownership changed during one of these periods. If, however, a facility 
receives a new CCN as a result of a change in ownership, we would treat 
the facility as a new facility for purposes of the ESRD QIP as of the 
date it received the new CCN. We believe that these proposals are the 
most operationally efficient and will allow facilities the most 
certainty when they change ownership. We propose to apply these rules 
beginning with the PY 2014

[[Page 40987]]

ESRD QIP, and we request public comment on these proposals.
15. Proposals for Public Reporting Requirements
    Section 1881(h)(6)(A) of the Act requires the Secretary to 
establish procedures for making information regarding facilities' 
performance under the ESRD QIP available to the public, including 
information on the Total Performance Score (as well as appropriate 
comparisons of facilities to the national average with respect to such 
scores) and performance scores for individual measures achieved by each 
facility. Section 1881(h)(6)(B) of the Act further requires that a 
facility have an opportunity to review the information to be made 
public with respect to that facility prior to such information's 
publication. In addition, section 1881(h)(6)(C) of the Act requires the 
Secretary to provide each facility with a certificate containing its 
Total Performance Score to post in patient areas within the facility. 
Finally, section 1881(h)(6)(D) of the Act requires the Secretary to 
post a list of facilities and performance-score data on the CMS Web 
site.
    In the PY 2012 ESRD QIP final rule, we adopted uniform requirements 
based on sections 1881(h)(6)(A) through 1881(h)(6)(D) of the Act, 
establishing procedures for facilities to review the information to be 
made public and the procedures for informing the public through 
facility-posted certificates for the first 3 payment years of the ESRD 
QIP (76 FR 636 through 639). We propose that these requirements 
generally apply to PY 2015 and subsequent payment years. However, we 
are proposing to make some modifications, as outlined below, to these 
requirements and that these modifications, if finalized, become 
effective upon the effective date of this final rule; thus, these 
requirements, if finalized, would apply in PY 2014 and for subsequent 
payment years. All other previously finalized requirements would remain 
the same. First, for the first year of the program, PY 2012, we did not 
explicitly state that we would be publishing a list of facility 
performance on or after December 1 of the year before the payment 
consequence year. We did, however, make this list available for the 
pubic via the CMS Web site. For the PY 2013 ESRD QIP and subsequent 
payment years, and in accordance with section 1881(h)(6)(D) of the Act, 
we propose to publish such aggregate list on the CMS Web site at 
www.cms.gov and any other Web site controlled by CMS. This list will 
include information on the facility, specifically:
    (i) Name and address;
    (ii) Measure rates (which may include numerators and denominators) 
and scores;
    (iii) And Total Performance Scores.
This list will also indicate those facilities which do not have enough 
data to calculate one or more measure rates and/or a Total Performance 
Score. We believe it is important to publish such a list because it 
allows beneficiaries, the public, and facilities access to this 
information without having to individually download a certificate for 
each facility, and, because of such access, we believe it will 
ultimately improve quality. The data will be more accessible, Medicare 
beneficiaries and their families will have the information more easily 
to make choices about their care, and facilities can more readily 
compare their performance to other facilities or across facilities. 
Therefore, beginning in January 2013, we propose to publish a list of 
facility information described above for each payment year after 
facilities have the ability to review their scores.
    Second, for PY 2012, we required facilities to prominently post 
certificates within five days of us making these certificates available 
for download from Dialysis Facility Reports (DFR) in accordance with 
section 1881(h)(6)(C) of the Act (76 FR 637). We are proposing to 
modify the previously finalized requirements for posting certificates 
in two ways. We no longer believe it is necessary for facilities to 
post these certificates within five days of their availability. The 
certificates are provided in late December, and it was our experience 
in the PY 2012 program that many individuals responsible for the 
certificates were away on holiday during this period of time. 
Therefore, we are proposing to change this requirement so that, 
beginning with the PY 2014 program, facilities will be required to post 
their certificates on or before the first business day after January 1 
of each payment year. Certificates are typically available for download 
on or around December 15, and we believe that this two week amount of 
time is long enough to allow facilities to post them. Therefore, 
beginning PY 2014, we propose that facilities be required to post their 
Performance Score Certificates on or before the first business day 
after January 1 of each payment year in a prominent place for the 
duration of that payment year and otherwise comply with the 
requirements listed in the PY 2012 final rule (76 FR 637).
    Third, for the PY 2012 ESRD QIP, we required facilities to post one 
copy of the certificate in their facility (76 FR 637). Beginning PY 
2014, we propose to require facilities to post two copies of this 
certificate, one copy in English and one copy in Spanish. Both of these 
certificates (which are posted as a single file) will be provided by 
CMS, both must be posted by the first business day after January 1 of 
the payment year, and both must be posted for the entirety of such year 
in a prominent location. We are proposing to require the certificate to 
be posted in both English and Spanish to make the certificate more 
understandable to native Spanish speakers. Thus, to best serve a 
greater number of ESRD patients, we propose to finalize the requirement 
that facilities must post both an English and a Spanish certificate 
prominently in their facility. The only additional burden for 
facilities in adding this Spanish certificate is its printing and 
posting.

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

A. Background

    Under section 1861(v)(1) of the Act and current regulations at 42 
CFR 413.89 and 413.178, Medicare pays some or all of the uncollectible 
deductible and coinsurance amounts to those entities eligible to 
receive reimbursement for bad debt. To determine if bad debt amounts 
are allowable, the requirements at Sec.  413.89 must be met. Chapter 3 
of the Provider Reimbursement Manual (PRM) (CMS Pub. 15, Part I) 
provides guidance on the standards governing bad debt reimbursement.
    Under section 1861(v)(1)(T) of the Act and Sec.  413.89(h)(1) of 
the regulations, Medicare payments for allowable bad debt amounts for 
hospitals are reduced by 30 percent for cost reporting periods 
beginning on or after October 1, 2001. Also, under section 
1861(v)(1)(V) of the Act and Sec.  413.89(h)(2) of the regulations, 
Medicare payments for allowable bad debt amounts for patients that are 
not dual eligible individuals in skilled nursing facilities (SNFs) with 
cost reporting periods beginning on or after October 1, 2005, are 
currently reduced by 30 percent. Section 413.89(h)(2) also defines a 
dual eligible individual for bad debt purposes as an individual that is 
entitled to benefits under Part A of Medicare and is determined 
eligible by the State for Medical Assistance under Title XIX of the Act 
as described in 42 CFR 423.772 paragraph (2) under the definition of a 
``full-benefit dual eligible individual.''
    For all other providers, suppliers, and entities eligible to 
receive bad debt payment, including critical access

[[Page 40988]]

hospitals (CAHs), rural health clinics (RHCs), Federally qualified 
health centers (FQHCs), community mental health centers (CMHCs), swing 
bed hospitals, as defined at 42 CFR 413.114(b), and patients that are 
dual eligible individuals in SNFs, Medicare pays 100 percent of 
allowable bad debt amounts. Although Medicare pays end-stage renal 
disease (ESRD) facilities 100 percent of allowable bad debt amounts, 
these payments are currently capped at the facility's reasonable cost 
in accordance with Sec.  413.178(a). In addition, for health 
maintenance organizations (HMOs) reimbursed on a cost basis and 
competitive medical plans (CMPs) defined under section 1876 of the Act, 
and for health care prepayment plans (HCPPs) defined under section 
1833(a)(1)(A) of the Act, Medicare pays a portion of bad debt amounts 
under 42 CFR 417.536(f) of our regulations.

B. Section 3201 of The Middle Class Tax Extension and Job Creation Act 
of 2012 Public Law 112-96

    Sections 3201(a) and (b) of the Middle Class Tax Extension and Job 
Creation Act of 2012 (Pub. L. 112-96) amended section 1861(v)(1)(T) and 
section 1861 (v)(1)(V) of the Act, respectively, by further reducing 
the percentage of allowable bad debt attributable to the deductibles 
and coinsurance amounts payable to hospitals and SNFs. Section 3201(b) 
of The Middle Class Tax Extension and Job Creation Act of 2012 revised 
the SNF bad debt reductions to include both dual eligible beneficiaries 
and non-dual eligible beneficiaries under section 1861(v)(1)(V) of the 
Act and to apply such reductions to swing bed hospitals for cost 
reporting periods beginning during fiscal year 2013 and subsequent 
fiscal years.
    Finally, section 3201(c) of The Middle Class Tax Extension and Job 
Creation Act of 2012 added a new subparagraph 1861(v)(1)(W) to the Act, 
which applied a reduction in bad debt payments to ``providers'' not 
addressed under subparagraphs 1861(v)(1)(T) or 1861 (v)(1)(V) of the 
Act. For the purpose of subparagraph 1861(v)(1)(W) of the Act, section 
3201(c) of The Middle Class Tax Extension and Job Creation Act of 2012 
defined ``providers'' as a supplier or any other type of entity that 
receives payment for bad debts under the authority of section 
1861(v)(1)(A) of the Act. These providers include, but are not limited 
to, CAHs, RHCs, FQHCs, CMHCs, HMOs reimbursed on a cost basis, CMPs, 
HCPPs and ESRD facilities.

C. Summary of Provisions of This Proposed Rule

1. Self-Implementing Provisions of Section 3201 of The Middle Class Tax 
Extension and Job Creation Act of 2012 (Pub. L. 112-96)
    The provisions of subsections 3201(a), (b), and (c) of The Middle 
Class Tax Extension and Job Creation Act of 2012 permit no discretion 
on the part of the Secretary and thus, are self implementing, with the 
exception of ESRD facilities as discussed below. We are proposing to 
codify these provisions, as summarized below, in our regulations.
     Payment of allowable bad debt to hospitals for cost 
reporting periods beginning during fiscal year 2013 and subsequent 
fiscal years would be reduced by 35 percent.
     Payment of allowable bad debt to SNFs and swing bed 
hospitals for cost reporting periods beginning during fiscal year 2013 
or a subsequent fiscal year would be reduced by 35 percent for 
coinsurance amounts for services furnished to a beneficiary who is not 
a dual eligible individual.

 Payment of allowable bad debt to SNFs and swing bed hospitals 
for coinsurance for services furnished to a beneficiary who is a dual 
eligible individual would be:
     For cost reporting periods beginning during fiscal year 
2013, reduced by 12 percent;
     For cost reporting periods beginning during fiscal year 
2014, reduced by 24 percent and;
     For cost reporting periods beginning during fiscal year 
2015, reduced by 35 percent.
 Payment of allowable bad debt to all other providers, 
suppliers and any other entity that receives payment for bad debts 
under the authority of section 1861(v)(1)(A) of the Act would be:
     For cost reporting periods beginning during fiscal year 
2013, reduced by 12 percent;
     For cost reporting periods beginning during fiscal year 
2014, reduced by 24 percent;
     And for cost reporting periods beginning during fiscal 
year 2015 and subsequent fiscal years, by 35 percent.
    A summary of the changes in Medicare bad debt payment percentages 
required by section 3201 of The Middle Class Tax Extension and Job 
Creation Act of 2012 is reflected in Table 9 below:

   Table 9--Summary of Medicare Bad Debt Reimbursement by Provider Types For Cost Reporting Periods That Begin
                               During FY 2013, 2014, 2015 and Subsequent Years \4\
----------------------------------------------------------------------------------------------------------------
                                                                                                  Allowable bad
                                            Allowable bad     Allowable bad     Allowable bad      debt amount
              Provider type                  debt amount       debt amount       debt amount    during FY 2015 &
                                           during FY 2012    during FY 2013    during FY 2014    subsequent FYs
                                              (percent)         (percent)         (percent)         (percent)
----------------------------------------------------------------------------------------------------------------
Hospitals...............................                70                65                65                65
SNFs: Non-Full Dual Eligibles...........                70                65                65                65
Swing Bed Hospitals: Non-Full Dual                     100                65                65                65
 Eligibles..............................
SNFs: Full Dual Eligibles...............               100                88                76                65
Hospital Swing Beds: Full Dual Eligibles               100                88                76                65
CAHs....................................               100                88                76                65
ESRD Facilities.........................               100                88                76                65
CMHCs...................................               100                88                76                65
FQHCs...................................               100                88                76                65
RHCs....................................               100                88                76                65
Cost Based HMOs.........................               100                88                76                65
Health Care Pre-Payment Plans...........               100                88                76                65
Competitive Medical Health Plans........               100                88                76                65
----------------------------------------------------------------------------------------------------------------
ESRD facility bad debt payments will continue to be subject to the cap up to the facility's reasonable costs.


[[Page 40989]]

2. Remove and Reserve Sec.  413.178
    We are proposing to move specific requirements to reimburse ESRD 
bad debt amounts from Sec.  413.178 to Sec.  413.89 and remove and 
reserve Sec.  413.178.
3. Technical Corrections
    We are also proposing a technical correction to 42 CFR 
417.536(f)(1) to refer to 42 CFR 413.89 as the appropriate cross 
reference to Medicare bad debt reimbursement policy, to revise the 
existing language describing bad debt to conform to Sec.  413.89(a), 
and to remove requirements that already are set out at Sec.  413.89.

D. Proposed Changes to Medicare Bad Debt Policy

    In this rule, we are proposing to conform existing regulations text 
found at Sec.  413.89(h) to the self-implementing provisions of section 
3201 of The Middle Class Tax Extension and Job Creation Act of 2012. We 
currently cap bad debt reimbursement to an ESRD facility's reasonable 
costs under Sec.  413.178(a). In this rule, we are proposing to move 
the current provision at Sec.  413.178(a) to proposed Sec.  
413.89(h)(3), and to add ESRD facilities to the list of facilities to 
which Sec.  413.89 ``Bad debts, charity, and courtesy allowances,'' 
applies. We also propose to remove duplicate provisions and reserve 
Sec.  413.178 for further use. In addition, we are making a technical 
correction to Sec.  417.536(f)(1) to clarify Medicare bad debt 
reimbursement policy.
1. Proposed Changes to 42 CFR 413.89(h)
    Under each paragraph of our existing regulations at Sec.  
413.89(h), we describe the limits on bad debt payment to be reductions 
to the amount of bad debt otherwise treated as allowable costs. Under 
Sec.  413.89(a), bad debts are deductions from revenue and are not to 
be included in allowable cost. Therefore, we are proposing to clarify 
that the limits on bad debt payments are reductions to amount of 
allowable bad debt.
    We propose to revise Sec.  413.89(h)(1)(iv) to set forth the 
percentage reduction in reimbursable bad debt payments to hospitals for 
cost reporting periods beginning during fiscal years 2001 through 2012.
    We propose to add a new Sec.  413.89(h)(1)(v), which would set 
forth the percentage reduction in reimbursable bad debt payments 
required by section 1861(v)(1)(T)(v) of the Act to hospitals for cost 
reporting periods beginning during fiscal year 2013 and subsequent 
fiscal years.
    We propose to revise Sec.  413.89(h)(2) to add paragraphs (h)(2)(i) 
and (h)(2)(ii). Paragraph (h)(2)(i) would set forth the percentage 
reduction in reimbursable bad debt payments required by section 
1861(v)(1)(V)(ii) of the Act for SNFs and swing bed hospitals for cost 
reporting periods beginning during fiscal year 2006 and subsequent 
fiscal years for a patient that was not a dual eligible individual. 
Paragraph (h)(2)(ii) would set forth the reduction in reimbursable bad 
debt payments for SNFs and swing bed hospitals, for cost reporting 
periods beginning during fiscal year 2013, fiscal year 2014, fiscal 
year 2015, and subsequent fiscal years, for a patient that was a dual 
eligible individual.
    We propose to revise Sec.  413.89(h)(3) to set forth the percentage 
reduction in allowable bad debt payments required by section 
1861(v)(1)(W) of the Act for ESRD facilities for cost reporting periods 
beginning during fiscal year 2013, fiscal year 2014, fiscal year 2015 
and subsequent fiscal years and to reimburse the reduced amount of bad 
debt up to the facility's costs as discussed below.
    We propose to add a new Sec.  413.89(h)(4) to set forth the 
percentage reduction in reimbursable bad debt payments for all other 
entities required by section 1861(v)(1)(W) of the Act not described in 
Sec.  413.89(h)(1), (h)(2), or (h)(3) that would be eligible to receive 
reimbursement of bad debt for cost reporting periods beginning during 
fiscal year 2013, fiscal year 2014, fiscal year 2015 and subsequent 
fiscal years.
2. Rationale for Removing 42 CFR 413.178
    For ESRD facilities, Sec.  413.178(a) states that CMS will 
reimburse each facility its allowable Medicare bad debts, as defined in 
Sec.  413.89(b), up to the facility's costs, as determined under 
Medicare principles, in a single lump sum payment at the end of the 
facility's cost reporting period. This cap on bad debt payments will 
remain in place along with applying the reductions in bad debt payments 
discussed above.
    Currently, we reimburse an ESRD facility 100 percent of its 
allowable bad debt up to the facility's reasonable cost. We considered 
applying the FY reduction percentage after the cap is applied, however, 
we are proposing to apply the FY reduction percentage to allowable bad 
debt prior to applying the cap. We believe that our proposed 
application of the reduction percentage is more appropriate and 
consistent with how we currently determine the amount of allowable bad 
debt that is capped at the facility's cost.
    We are proposing to make the following revisions to Sec.  
413.89(h)(3) to implement the ESRD facilities' bad debt reduction 
effective October 1, 2012 in accordance with section 1861(v)(1)(W) of 
the Act and to apply the cap on ESRD facilities' bad debt payments as 
required under Sec.  413.178(a). For illustrative purposes only, we 
have included examples of the computation of bad debt payments for each 
proposed revision to Sec.  413.89(h)(3).

    We are proposing to add Sec.  413.89(h)(3)(i) for cost reporting 
periods that begin before October 1, 2012, where the cap on bad debt 
payments would be applied as follows:

1. Unrecovered costs = $90.00
2. Allowable bad debt = $110.00
3. Allowable bad debt of $110.00 is capped at the unrecovered costs 
of $90.00, therefore, the facility would receive $90.00.

    We are proposing to add Sec.  413.89(h)(3)(ii) for cost 
reporting periods that begin during FY 2013, where the amount of 
allowable bad debt is reduced by 12 percent and the cap would be 
applied as follows:

1. Unrecovered costs = $90.00
2. Allowable bad debt = $110.00
3. Allowable bad debt of $110.00 would be reduced by 12 percent to 
$96.80 which is capped at the unrecovered costs, therefore, the 
facility would receive $90.00.
    We are proposing to add Sec.  413.89(h)(3)(iii) for cost 
reporting periods that begin during FY 2014, where the amount of 
allowable bad debt is reduced by 24 percent and the cap would be 
applied as follows:

1. Unrecovered costs = $90.00
2. Allowable bad debt = $110.00
3. Allowable bad debt of $110.00 would be reduced by 24 percent to 
$83.60 which does not exceed the unrecovered costs, therefore, the 
facility would receive $83.60.

    We are proposing to add Sec.  413.89(h)(3)(iv) for cost 
reporting periods that begin during a subsequent FY, where the 
amount of allowable bad debt is reduced by 35 percent and the cap 
would be applied as follows:

1. Unrecovered costs = $50.00
2. Allowable bad debt = $110.00
3. In this example, allowable bad debt of $110.00 would be reduced 
by 35 percent to $71.50 which is capped at the unrecovered costs. 
Because, under this example, unrecovered costs are set at $50.00, 
the facility would receive $50.00.

    We propose to remove current regulations text at Sec.  413.178(a) 
since the requirement to apply the cap on bad debt payments will be at 
proposed Sec.  413.89(h)(3). We also propose to remove current 
regulations text at Sec.  413.178(b), (c), and (d)(1) since these 
provisions already exist in the discussions of our bad debt 
requirements Sec.  413.89, Chapter 3 of the PRM Part I, and in the 
Medicare cost report instructions in the PRM Part II. In addition, we 
are proposing to move the current general bad debt exception at Sec.  
413.89(i) to new paragraph

[[Page 40990]]

Sec.  413.89(i)(1) in order to propose moving the ESRD facilities' bad 
debt exception provision currently discussed at Sec.  413.178(d)(2) to 
proposed new paragraph Sec.  413.89(i)(2). Since we are proposing to 
remove all existing regulations under Sec.  413.178 we are proposing to 
reserve this section for future use.
3. Technical Corrections to 42 CFR 417.536(f)(1)
    In this rule, we are proposing to revise the regulations text at 
417.536(f)(1) to correct the cross-reference to the Medicare bad debt 
reimbursement regulation, so that Sec.  417.536(f)(1) would reference 
42 CFR 413.89 instead of the current outdated reference to Sec.  
413.80. In addition, we are revising the existing language at 42 CFR 
417.536(f)(1) to conform to the description of bad debt in Sec.  
413.89(a) and we are removing Sec. Sec.  417.536(f)(1)(i) and (ii) 
since these provisions already exist in the discussions of our bad debt 
requirements Sec.  413.89, Chapter 3 of the PRM Part I, and in the 
Medicare cost report instructions in the PRM Part II.

V. Collection of Information Requirements

A. Legislative Requirement for Solicitation of Comments

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

B. Requirements in Regulation Text

    In this proposed rule, we are not proposing any changes to 
regulatory text for the ESRD PPS in CY 2013.

C. Additional Information Collection Requirements

    This proposed rule does not impose any new information collection 
requirements in the regulation text, as specified above. However, this 
proposed rule does make reference to several associated information 
collections that are not discussed in the regulation text contained in 
this document. The following is a discussion of these information 
collections.
1. ESRD QIP
a. Display of Certificates for the PY 2015 ESRD QIP
    Section III.C.15 of this proposed rule discusses a disclosure 
requirement for the PY 2014 and PY 2015 ESRD QIP. As stated earlier in 
this proposed rule, section 1881(h)(6)(C) of the Act requires the 
Secretary to provide certificates to dialysis care providers and 
facilities with their Total Performance Scores under the ESRD QIP. This 
section also requires each facility that receives an ESRD QIP 
certificate to display it prominently at the facility.
    To comply with this requirement, we proposed to issue one English 
and one Spanish ESRD QIP certificate beginning in PY 2014 to facilities 
via a generally accessible electronic file format. We have previously 
finalized other display requirements for the program, including that 
each facility prominently display the applicable ESRD QIP certificate 
in the patient area, take the necessary measures to ensure the security 
of the certificate in the patient areas, and have staff available to 
answer questions about the certificate in an understandable manner, 
taking into account that some patients might have limited English 
proficiency.
    The burden associated with the aforementioned requirements is the 
time and effort necessary for facilities to print the applicable ESRD 
QIP certificates, display the certificates prominently in patient 
areas, ensure the safety of the certificates, and respond to patient 
inquiries in reference to the certificates. We do not anticipate that 
posting the Spanish certificate will add more time or burden to the 
Collection of Information requirements outlined in the CY 2011 ESRD PPS 
final rule (76 FR 70298 through 70299) for the PY 2014 ESRD QIP. 
Therefore, this analysis only applies to the burden associated with the 
PY 2015 and beyond requirements.
    We estimate that approximately 5,633 facilities will receive ESRD 
QIP certificates in PY 2015 and will be required to display them. We 
also estimate that it will take each facility 10 minutes per year to 
print, prominently display, and secure the ESRD QIP certificates, for a 
total estimated annual burden of 939 hours (10/60 hours * 5,633 
facilities). According to the Bureau of Labor Statistics, the mean 
hourly wage of a registered nurse is $33.23. Since we anticipate nurses 
(or administrative staff) will post these certificates, we estimate 
that the aggregate cost of this requirement will be $31,203 ($33.23/
hour x 939 hours). We estimate that approximately one-third of ESRD 
patients, or 100,000 patients, will ask a question about the ESRD QIP 
certificate. We further estimate that it will take each facility 
approximately five minutes to answer each patient question about the 
applicable ESRD QIP certificate, or 1.52 hours per facility each year. 
The total estimated annual burden associated with this requirement is 
8,563 hours (1.52 hours/facility x 5,633 facilities). The total 
estimated annual burden for both displaying the ESRD QIP certificates 
and answering patient questions about the certificates is 9,502 hours 
(8,563 hours + 939 hours). While the total estimated annual burden 
associated with both of these requirements as discussed is 9,502 hours, 
we do not believe that there will be a significant cost associated with 
these requirements because we are not proposing to require facilities 
to complete new forms. We estimate that the total cost for all ESRD 
facilities to comply with the collection of information requirements 
associated with the certificates each year would be less than $315,752 
($33.23/hour x 9,502 hours).
b. Proposed NHSN Dialysis Event Reporting Requirement for the PY 2015 
ESRD QIP
    As stated above in section III.C.2 of this proposed rule, we 
propose to include reporting dialysis events to the NHSN as a reporting 
measure for the PY 2015 ESRD QIP. Specifically, we would require 
facilities to submit 12 months of dialysis event data to the NHSN. The 
burden associated with this requirement for existing facilities is the 
time and effort necessary for facilities to submit 12 months of data. 
According to our most recent data, 5,490 facilities treat in-center 
hemodialysis and/or pediatric hemodialysis patients and are, then, 
eligible to receive a score on this measure; therefore, we estimate 
that approximately 5,490 facilities will submit the required data. 
Based on data previously collected, we further estimate that the 
average number of dialysis events is 0.08 per patient per month and 
that each facility has approximately 75 patients. Accordingly, we 
estimate the number of dialysis events in a 12-month period for all 
facilities to be 395,230 (0.08 events/patient/month x 75 patients/
facility x 5,490 facilities x 12 months) for the PY

[[Page 40991]]

2015 ESRD performance period. We estimate it will require 10 minutes to 
collect and submit data on these events and the estimated burden for 
submitting 12 months of data will be 65,880 hours (395,230 dialysis 
events x 10/60 minutes). If the dialysis events were distributed evenly 
across all 5,490 facilities that would result in an additional 12 hour 
(67,596 hours/5,490 facilities) burden for each facility at a cost of 
$399 ($33.23/hour x 12 hours) per facility. In total, we believe that 
the cost for all ESRD facilities to comply with the reporting 
requirements associated with NHSN Dialysis Event measure would be 
approximately $2.2 million ($399 x 5,490 facilities = $2,190,510) per 
year.
    In addition, we recognize that some facilities are new and would 
not have completed the required training and enrollment required by the 
NHSN. We estimate that the number of ESRD facilities increases by 3 
percent per year. Accordingly, we believe that 169 facilities (.03 x 
5,633 facilities) will be new in PY 2015. As noted in the CY 2011 ESRD 
QIP final rule (76 FR 70299), we estimate that it will take each new 
provider 8 hours to enroll and complete the required training. The 
total estimated burden for these facilities to enroll and train is 
1,352 hours (169 x 8 hours) or $44,927 ($33.23/hour x 1,352 hours). In 
sum, we estimate the total cost for all facilities to comply with the 
NHSN Dialysis Events reporting requirement to be less than $2.2 million 
($2,190,510 + $44,927).
c. ICH CAHPS Survey Attestation Requirement for the PY 2015 ESRD QIP
    As stated above in section III.C.1 of this proposed rule, we 
proposed to include a measure that assesses facility usage of the ICH 
CAHPS survey as a reporting measure for the PY 2015 ESRD QIP. The 
burden associated with this requirement is the time and effort 
necessary for facilities to administer the ICH CAHPS survey through a 
third party and submit an attestation to CMS that they successfully 
administered the survey.
    We estimate that approximately 5,489 facilities treat adult, in-
center hemodialysis patients and are, therefore, eligible to receive a 
score on this measure. We estimate that all 5,489 facilities will 
administer the ICH CAHPS survey through a third-party and submit an 
attestation to that effect. We estimate that it will take each 
facility's third-party administrator 16 hours per year to be trained on 
the survey features. We further estimate that it will take each 
facility approximately five minutes to submit the attestation each 
year. The estimated total annual burden on facilities is 88,281 hours 
((16 hours x 5,489 facilities) + ((5/60 minutes) x 5,489 facilities) 
which is valued at approximately $3 million (88,281 hours x $33.23), or 
$547 per facility ($3,000,000/5,489). We estimate that it would take 
each patient 30 minutes to complete the survey (to account for 
variability in education levels) and that approximately 75 surveys per 
year would be taken per facility.\5\ Interviewers from each facility 
would spend a total of approximately 37.5 hours per year with patients 
completing these surveys (30/60 minutes * 75 minutes) or $1,247 (37.5 
hours x $33.23) for an estimated annual burden of 205,838 hours (37.5 
hours * 5,489 facilities) which is valued at approximately $6.9 million 
(205,838 hours x 33.23/hour). We estimate that time burden for ESRD 
facilities to comply with the collection of information requirements 
associated with administering the ICH CAHPS survey each year would be 
approximately $1,794 ($547 + $1,247) or $9.9 million ($1,794 x 5,489 
facilities = $9,847,266) across all ESRD facilities.
---------------------------------------------------------------------------

    \5\ Last year, we stated that we believed that 200 surveys would 
be administered per facility per year (76 FR 70299). Upon further 
review, however, we note that the ICH CAHPS specifications require a 
sample of 200 surveys only for those facilties with a large patient 
population. Facilties with fewer than 200 patients are required to 
survey a sample of patients, aiming for a 40 percent response rate. 
(http://www.cahps.ahrq.gov/~/media/Files/SurveyDocuments/ICH/Admin--
Survey/53--fielding--the--ich--survey.pdf). Since we estimate that 
each facility serves approximately 75 patients, we believe that the 
average facility, at most, would survey 75 patients per year.
---------------------------------------------------------------------------

d. Data Validation Requirements
    Section III.C.13 of the proposed rule outlines our data validation 
proposals. We proposed to randomly sample records from 750 facilities; 
each sampled facility would be required to produce approximately 10 
records. The burden associated with this validation requirement is the 
time and effort necessary to submit validation data to a CMS 
contractor. We estimate that it will take each facility approximately 
2.5 hours to comply with these requirements. If 750 facilities are 
tasked with providing the required documentation, the estimated annual 
burden across all facilities would be 1,875 hours (750 facilities x 2.5 
hours) at a total of $62, 307 (1,875 hours x $33.23/hour) or $83.08 
($62,307/750) per facility in the sample. We also anticipate that the 
sampled facilities will be reimbursed by our validation contractor for 
the costs associated with copying and mailing the requested records.
    To obtain copies of the supporting statement and any related forms 
for the proposed paperwork collections referenced above, access CMS' 
Web site at http://www.cms.gov/PaperworkReductionActof1995/PRAL/list.asp#TopOfPage.
    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
[CMS-1352-P], Fax: (202) 395-6974; or Email: OIRA_submission@omb.eop.gov.
2. Reductions to Bad Debt Payments for All Medicare Providers
    The statutorily mandated reductions of bad debt payments to 
providers, suppliers, and other entities that are currently receiving 
bad debt payments will not result in any changes to or any additional 
collection of information requirements.

VI. Response to Comments

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

VII. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We examined the impacts of this proposed rule as required by 
Executive Order 12866 (September 30, 1993, Regulatory Planning and 
Review) and Executive Order 13563 on Improving Regulation and 
Regulatory Review (January 18, 2011). Executive Orders 12866 and 13563 
direct agencies to assess all costs and benefits of available 
regulatory alternatives and, if regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety effects, distributive 
impacts, and equity). Executive Order 13563 emphasizes the importance 
of quantifying both costs and benefits, of

[[Page 40992]]

reducing costs, of harmonizing rules, and of promoting flexibility. 
This rule has been designated economically significant under section 
3(f)(1) of Executive Order 12866. Accordingly, the rule has been 
reviewed by the Office of Management and Budget. We have prepared a 
Regulatory Impact Analysis that to the best of our ability presents the 
costs and benefits of the proposed rule. We solicit comments on the 
regulatory impact analysis provided.
2. Statement of Need
    This rule proposes a number of routine updates for renal dialysis 
services in CY 2013, proposes to implement the third year of the ESRD 
PPS transition, and proposes to make several policy changes and 
clarifications to the ESRD PPS. These include proposed updates and 
changes to the ESRD PPS and composite rate base rates, wage index 
values, wage index budget-neutrality adjustment factors, outlier 
payment policy, and transition budget-neutrality adjustment. Failure to 
publish this proposed rule would result in ESRD facilities not 
receiving appropriate payments in CY 2013.
    This rule proposes to implement the QIP for PY 2015 and beyond by 
establishing measures, scoring, and payment reductions to incentivize 
improvements in dialysis care as directed by section 1881(h) of the 
Act. Failure to establish QIP program parameters in this rule would 
prevent continuation of the QIP beyond PY 2014.
    This proposed rule implements the reduction percentages of bad debt 
reimbursement required by section 3201 of The Middle Class Tax 
Extension and Job Creation Act of 2012. Section 3201(c) of The Middle 
Class Tax Extension and Job Creation Act of 2012 added a new 
subparagraph-1861(v)(1)(W) to the Act, which applied a reduction in bad 
debt payments to ``providers'' not addressed under subparagraphs 
1861(v)(1)(T) or 1861 (v)(1)(V) of the Act. For the purpose of 
subparagraph 1861(v)(1)(W) of the Act, section 3201(c) of The Middle 
Class Tax Extension and Job Creation Act of 2012 defined ``providers'' 
as a supplier or any other type of entity that receives payment for bad 
debts under the authority of section 1861(v)(1)(A) of the Act. These 
providers include, but are not limited to, CAHs, RHCs, FQHCs, CMHCs, 
HMOs reimbursed on a cost basis, CMPs, HCPPs and ESRD facilities.
3. Overall Impact
    We estimate that the proposed revisions to the ESRD PPS will result 
in an increase of approximately $320 million in payments to ESRD 
facilities in CY 2013, which includes the amount associated with the 
increase in the ESRDB market basket reduced by the productivity 
adjustment, updates to outlier amounts, and the effect of changing the 
blended payments from 50 percent under the composite rate payment and 
50 percent under the ESRD PPS to 25 percent under the composite rate 
payment and 75 percent under the ESRD PPS.
    We estimate that the proposed requirements related to the ESRD QIP 
for PY 2015 will cost approximately $12.4 million and the predicted 
payment reductions will equal about $8.5 million to result in a total 
impact from the proposed ESRD QIP requirements of $20.9 million.
    In section IV of this proposed rule, we discuss the provisions 
required by section 3201 of The Middle Class Tax Extension and Job 
Creation Act of 2012, which apply percentage reductions in bad debt 
reimbursement to all providers eligible to receive bad debt 
reimbursement; these provisions are specifically prescribed by statute 
and thus, are self-implementing. Table 9 in section IV.C.1 of this 
proposed rule depicts a comparison of the bad debt payment percentages 
prior to and after FY 2013. We estimate these self implementing 
provisions of section 3201 of The Middle Class Tax Extension and Job 
Creation Act of 2012 will result in savings to the Medicare program of 
$10.92 billion over the period from 2012 through 2022.

B. Detailed Economic Analysis

1. CY 2013 End-Stage Renal Disease Prospective Payment System
a. Effects on ESRD Facilities
    To understand the impact of the changes affecting payments to 
different categories of ESRD facilities, it is necessary to compare 
estimated payments (that is, payments made under the 100 percent ESRD 
PPS and those under the ESRD PPS blended payment during the transition) 
in CY 2012 to estimated payments in CY 2013. To estimate the impact 
among various classes of ESRD facilities, it is imperative that the 
estimates of payments in CY 2012 and CY 2013 contain similar inputs. 
Therefore, we simulated payments only for those ESRD facilities for 
which we are able to calculate both current payments and new payments.
    For this proposed rule, we used the December 2011 update of CY 2011 
National Claims History file as a basis for Medicare dialysis 
treatments and payments under the ESRD PPS. We updated the 2011 claims 
to 2012 and 2013 using various updates. The updates to the ESRD PPS 
base rate and the base composite rate portion of the blended rate 
during the transition are described in section II.B. of this proposed 
rule. In addition, in order to prepare an impact analysis, since some 
ESRD facilities opted to be paid the blended payment amount during the 
transition, we made various assumptions about price growth for the 
formerly separately billable drugs and laboratory tests with regard to 
the composite portion of the ESRD PPS blended payment during the 
transition. These rates of price growth are briefly outlined below, and 
are described in more detail in the CY 2011 ESRD PPS final rule (75 FR 
49078 through 49080).
    We used the CY 2011 amounts for the CYs 2012 and 2013 amounts for 
Supplies and Other Services, since this category primarily includes the 
$0.50 administration fee for separately billable Part B drugs and this 
fee continues to be an appropriate amount. Because some ESRD facilities 
will receive blended payments during the transition and receive payment 
for ESRD drugs and biologicals based on their average sales price plus 
6 percent (ASP+6), we estimated price growth for these drugs and 
biologicals based on ASP+6 percent. We updated the last available 
quarter of actual ASP data for the top twelve drugs (the second quarter 
of 2012) thru 2013 by using the quarterly growth in the Producer Price 
Index (PPI) for Drugs, consistent with the method for addressing price 
growth in the ESRDB market basket. This resulted in increases of 1.5 
percent, 0.6 percent, 2.8 percent, 0.3 percent, 0.9 percent and 1.4 
percent, respectively, for the third quarter of 2012 thru the fourth 
quarter of 2013. Since the top twelve drugs account for over 99 percent 
of total former separately billable Part B drug payments, we used a 
weighted average growth of the top twelve drugs for the remainder. 
Table 10 below shows the updates used for the drugs.
    We updated payments for laboratory tests paid under the laboratory 
fee schedule to 2012 and 2013 using the statutorily required update of 
the CPI-U increase with any legislative adjustments. For this proposed 
rule, the growth from 2011 to 2012 is 0.7 percent and the growth from 
2011 to 2013 is 0.3 percent.

[[Page 40993]]



 Table 10--Price Increases From 2011 to 2012 and 2011 to 2013 of Former
                    Separately Billable Part B Drugs
------------------------------------------------------------------------
                                        Price update
                                        2011 to 2012      Price update
                                             (%)        2011 to 2013 (%)
------------------------------------------------------------------------
EPO.................................               0.3               5.8
Paricalcitol........................             -27.4             -25.5
Sodium--ferric--glut................             -20.3             -20.7
Iron--sucrose.......................             -13.1             -11.0
Levocarnitine.......................              22.7              29.3
Doxercalciferol.....................             -72.2             -77.1
Calcitriol..........................              90.7              65.7
Vancomycin..........................              -8.2              -1.9
Alteplase...........................              13.2              19.4
Aranesp.............................               6.4              12.3
Daptomycin..........................               9.5              15.0
Ferumoxytol.........................              -7.0              -2.9
Other Injectibles...................              -7.4              -3.1
------------------------------------------------------------------------

    Table 11 shows the impact of the estimated CY 2013 ESRD payments 
compared to estimated payments to ESRD facilities in CY 2012.

       Table 11--Impact of Proposed Changes in Payments to ESRD Facilities for CY 2013 ESRD Proposed Rule
             [Percent change in total payments to ESRD facilities (both program and beneficiaries)]
----------------------------------------------------------------------------------------------------------------
                                                                  Effect of 2013  Effect of 2013     Effect of
                                     Number of       Number of      changes in      changes in      total 2013
          Facility type             facilities    treatments (in  outlier policy   wage indexes     changes \3\
                                                     millions)          (%)             (%)             (%)
                                               A               B               C               D               E
----------------------------------------------------------------------------------------------------------------
All Facilities..................           5,633            37.0             0.4             0.0             3.1
Type:
    Freestanding................           5,089            34.0             0.4             0.0             3.0
    Hospital based..............             544             2.9             0.2             0.2             3.7
Ownership Type:
    Large dialysis organization.           3,663            24.5             0.5             0.0             3.0
    Regional chain..............             915             6.3             0.3             0.1             3.1
    Independent.................             617             3.9             0.2             0.0             3.2
    Hospital based \1\..........             429             2.2             0.2             0.3             3.7
    Unknown.....................               9             0.0             0.3             1.3             4.2
Geographic Location:
    Rural.......................           1,249             6.1             0.5            -0.2             3.0
    Urban.......................           4,384            30.9             0.4             0.0             3.1
Census Region:
    East North Central..........             916             5.5             0.5             0.1             3.2
    East South Central..........             464             2.8             0.6            -0.4             2.7
    Middle Atlantic.............             623             4.5             0.4             0.1             3.2
    Mountain....................             332             1.7             0.3            -0.2             2.8
    New England.................             167             1.2             0.5             0.6             3.6
    Pacific.....................             662             5.0             0.2             0.5             3.3
    Puerto Rico and Virgin                    41             0.3            -0.2            -2.4             0.4
     Islands....................
    South Atlantic..............           1,244             8.5             0.5            -0.3             2.9
    West North Central..........             411             2.0             0.3             0.2             3.4
    West South Central..........             773             5.4             0.4            -0.1             3.0
Facility Size:
    Less than 4,000 treatments             1,043             2.8             0.3             0.2             3.4
     \2\........................
    4,000 to 9,999 treatments...           2,163            10.4             0.5             0.0             3.1
    10,000 or more treatments...           2,270            23.4             0.4             0.0             3.1
    Unknown.....................             157             0.3             0.3             0.0             2.9
Percentage of Pediatric
 Patients:
    Less than 2%................           5,524            36.6             0.4             0.0             3.1
    Between 2% and 19%..........              45             0.3             0.3             0.0             3.1
    Between 20% and 49%.........               9             0.0            -1.9            -0.1             2.0
    More than 50%...............              55             0.0            -0.3             0.1             2.2
----------------------------------------------------------------------------------------------------------------
\1\ Includes hospital based facilities not reported to have large dialysis organization or regional chain
  ownership.
\2\ Of the 1,043 Facilities with less than 4,000 treatments, only 322 qualify for the low-volume adjustment. The
  low-volume adjustment is mandated by Congress, and is not applied to pediatric patients. The impact to these
  Low volume Facilities is a 3.5% increase in payments.

[[Page 40994]]

 
\3\ Includes the effect of ESRDB Market Basket minus productivity increase of 2.5% to the ESRD PPS base and the
  Composite Rate. Includes the effect of the change in the drug add-on percentage from 14.3% to 14.0% for those
  facilities that opted to be paid under the transition. Includes the effect of the blend changing from 50/50 to
  25/75 for CY 2012 to CY 2013 for those facilities that choose to be paid under the transition.
Note: Totals do not necessarily equal the sum of rounded parts.

    Column A of the impact table indicates the number of ESRD 
facilities for each impact category and column B indicates the number 
of dialysis treatments (in millions). The overall effect of the 
proposed changes to the outlier payment policy described in section 
II.B.7 of this proposed rule, is shown in column C. For CY 2013, the 
impact on all facilities as a result of the changes to the outlier 
payment policy would be a 0.4 percent increase in estimated payments. 
The estimated impact of the changes to outlier payment policy ranges 
from a 1.9 percent decrease to a 0.6 percent increase. Most ESRD 
facilities are anticipated to experience a positive effect in their 
estimated CY 2013 payments as a result of the proposed outlier policy 
changes.
    Column D shows the effect of the wage index on ESRD facilities and 
reflects the CY 2013 wage index values for the composite rate portion 
of the blended payment during the transition and the ESRD PPS payments. 
Facilities located in the census region of Puerto Rico and the Virgin 
Islands would receive a 2.4 percent decrease in estimated payments in 
CY 2013. Since most of the facilities in this category are located in 
Puerto Rico, the decrease is primarily due to the reduction in the wage 
index floor, (which only affects facilities in Puerto Rico in CY 2013). 
The other categories of types of facilities in the impact table show 
changes in estimated payments ranging from a 0.4 percent decrease to a 
1.3 percent increase due to the update of the wage index.
    Column E reflects the overall impact (that is, the effects of the 
proposed outlier policy changes, the proposed wage index, the effect of 
the ESRDB market basket increase minus productivity adjustment, and the 
effect of the change in the blended payment percentage from 50 percent 
of payments based on the composite rate system and 50 percent based on 
the ESRD PPS in 2012, to 25/75, respectively, for 2013, for those 
facilities that opted to be paid under the transition). We expect that 
overall, ESRD facilities will experience a 3.1 percent increase in 
estimated payments in 2013. ESRD facilities in Puerto Rico and the 
Virgin Islands are expected to receive a 0.4 percent increase in their 
estimated payments in CY 2013. This small increase is primarily due to 
the negative impact of the wage index. The other categories of types of 
facilities in the impact table show positive impacts ranging from an 
increase of 2.0 percent to 4.2 percent in their 2013 estimated 
payments.
b. Effects on Other Providers
    Under the ESRD PPS, ESRD facilities are paid directly for the renal 
dialysis bundle and other provider types such as laboratories, DME 
suppliers, and pharmacies, may no longer bill Medicare directly for 
renal dialysis services. Rather, effective January 1, 2011, such other 
providers can only furnish renal dialysis services under arrangements 
with ESRD facilities and must seek payment from ESRD facilities rather 
than Medicare. Under the ESRD PPS, Medicare pays ESRD facilities one 
payment for renal dialysis services, which may have been separately 
paid to suppliers by Medicare prior to the implementation of the ESRD 
PPS. Therefore, in CY 2013, the third year of the ESRD PPS, we estimate 
that the proposed ESRD PPS will have zero impact on these other 
providers.
c. Effects on the Medicare Program
    We estimate that Medicare spending (total Medicare program 
payments) for ESRD facilities in 2013 will be approximately $8.7 
billion. This estimate is based on various price update factors 
discussed in section VII.B.1.a in this proposed rule and takes into 
account a projected increase in fee-for-service Medicare dialysis 
beneficiary enrollment of 4.6 percent in CY 2013.
d. Effects on Medicare Beneficiaries
    Under the ESRD PPS, beneficiaries are responsible for paying 20 
percent of the ESRD PPS payment amount or blended payment amount for 
patients treated in facilities going through the ESRD PPS transition. 
As a result of the projected 3.1 percent overall increase in the 
proposed ESRD PPS payment amounts in CY 2013, we estimate that there 
will be an increase in beneficiary co-insurance payments of 3.1 percent 
in CY 2013, which translates to approximately $70 million.
e. Alternatives Considered
    We considered eliminating the AY modifier use by ESRD facilities in 
CY 2013, which could address program integrity concerns but could also 
require Medicare beneficiaries to incur additional injections, medical 
visits and co-insurance liabilities and accordingly, we did not pursue 
this alternative. Rather, we decided to monitor the use of the AY 
modifier and consider the elimination of the AY modifier in future 
rulemaking if we determine that it is being used inappropriately.
2. End-Stage Renal Disease Quality Incentive Program
a. Effects of the PY 2015 ESRD QIP
    The ESRD QIP provisions are intended to prevent possible reductions 
in the quality of ESRD dialysis facility services provided to 
beneficiaries as a result of payment changes under the ESRD PPS by 
implementing a ESRD QIP that reduces ESRD payments by up to 2 percent 
for dialysis facilities that fail to meet or exceed a Total Performance 
Score with respect to performance standards established by the 
Secretary with respect to certain specified measures. The methodology 
that we are proposing to determine a facility's Total Performance Score 
is described in section III.C.10 of this proposed rule. Any reductions 
in ESRD payments would begin on January 1, 2015 for services furnished 
on or after January 1, 2015.
    As a result, based on the ESRD QIP outlined in this proposed rule, 
we estimate that, of the total amount of dialysis facilities (including 
those not receiving an ESRD QIP Total Performance Score), approximately 
14 percent or 801 of the facilities would likely receive a payment 
reduction for PY 2015. Facilites that do not receive a TPS are not 
eligible for a payment reduction.
    The ESRD QIP impact assessment assumes an initial count of 5,633 
dialysis facilities paid through the PPS. Table 12 shows the overall 
estimated distribution of payment reductions resulting from the PY 2015 
ESRD QIP.

[[Page 40995]]



 Table 12--Estimated Distribution of PY 2015 ESRD QIP Payment Reductions
------------------------------------------------------------------------
                                             Number of      Percent of
         Payment  reduction (%)             facilities      facilities
------------------------------------------------------------------------
0.0.....................................            4563            85.1
0.5.....................................             470             8.8
1.0.....................................             190             3.5
1.5.....................................              77             1.4
2.0.....................................              64             1.2
------------------------------------------------------------------------
* Note: This table excludes 268 facilities that did not receive a score
  because they did not have enough data to receive a Total Performance
  Score.

    To estimate whether or not a facility would receive a payment 
reduction under the proposed approach, we scored each facility on 
achievement and improvement for each of the proposed clinical measures 
using the most recent data available for each measure shown in Table 
13.

   Table 13--Data Used To Estimate PY 2015 ESRD QIP Payment Reductions
------------------------------------------------------------------------
                                    Period of time
                                   used to calculate
                                      achievement
                                      thresholds,
             Measure                  performance     Performance period
                                      standards,
                                    benchmarks, and
                                      improvement
                                      thresholds
------------------------------------------------------------------------
Hemoglobin Greater Than 12 g/dL.  Jan 2010-Dec 2010.  Jan 2011-Sep 2011
Vascular Access Type:
    % Fistula...................  Oct 2010-Mar 2011.  Apr 2011-Sep 2011.
    % Catheter..................  Oct 2010-Mar 2011.  Apr 2011-Sep 2011.
Kt/V:
    Adult HD....................  Jul 2010-Dec 2010.  Jan 2011-Sep 2011.
    Adult PD....................  Jul 2010-Dec 2010.  Jan 2011-Sep 2011.
    Pediatric HD................  Jul 2010-Dec 2010.  Jan 2011-Sep 2011.
Hypercalcemia...................  Mar 2010-Dec 2010.  Apr 2011-Oct 2011.
------------------------------------------------------------------------

    For the all of the measures except Hypercalcemia, we used claims 
data for these calculations. For the Hypercalcemia measure, we used 
CROWNWeb data. Clinical measures with less than 11 cases for a facility 
were not included in that facility's Total Performance Score. Clinical 
measures with 11-25 cases for a facility received an adjustment as 
outlined in section III.C.1 of this proposed rule. Each facility's 
Total Performance Score was compared to the estimated minimum Total 
Performance Score and the payment reduction table found in section 
III.C.12 of this proposed rule. Facilities were required to have a 
score on at least one clinical measure to receive a Total Performance 
Score. For these simulations, reporting measures were not included due 
to lack of data availability. Therefore, the simulated facility Total 
Performance Scores were calculated using only the clinical measure 
scores.
    To estimate the total payment reductions in PY 2015 for each 
facility resulting from this proposed rule, we multiplied the total 
Medicare payments to the facility during the one year period between 
October 2010 and September 2011 by the facility's estimated payment 
reduction percentage expected under the ESRD QIP, yielding a total 
payment reduction amount for each facility: (Total ESRD payment in 
October 2010 through September 2011 times the estimated payment 
reduction percentage). For PY 2015 the total payment reduction for all 
of the 801 facilities expected to receive a reduction is approximately 
$8.5 million ($8,523,594). Further, we estimate that the total costs 
associated with the collection of information requirements for PY 2015 
described in section V.C.2 of this proposed rule would be approximately 
$12.4 million for all ESRD facilities. As a result, we estimate that 
ESRD facilities will experience an aggregate impact of $20.9 million 
($12,398,455 + 8,523,594 = $20,922,049) as a result of the PY 2015 ESRD 
QIP.
    Table 14 below shows the estimated impact of the finalized ESRD QIP 
payment reductions to all ESRD facilities for PY 2015. The table 
details the distribution of ESRD facilities by facility size (both 
among facilities considered to be small entities and by number of 
treatments per facility), geography (both urban/rural and by region), 
and by facility type (hospital based/freestanding facilities). Given 
that the time periods used for these calculations will differ from 
those we propose to use for the PY 2015 ESRD QIP, the actual impact of 
the PY 2015 ESRD QIP may vary significantly from the values provided 
here.

               Table 14--Impact of Proposed QIP Payment Reductions to ESRD Facilities for PY 2015
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of        Payment
                                                     Number of                      facilities       reduction
                                     Number of       Medicare        Number of      expected to      (percent
                                    facilities      treatments      facilities       receive a       change in
                                                     2011 (in     with QIP score      payment       total ESRD
                                                   millions) \3\                     reduction       payments)
----------------------------------------------------------------------------------------------------------------
All Facilities..................           5,633            37.0           5,364             801           -0.12
Facility Type:
    Freestanding................           5,089            34.0           4,956             679           -0.10

[[Page 40996]]

 
    Hospital-based..............             544             2.9             408             122           -0.31
Ownership Type:
    Large Dialysis..............           3,663            24.5          3, 586             459           -0.09
    Regional Chain..............             915             6.3             876             119           -0.12
    Independent.................             617             3.9             583             125           -0.20
    Hospital-based (non-chain)..             429             2.2             314              96           -0.33
    Unknown.....................               9             0.0               5               2           -0.20
Facility Size:
    Large Entities..............           4,578            30.8           4,462             578           -0.09
    Small Entities \1\..........           1,046             6.1             897             221           -0.24
    Unknown.....................               9             0.0               5               2           -0.20
Urban/Rural Status:
    Rural.......................           1,249             6.1           1,186             173           -0.11
    Urban.......................           4,384            30.9           4,178             628           -0.12
Census Region:
    Northeast...................             784             5.7             741             117           -0.13
    Midwest.....................           1,320             7.5           1,223             229           -0.16
    South.......................           2,476            16.7           2,407             346           -0.11
    West........................             991             6.7             954              96           -0.08
    US Territories \2\..........              62             0.3              39              13           -0.24
Census Division:
    East North Central..........             916             5.5             847             175           -0.18
    East South Central..........             464             2.8             451              65           -0.12
    Middle Atlantic.............             623             4.5             582             100           -0.14
    Mountain....................             332             1.7             318              37           -0.08
    New England.................             167             1.2             159              17           -0.10
    Pacific.....................             662             5.0             636              59           -0.08
    South Atlantic..............           1,244             8.5           1,209             188           -0.12
    West North Central..........             411             2.0             376              54           -0.11
    West South Central..........             773             5.4             747              93           -0.10
    US Territories \2\..........              41             0.3              39              13           -0.24
Facility Size (# of total
 treatments):
    Less than 4,000 treatments..           1,043             2.8             899             143           -0.17
    4,000-9,999 treatments......           2,163            10.4           2,121             299           -0.10
    Over 10,000 treatments......           2,270            23.4           2,249             324           -0.10
    Unknown.....................             157             0.3              95              35           -0.47
----------------------------------------------------------------------------------------------------------------
\1\ Small Entities include hospital-based and satellite facilities and non-chain facilities based on DFC self-
  reported status.
\2\ Includes Puerto Rico and Virgin Islands.
\3\ Based on claims data through September 2011.

b. Alternatives Considered for the PY 2015 ESRD QIP
    In developing the proposed PY 2015 ESRD QIP, we selected measures 
that we believe are important indicators of patient outcomes and 
quality of care as discussed in sections III.C.1, III.C.2, and III.C.3 
of this proposed rule. Poor management of anemia and inadequate 
dialysis, for example, can lead to avoidable hospitalizations, 
decreased quality of life, and death. Infections are also a leading 
cause of death and hospitalization among hemodialysis patients, but 
there are proven infection control methods that have been shown 
effective in reducing morbidity and mortality. We also considered 
proposing to adopt the Standardized Hospitalization Ratio Admissions 
(SHR) measure and the Standardized Mortality Ratio (SMR) measures as 
part of the PY 2015 ESRD QIP. While we decided not to propose to adopt 
the SHR and SMR measures for the PY 2015 ESRD QIP, we will publicly 
report these measure rates/ratios to the public via DFC to encourage 
facilities to improve their care. We believe the measures selected will 
allow us to continue focusing on improving the quality of care that 
Medicare beneficiaries receive from ESRD dialysis facilities.
    In developing the proposed scoring methodology for the PY 2015 ESRD 
QIP, we considered a number of alternatives including various 
improvement ranges, achievement thresholds, and benchmarks. We also 
considered whether some of the new measures should be scored based on 
only achievement. We also discussed scoring some of the clinical 
measures using a binary methodology (that is, facilities receive either 
zero or 10 points for missing or achieving a standard, respectively). 
We ultimately decided to propose to mirror the PY 2014 ESRD QIP scoring 
methodology as closely as possible. We aim to design a scoring 
methodology that is straightforward and transparent to facilities, 
patients, and other stakeholders, and we believe one of the ways to 
obtain this transparency is to be as consistent as possible from year-
to-year of the program. We believe that this consistency will allow us 
to better assess the impacts of the ESRD QIP upon facilities and 
beneficiaries. Finally, we believe that all scoring methodologies for 
Medicare VBP programs should be aligned as appropriate given their 
specific statutory requirements, and the scoring methodology proposed 
for the ESRD QIP is similar to the Hospital Inpatient VBP Program.
    When deciding upon how to best score the Vascular Access Type and 
Kt/V Dialysis Adequacy measure topics, we considered combining all of 
the

[[Page 40997]]

measures within the measure topic into one composite measure (that is, 
having one, combined numerator and one, combined denominator for all of 
the measures within the topic) rather than individually scoring each 
measure and weighting it appropriately in the measure topic. We believe 
that it is important to mirror the NQF specifications for each measure 
as much as possible; we also heeded the suggestion of the Measures 
Application Partnership to further test composite measures before 
implementing them. Therefore, we decided to propose measure topics 
where each measure within the measure topic is scored individually and 
then weighted appropriately.
    In order to receive credit for a month of reporting, we considered 
proposing to require facilities to report the required information for 
less than 100 percent of their patients for the Mineral Metabolism and 
Anemia Management reporting measures. Specifically, we considered 
lowering the threshold to reporting 98 percent of patients for a month 
in order to receive credit for that month. We ultimately decided that, 
in order to encourage the best care for patients, it is appropriate to 
hold facilities to the higher standard. Because the measures allow 
facilities to report values taken by other providers/facilities and 
because we require reporting only for those hemodialysis patients that 
a facility sees at least twice in a claim month or for those peritoneal 
dialysis patients for which a facility submits a claim, we believe that 
the measures afford facilities enough flexibility while also requiring 
the best quality care.
    We also considered multiple baseline periods for purposes of 
scoring facilities on achievement and improvement. We considered 
periods of the same time and duration, periods occurring at different 
times, and periods with various durations. We ultimately decided that a 
baseline period of 12 months for both the achievement and improvement 
scores is best because it is consistent with the PY 2014 program. 
Additionally, a 12-month baseline period prevents issues related to 
seasonality. We decided to propose achievement and improvement baseline 
periods occurring over different periods of time because we believe 
that this approach mitigates data lag as much as possible and also 
allows us to score all of the measures on both achievement and 
improvement. Finally, we decided to propose an achievement baseline 
period spanning a calendar year (CY 2011) because this approach allows 
us to publish the numerical values for the performance standards before 
the beginning of the performance period.
    In deciding upon the minimum number of cases required for a 
facility to be scored on a measure, we reviewed and discussed many 
options. We considered keeping the program the same as PY 2014 by 
excluding measures with less than 11 cases and applying no adjustment. 
We also discussed excluding measures with less than 26 and less than 51 
cases. Finally, we discussed an adjustment applicable to measures with 
26-50 cases. We believe that, given the alternatives, the proposed 
methodology strikes an appropriate balance between maximizing facility 
inclusion in the program and preventing results for very small 
facilities from limiting the reliability of total performance scores.
    Finally, in deciding upon the calculation of the minimum Total 
Performance Score, we considered a score that includes a value for each 
of the reporting measures. We decided, however, to propose to adhere to 
the PY 2014 methodology--calculating the minimum Total Performance 
Score as if the reporting measures were excluded from the calculation. 
Again, we believe that consistently scoring the ESRD QIP will allow us 
to better assess its impacts and allow facilities to plan for future 
years of the program.
3. Reductions to Bad Debt Payments for All Medicare Providers
    Section 3201 of The Middle Class Tax Extension and Job Creation Act 
of 2012 that requires reductions in bad debt reimbursement to all 
providers, supplies and other entities eligible to receive bad debt 
reimbursement will have a significant impact on the operations of all 
affected entities. However, these provisions are specifically 
prescribed by statute and thus, are self-implementing. It is estimated 
that the savings in the CY 2013 would be $330 million.

C. Accounting Statement

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

  Table 15--Accounting Statement: Classification of Estimated Transfers
                 and Costs/Savings ESRD PPS for CY 2013
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $250 million.
From Whom to Whom......................  Federal government to ESRD
                                          providers.
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Increased Beneficiary Co-insurance       $70 million.
 Payments.
From Whom to Whom......................  Beneficiaries to ESRD
                                          providers.
------------------------------------------------------------------------
                          ESRD QIP for PY 2015
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  -$8.5 million.*
From Whom to Whom......................  Federal government to ESRD
                                          providers.
------------------------------------------------------------------------
                Category                              Costs
------------------------------------------------------------------------
Annualized Monetized ESRD Provider       12.4 million.**
 Costs.
------------------------------------------------------------------------

[[Page 40998]]

 
Savings from Congressionally Mandated Reductions of Bad Debt Payments in
                                 CY 2013
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Bad Debt Payments.  $-330 million.
From Whom to Whom......................  Federal government to Medicare
                                          providers.
------------------------------------------------------------------------
* It is the reduced payment to the ESRD facilities, which fall below the
  quality standards as stated in section III.C.12 of this proposed rule.
** It is the cost associated with the collection of information
  requirements for all ESRD facilities.

VIII. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (September 19, 1980, Pub. L. 96-354) 
(RFA) requires agencies to analyze options for regulatory relief of 
small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Approximately 19 percent of ESRD dialysis 
facilities are considered small entities according to the Small 
Business Administration's (SBA) size standards, which classifies small 
businesses as those dialysis facilities having total revenues of less 
than $34.5 million in any 1 year. Individuals and States are not 
included in the definitions of a small entity. For more information on 
SBA's size standards, see the Small Business Administration's Web site 
at http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf (Kidney Dialysis Centers are listed as 621492 with a 
size standard of $34.5 million).
    The claims data used to estimate payments to ESRD facilities in 
this RFA analysis and RIA do not identify which dialysis facilities are 
part of a large dialysis organization (LDO), regional chain, or other 
type of ownership because each individual dialysis facility has its own 
provider number and bills Medicare using this number. Therefore, in 
previous RFA analyses and RIAs presented in proposed and final rules 
that updated the basic case-mix adjusted composite payment system, we 
considered each ESRD facility to be a small entity for purposes of the 
RFA analysis. However, we conducted a special analysis for this 
proposed rule that enabled us to identify the ESRD facilities that are 
part of an LDO or regional chain and therefore, were able to identify 
individual ESRD facilities that would be considered small entities.
    We do not believe ESRD facilities are operated by small government 
entities such as counties or towns with populations of 50,000 or less, 
and therefore, they are not enumerated or included in this estimated 
RFA analysis. Individuals and States are not included in the definition 
of a small entity.
    For purposes of the RFA, we estimate that approximately 19 percent 
of ESRD facilities are small entities as that term is used in the RFA 
(which includes small businesses, nonprofit organizations, and small 
governmental jurisdictions). This amount is based on the number of ESRD 
facilities shown in the ownership category in Table 11. Using the 
definitions in this ownership category, we consider the 617 facilities 
that are independent and the 429 facilities that are shown as hospital-
based to be small entities. The ESRD facilities that are owned and 
operated by LDOs and regional chains would have total revenues of more 
than $34.5 million in any year when the total revenues for all 
locations are combined for each business (individual LDO or regional 
chain), and are not, therefore, included as small entities.
    For the ESRD PPS updates proposed in this rule, a hospital-based 
ESRD facility (as defined by ownership type) is estimated to receive a 
3.7 percent increase in payments for CY 2013. An independent facility 
(as defined by ownership type) is estimated to receive a 3.2 percent 
increase in payments for 2013.
    Based on the proposed QIP payment reduction impacts to ESRD 
facilities for PY 2015, we estimate that of the 801 ESRD facilities 
expected to receive a payment reduction, 221 ESRD small entity 
facilities would experience a payment reduction (ranging from 0.5 
percent up to 2.0 of total payments), as presented in Table 14 above. 
We anticipate the payment reductions to average approximately $10,462 
per facility among the 801 facilities receiving a payment reduction, 
with an average of $12,509 per small entity facilities receiving a 
payment reduction. Using our projections of facility performance, we 
then estimated the impact of anticipated payment reductions on ESRD 
small entities, by comparing the total payment reductions for the 221 
small entities expected to receive a payment reduction, with the 
aggregate ESRD payments to all small entities. We estimate that there 
are a total of 897 small entity facilities. For this entire group of 
897 ESRD small entity facilities, a decrease of 0.24 percent in 
aggregate ESRD payments is observed.
    Therefore, the Secretary has determined that this proposed rule 
will not have a significant economic impact on a substantial number of 
small entities. We solicit comment on the RFA analysis provided.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. Any 
such regulatory impact analysis must conform to the provisions of 
section 603 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
a metropolitan statistical area and has fewer than 100 beds. We do not 
believe this proposed rule will have a significant impact on operations 
of a substantial number of small rural hospitals because most dialysis 
facilities are freestanding. While there are 178 rural hospital-based 
dialysis facilities, we do not know how many of them are based at 
hospitals with fewer than 100 beds. However, overall, the 178 rural 
hospital-based dialysis facilities will experience an estimated 3.4 
percent increase in payments. As a result, this proposed rule is 
estimated to not have a significant impact on small rural hospitals. 
Therefore, the Secretary has determined that this proposed rule will 
not have a significant impact on the operations of a substantial number 
of small rural hospitals.
    In addition, section 3201 of The Middle Class Tax Extension and Job 
Creation Act of 2012 that requires reductions in bad debt reimbursement 
to all providers, supplies and other

[[Page 40999]]

entities eligible to receive bad debt reimbursement will have a 
significant impact on the operations of a substantial number of small 
entities and small rural hospitals. However, these provisions are 
specifically prescribed by the Congress and thus, are self-
implementing. Thus, we are not providing a Regulatory Flexibility Act 
Analysis to codify these mandated reductions in bad debt payments.

IX. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
(Pub. L. 104-4) also requires that agencies assess anticipated costs 
and benefits before issuing any rule whose mandates require spending in 
any 1 year $100 million in 1995 dollars, updated annually for 
inflation. In 2012, that threshold is approximately $139 million. This 
proposed rule does not include any mandates that would impose spending 
costs on State, local, or Tribal governments in the aggregate, or by 
the private sector, of $139 million.

X. Federalism Analysis

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

XI. Files Available to the Public Via the Internet

    This section lists the Addenda referred to in the preamble of this 
proposed rule. Beginning in CY 2012, the Addenda for the annual ESRD 
PPS proposed and final rulemakings will no longer appear in the Federal 
Register. Instead, the Addenda will be available only through the 
Internet. We will continue to post the Addenda through the Internet.
    Readers who experience any problems accessing the Addenda that are 
posted on the CMS Web site at http://www.cms.gov/ESRDPayment/PAY/list.asp, should contact Michelle Cruse at (410) 786-7540.

List of Subjects

42 CFR Part 413

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

42 CFR Part 417

    Administrative practice and procedure, Grant programs--health, 
Health care, Health insurance, Health maintenance organizations (HMOs), 
Loan programs--health, Medicare, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services proposes to amend 42 CFR chapter IV as follows:

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

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

    Authority:  Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), 
and (n), 1861(v), 1871, 1881, 1883 and 1886 of the Social Security 
Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and 
(n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of 
Pub. L. 106-113 (113 Stat. 1501A-332) and sec. 3201 of Pub. L. 112-
96 (126 Stat. 156).

Subpart F--Specific Categories of Costs

    2. Section 413.89 is amended by revising paragraphs (h)(1) 
introductory text, (h)(1)(iv), (h)(2), (h)(3), and (i), and by adding 
paragraphs (h)(1)(v) and (h)(4) to read as follows:


Sec.  413.89  Bad debts, charity, and courtesy allowances.

* * * * *
    (h) * * *
    (1) Hospitals. In determining reasonable costs for hospitals, the 
amount of allowable bad debt (as defined in paragraph (e) of this 
section) is reduced:
* * * * *
    (iv) For cost reporting periods beginning during fiscal years 2001 
through 2012, by 30 percent.
    (v) For cost reporting periods beginning during a subsequent fiscal 
year, by 35 percent.
    (2) Skilled nursing facilities and swing bed hospitals. For the 
purposes of this paragraph (h)(2), a dual eligible individual is 
defined as an individual that is entitled to benefits under Part A of 
Medicare and is determined eligible by the State for medical assistance 
under Title XIX of the Act as described under paragraph (2) of the 
definition of a ``full-benefit dual eligible individual'' at Sec.  
423.772 of this chapter. In determining reasonable costs for a skilled 
nursing facility and for post-hospital SNF care furnished in a swing 
bed hospital, as defined in 42 CFR 413.114(b) of this part, the amount 
of allowable bad debt (as defined in paragraph (e) of this section) is 
reduced:
    (i) For non-dual eligible individuals--(A) For cost reporting 
periods beginning during fiscal years 2006 through 2012, by 30 percent, 
for a patient in a skilled nursing facility.
    (B) For cost reporting periods beginning during a subsequent fiscal 
year, by 35 percent, for a patient in a skilled nursing facility or 
receiving post-hospital SNF care in a swing bed hospital.
    (ii) For dual eligible individuals--(A) For cost reporting periods 
beginning during fiscal year 2013, by 12 percent, for a patient in a 
skilled nursing facility or receiving post-hospital SNF care in a swing 
bed hospital.
    (B) For cost reporting periods beginning during fiscal year 2014, 
by 24 percent, for a patient in a skilled nursing facility or receiving 
post-hospital SNF care in a swing bed hospital.
    (C) For cost reporting periods beginning during a subsequent fiscal 
year, by 35 percent, for a patient in a skilled nursing facility or 
receiving post-hospital SNF care in a swing bed hospital.
    (3) End-stage renal dialysis facilities. In determining reasonable 
costs for an end-stage renal dialysis facility, the amount of allowable 
bad debt (as defined in paragraph (e) of this section) is:
    (i) For cost reporting periods beginning before October 1, 2012, 
reimbursed up to the facility's costs.
    (ii) For cost reporting periods beginning during fiscal year 2013, 
reduced by 12 percent and reimbursed up to the facility's costs.
    (iii) For cost reporting periods beginning during fiscal year 2014, 
reduced by 24 percent and reimbursed up to the facility's costs.
    (iv) For cost reporting periods beginning during a subsequent 
fiscal year, reduced by 35 percent and reimbursed up to the facility's 
costs.
    (4) All other providers. In determining reasonable costs for all 
other providers, suppliers and other entities not described elsewhere 
in paragraph (h) of this section that are eligible to receive

[[Page 41000]]

reimbursement for bad debts under this section, the amount of allowable 
bad debts (as defined in paragraph (e) of this section) is reduced:
    (i) For cost reporting periods beginning during fiscal year 2013, 
by 12 percent.
    (ii) For cost reporting periods beginning during fiscal year 2014, 
by 24 percent.
    (iii) For cost reporting periods beginning during a subsequent 
fiscal year, by 35 percent.
    (i) Exceptions applicable to Bad Debt Reimbursement. (1) Bad debts 
arising from covered services paid under a reasonable charge-based 
methodology or a fee schedule are not reimbursable under the program.
    (2) For end-stage renal dialysis services furnished on or after 
January 1, 2011 and paid for under the end-stage renal dialysis 
prospective payment system described in Sec.  413.215, bad debts 
arising from covered items or services that, prior to January 1, 2011 
were paid under a reasonable charge-based methodology or a fee 
schedule, including but not limited to drugs, laboratory tests, and 
supplies are not reimbursable under the program.


Sec.  413.178  [Removed and Reserved]

    3. Section 413.178 is removed and reserved.

PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL 
PLANS, AND HEALTH CARE PREPAYMENT PLANS

    4. The authority citation for part 417 continues to read as 
follows:

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh), secs. 1301, 1306, and 1310 of the Public 
Health Service Act (42 U.S.C. 300e, 300e-5, and 300e-9), and 31 
U.S.C. 9701.

Subpart O--Medicare Payment: Cost Basis

    5. Section 417.536 is amended by revising paragraph (f)(1) to read 
as follows:


Sec.  417.536  Cost payment principles.

* * * * *
    (f) * * *
    (1) Bad debts attributable to Medicare deductible and coinsurance 
amounts are allowable only if the requirements of Sec.  413.89 of this 
chapter are met, subject to the limitations described under Sec.  
413.89(h) and the exceptions for services described under Sec.  
413.89(i).
* * * * *

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


    Dated: June 22, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.

    Approved: June 27, 2012.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2012-16566 Filed 7-2-12; 4:15 pm]
BILLING CODE 4120-01-P