[Federal Register Volume 75, Number 155 (Thursday, August 12, 2010)]
[Rules and Regulations]
[Pages 49030-49214]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-18466]
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Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 410, 413 and 414
Medicare Program; End-Stage Renal Disease Prospective Payment System;
Final Rule and Proposed Rule
Federal Register / Vol. 75, No. 155 / Thursday, August 12, 2010 /
Rules and Regulations
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 410, 413 and 414
[CMS-1418-F]
RIN 0938-AP57
Medicare Program; End-Stage Renal Disease Prospective Payment
System
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: This final rule implements a case-mix adjusted bundled
prospective payment system (PPS) for Medicare outpatient end-stage
renal disease (ESRD) dialysis facilities beginning January 1, 2011
(ESRD PPS), in compliance with the statutory requirement of the
Medicare Improvements for Patients and Providers Act (MIPPA), enacted
July 15, 2008. This ESRD PPS also replaces the current basic case-mix
adjusted composite payment system and the methodologies for the
reimbursement of separately billable outpatient ESRD services.
DATES: Effective Date: These regulations are effective on January 1,
2011, except for Sec. 413.174(f)(6), which will be effective on
January 1, 2014 and Sec. 413.232(f) and Sec. 413.239(b), which will
be effective November 1, 2010.
FOR FURTHER INFORMATION CONTACT: William Cymer, (410) 786-4533. Lynn
Riley, (410) 786-1286, (ESRD Quality Incentive Program).
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Overview of the Proposed ESRD PPS
B. Legislative History and Statutory Authority for the ESRD
Prospective Payment System
C. Existing Basic Case-Mix Adjustments
II. Summary of the Proposed Provisions and Responses to Comments on
the Proposed Rule
A. The Proposed ESRD PPS Bundle
1. Composite Rate Services
2. ESAs and Their Oral Forms
3. Other Drugs and Biologicals and Their Oral Forms
a. Oral-Only ESRD-Related Drugs
b. Other Drugs and Biologicals
4. Diagnostic Laboratory Tests and Other Items and Services
5. Physicians' Services
6. Other Services
7. Home Dialysis Patients (Method I and II) and Self
Dialysis Training
a. Payment for Home Dialysis (Method I and Method II)
i. Method I--The Composite Rate
ii. Method II--Dealing Directly with Suppliers
b. Self-Dialysis Training
B. Unit of Payment
C. Data Sources
1. Patient Claims Data
2. Medicare Cost Reports
3. Patient Claim and Cost Report Summary Data 2006-2008
4. Data for the Case-Mix Analyses, 2006-2008
5. Prescription Drug Event Data, CY 2007, CY 2008, Jan-Sept 2009
D. Analytical Approach
E. Development of ESRD PPS Base Rate
1. Calculation of the CY 2007 Unadjusted Rate per Treatment
a. Composite Rate Services
b. Part B Drugs and Biologicals
c. Laboratory Tests
d. Durable Medical Equipment (DME) and Supplies
e. Dialysis Support Services
f. Supplies and Other Services Billed by Dialysis Facilities
g. Former Part D Drugs
h. Total Medicare Hemodialysis (HD)-Equivalent Sessions
i. Average MAP per Treatment
2. Determining the Update Factors for the Budget-Neutrality
Calculation
a. Composite Rate Services
b. Self-Dialysis Support Services for Method II Patients
c. Part B Drugs And Biologicals
d. Laboratory Tests
e. DME Supplies and Equipment
f. Supplies and Other Services
g. Former Part D Drugs
3. Standardization Adjustment
4. Calculation of the Budget-Neutrality Adjustments
a. Outlier Adjustment
b. 98 Percent Budget-Neutrality Adjustment
5. Calculation of the Transition Budget-Neutrality Adjustment
F. Regression Model Used To Develop Final Payment Adjustment
Factors
1. Regression Analysis
a. Dependent Variables
i. Average Cost per Treatment for Composite Rate Services
ii. Average Medicare Allowable Payment (MAP) for Separately
Billable Services
b. Independent Variables
i. Control Variables
ii. Case-Mix Adjustment Variables
2. Choosing Between a Separately Billable Model Based on
Patient-Year or Patient-Month Data
3. Patient-Level Adjustments
a. Patient Age
b. Patient Sex
c. Body Surface Area and Body Mass Index
d. Onset of Dialysis (New Patient Adjustment)
e. Co-Morbidities
f. ICD-9-CM Coding
g. Race/Ethnicity
h. Modality
4. Proposed Facility-Level Adjustments
a. Wage Index
b. Low-Volume Adjustment
i. Defining a Low-Volume facility
ii. Defining the Percent of Increase
c. Alaska/Hawaii Facilities
d. Rural
e. Site Neutral ESRD PPS Rate
5. Determination of ESRD PPS Payment Adjusters
G. Pediatric Patients
1. The Revised Payment Methodology for the Pediatric Payment
Adjustments
2. Composite Rate Payments for Pediatric Patients
3. Separately Billable Services
4. No Caps Applied to the Separately Billable MAP per Treatment
5. A Combined Composite Rate and Separately Billable Payment
Model for Pediatric Patients
6. Adult Payment Adjustments That Do Not Apply to Pediatric
Patients
H. Outlier Policy
1. Eligibility for Outlier Payment
a. ESRD Outlier Services
b. Predicted ESRD Outlier Services MAP Amounts
c. Estimating the Imputed ESRD Outlier Services MAP Amounts
i. Data Used To Estimate Imputed ESRD Outlier Services MAP
Amounts
ii. Determining Imputed Per Treatment ESRD Outlier Services MAP
Amount
d. Outlier Percentage and Fixed Dollar Loss Amounts
2. Outlier Payments
3. Hypothetical Outlier Payment Examples
4. Application of Outlier Policy During the Transition and in
Relation to the ESA Monitoring Policy, Other Claims Processing
Tools, and Other CMS Policies
I. Comprehensive Payment Model Examples
J. ESRD Bundled Market Basket
K. Implementation
1. Transition Period
a. New ESRD Facilities
b. Limitation on Beneficiary Charges Under the ESRD PPS and
Beneficiary Deductible and Co-Insurance Obligations
2. Claims Processing
a. Consolidated Billing Rules and Edits
i. Laboratory Tests
ii. Drugs and Biologicals
iii. Home Dialysis
b. Expansion of the Data Elements Reported on Claims
3. Miscellaneous Comments
4. Comments Regarding Monitoring
5. Comments Beyond the Scope of This Final Rule
L. Evaluation of Existing ESRD Policies and Other Issues
1. Exceptions Under the Case-Mix Adjusted Composite Payment
System
2. Erythropoiesis Stimulating Agent (ESA) Claims Monitoring
Policy
3. ESRD Facility Network Deduction
4. Bad Debt
5. Limitation on Review
6. 50 Percent Rule Utilized in Laboratory Payments
7. Medicare as a Secondary Payer
8. Conforming Regulation Changes
M. Anemia Management and Dialysis Adequacy Measures
1. Anemia Management Measures: Hemoglobin Less Than 10 g/dL and
Hemoglobin Greater Than 12 g/dL
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2. Hemodialysis Adequacy Measure: Urea Reduction Ratio (URR)
3. Additional Comments
III. Collection of Information Requirements
A. ICRs Regarding a Low-Volume Adjustment (Sec. 413.232(f))
B. ICRs Regarding Transition Period (Sec. 413.239)
IV. Regulatory Impact Analysis
A. Overall Impact
B. Anticipated Effects
1. Effects on ESRD Facilities
2. Effects on Other Providers
3. Effects on the Medicare and Medicaid Programs
4. Effects on Medicare Beneficiaries
C. Alternatives Considered
D. Accounting Statement and Table
E. Conclusion
Regulations Text
Appendix
Acronym List
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:
Act The Social Security Act
ASC Ambulatory surgical center
AV Arteriovenous
BIPA Medicare, Medicaid, and SCHIP (State Children's Health
Insurance Program) Benefits Improvement and Protection Act of 2000
(Pub. L. 106-554)
BMI Body mass index
BSA Body surface area
BLS Bureau of Labor Statistics
CAH Critical assess hospitals
CAPD Continuous ambulatory peritoneal dialysis
CBC Complete blood count
CBSA Core-Based Statistical Area
CCPD Continuous cycling peritoneal dialysis
CDC Centers for Disease Control and Prevention
CFC Conditions for Coverage
CFR Code of Federal Regulations
CKD Chronic kidney disease
CMS Centers for Medicare & Medicaid Services
COLA Cost of living allowance
CPM Clinical performance measure
CR Composite rate
CROWN Consolidated Renal Operations in a Web-Enabled Network
CY Calendar year
DFC Dialysis facility compare
DME Durable medical equipment
EDB Enrollment Data Base
EPO Epoetin alfa
ESA Erythropoiesis stimulating agent
ESRD End-stage renal disease
FI Fiscal intermediary
FY Fiscal year
GAO Government Accountability Office
GI Gastrointestinal
HD Hemodialysis
IDPN Intradialytic parenteral nutrition
IEF Isolated essential facility
IHS Indian Health Service
IPD Intermittent peritoneal dialysis
IPN Intraperitoneal parenteral nutrition
IPPS Inpatient prospective payment system
IQR Interquartile range
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
LPN Licensed practical nurse
LTC Long term care
MAC Medicare Administrative Contractor
MAP Medicare allowable payment
MBR Master beneficiary record
MCP Monthly capitation payment
MCR Medical cost reports
MedPAC Medicare Payment Advisory Commission
MIPPA Medicare Improvements for Patients and Providers Act of 2008
(Pub. L. 110-275)
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (Pub. L. 108-173)
MRSA Methylcyline resistance staphylococcus aurues
MSA Metropolitan Statistical Area
MUE Medically unbelievable edit
NAICS North American Industry Classification Systems
NIH National Institutes of Health
NKF-KDOQI National Kidney Foundation's Kidney Disease Quality
Initiative Clinical Practice Guidelines
NOS Not otherwise specified
NQF National Quality Forum
OMB Office of Management and Budget
OPPS Outpatient prospective payment system
OSCAR Online State Certification and Reporting System
PD Peritoneal dialysis
PDE Prescription drug event
PFS Physician fee schedule
PPI Producer price index
PPS Prospective payment system
PRS Practice-related risk score
PVD Peripheral vascular disease
QIP Quality Incentive Program
REMIS Renal Management Information System
RN Registered nurse
RRB Railroad Retirement Board
RRT Renal replacement therapy
SAF Standard analytical file
SB Separately billable
SDO Small dialysis organization
SIMS ESRD Standard Information Management System
SSA Social Security Administration
UM-KECC University of Michigan, Kidney Epidemiology & Cost Center
URR Urea reduction ratio
USRDS United States Renal Data System
WAC Wholesale acquisition cost
I. Background
A. Overview of the Proposed ESRD PPS
On September 29, 2009, we published in the Federal Register a
proposed rule entitled ``End-Stage Renal Disease Prospective Payment
System'' (74 FR 49922). In that rule, we proposed that the ESRD PPS
would combine payments for composite rate and separately billable
services into a single base rate of $198.64 developed from CY 2007
claims data (74 FR 49944). Under the proposed rule, the base rate would
be adjusted using patient-specific case-mix adjustment factors
developed from separate equations for composite rate and separately
billable services (74 FR 49949). The case-mix adjusters would include
variables for age, body surface area (BSA), low body mass index (BMI),
patient sex, eleven co-morbidity categories, and the onset of renal
dialysis. The proposed adjustment factors were developed using standard
techniques of multiple regression analysis to yield case-mix adjusted
payments per treatment. The per treatment payment amounts would also be
adjusted to reflect urban and rural differences in area wage levels
using an area wage index developed from Core Based Statistical Area
(CBSA) definitions (74 FR 49968). The proposed rule also provided that
ESRD facilities treating patients with unusually high resource
requirements as measured through their utilization of identified
services beyond a specified threshold would be entitled to outlier
payments, that is, additional payments beyond the otherwise applicable
case-mix adjusted prospective payment amount (74 FR 49988). The
proposed ESRD PPS also provided for special adjustments for pediatric
patients (74 FR 49981) and for facilities treating a low-volume of ESRD
patients) 74 FR 49969), as well as a 4-year transition (phase-in)
period under which facilities would receive a blend of payments under
the prior case-mix adjusted composite payment system and the new ESRD
PPS (74 FR 50003). This final rule will implement a case-mix adjusted
bundled PPS for Medicare outpatient ESRD dialysis patients beginning
January 1, 2011, in accordance with the statutory provisions set forth
in section 153(b) of MIPPA.
B. Legislative History and Statutory Authority for the ESRD Prospective
Payment System
Section 299I of the Social Security Amendments of 1972, Public Law
92-603, established the ESRD program under Medicare. That law extended
Medicare coverage to individuals regardless of age who have permanent
kidney failure, requiring either dialysis or kidney transplantation to
maintain life, and meet certain other eligibility criteria.
The enactment of the Omnibus Budget Reconciliation Act of 1981,
Public Law 97-35, resulted in changes to the ESRD payment system.
Section 2145 of Public Law 97-35 amended section 1881 of the Act by
requiring the Secretary to provide by regulation a method for
determining prospectively
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the amounts of payments for dialysis services furnished by providers of
services and renal dialysis facilities to individuals in a facility,
and to such individuals at home. In particular, the law required that
such method be based on a single composite weighted formula
(``composite rate'') (which takes into account the mix of patients who
receive services at a facility or at home and the relative costs for
furnishing such services) for hospital-based facilities and such a
single composite rate for other renal dialysis facilities, or that
payment be based on such other method or combination of methods which
differentiate between hospital-based and other renal dialysis
facilities, and which would more effectively encourage more efficient
delivery of dialysis services and would provide greater incentives for
increased use of home dialysis.
As a result of these statutory requirements, on February 12, 1982,
we published a proposed rule on reimbursement for outpatient dialysis
services (47 FR 6556) to implement section 1881 of the Act, as amended
by section 2145 of Public Law 97-35. The regulations provided that each
facility would receive a payment rate per dialysis treatment
(``composite rate''), that is adjusted for geographic differences in
area wage levels for the treatment furnished in the facility or at
home. We refer to the methodology for payment of outpatient maintenance
dialysis services on a per-treatment basis as the ``composite payment
system''.
Final regulations implementing the composite payment system were
published on May 11, 1983 (48 FR 21254). The initial payment rates,
which were developed from Medicare cost reports for fiscal years ending
in 1977, 1978, and 1979, were established at $127 per treatment for
independent facilities and $131 for hospital-based facilities. The
composite payment system was effective August 1, 1983. It was limited
to payments for the costs incurred by dialysis facilities furnishing
outpatient maintenance dialysis, including some routinely provided
drugs, laboratory tests, and supplies, whether furnished by hospital-
based and independent facilities in a facility or at home. We
established separate rates for hospital-based and independent dialysis
facilities, and provided a process under which facilities with costs in
excess of their payment rates could seek exceptions to those rates
under specified circumstances.
With regard to home dialysis, this system was the basis for
reimbursing home dialysis furnished by hospital-based and independent
facilities (Method I). (The other is Method II, under which the
beneficiary works directly with a durable medical equipment (DME)
supplier to obtain the supplies and equipment needed.) For further
information on the distinctions between Method I and Method II, see
section II.A.7. of this final rule.
The composite payment system implemented in 1983 was relatively
comprehensive with respect to the renal dialysis services included as
part of the composite payment bundle. However, over time a substantial
portion of expenditures for renal dialysis services became excluded
from the composite payment system and reimbursed in accordance with the
respective fee schedules or other payment methodologies. For example,
payments for erythropoiesis stimulating agents (ESAs) such as epoetin
alfa (EPO, for example, Epogen[supreg]) and darbepoetin alfa
(ARANESP[supreg]) used to treat anemia, and vitamin D analogues
(paracalcitol, doxercalciferol, calcitriol), are made outside of the
composite payment system as separately billable services. These
separately billable services currently comprise about 40 percent of
total spending for outpatient maintenance dialysis. Thus, the current
payment for outpatient maintenance dialysis under Medicare represents a
mix of prospective payment, fee-for-service, and other payment rules.
Subsequent inflation increases to the composite payment system
occurred only in response to specific statutory directives. For
example, between 1983 and 2001, the payment rates were increased only
three times. A $1.00 increase per treatment was effective January 1,
1991 as a result of the enactment of the Omnibus Budget Reconciliation
Act of 1990, Public Law 101-508. The rates were not revised again until
the enactment of the Medicare, Medicaid, and SCHIP Balanced Budget
Refinement Act of 1999, Public Law 106-113, which increased the
payments by 1.2 percent effective January 1, 2000 and January 1, 2001,
respectively.
During the last few years, policymakers and other interested
parties, including the Medicare Payment Advisory Commission (MedPac)
and the Government Accountability Office (GAO), have examined the
Medicare outpatient maintenance dialysis payment system and suggested a
bundled prospective payment approach. See Medicare Payment Advisory
Commission (MedPAC): Report to the Congress: Medicare Payment Policy,
March 2001, March 2005, and March 2007, and GAO Report GAO-07-77, End
Stage Renal Disease: Bundling Medicare's Payment for Drugs with Payment
for All ESRD Services Would Promote Efficiency and Clinical
Flexibility, November 2006. The ESRD PPS would combine composite rate
dialysis services with separately billable services under a single
payment, adjusted to reflect patient differences in resource needs or
case-mix. As in any PPS, dialysis facilities would keep the difference
if Medicare payments exceeded costs for the bundled services, and would
be liable for the difference if costs exceeded Medicare payments.
Aside from resulting in a single comprehensive payment for all
services included in the bundle, we believe the ESRD PPS would meet
several objectives. These include reducing incentives to overuse
profitable separately billable drugs, particularly EPO, the targeting
of greater payments to ESRD facilities with more costly patients to
promote both equitable payment and access to services, and the
promotion of operational efficiency. Because of the increased
flexibility a bundled PPS would provide in the delivery of outpatient
maintenance dialysis services, we believe that it could also increase
desirable clinical outcomes, resulting in an enhanced quality of care.
The Congress has twice required studies on the bundling of
additional services into the composite payment system. In section
422(c)(2) of the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA), Pub. L. 106-554, the Congress required
the Secretary to issue a report on a bundled system that would include
separately billable drugs and clinical laboratory services routinely
used in furnishing dialysis. The Secretary submitted this report,
Toward a Bundled Outpatient Medicare End Stage Renal Disease
Prospective Payment System, to Congress in May 2003. That report
contained three major findings that would form the basis for the
subsequent development of the ESRD PPS:
1. Currently available administrative data are adequate for
proceeding with the development of an expanded outpatient ESRD PPS.
2. Case-mix adjustment is potentially feasible based on available
clinical information for ESRD patients in order to pay facilities
appropriately for treating more costly resource intensive patients.
3. Current quality review initiatives provide a basis for
monitoring the impact of a bundled ESRD PPS after implementation, to
ensure quality of
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care does not deteriorate in response to the system's efficiency
incentives.
The Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (MMA), Public Law 108-173, also required the Secretary to
submit to the Congress a report detailing the elements and features for
the design and implementation of a bundled ESRD PPS. Section 623(f)(1)
of the MMA specified that such a system should include the bundling of
separately billed drugs, clinical laboratory tests, and other items
``to the maximum extent feasible''. That section also required the
report to include a description of the methodology to be used to
establish payment rates and that the report, detailing the design of an
appropriate bundled payment system, be submitted to the Congress by
October 1, 2005. Section 623(e) of the MMA also required a
demonstration project testing the feasibility of using a fully bundled
case-mix adjusted ESRD PPS.
In addition to requiring a report on a bundled ESRD PPS, section
623 of the MMA amended section 1881(b) of the Act, by requiring
significant revisions to the composite payment system. Specifically,
section 623 of the MMA required:
An increase of 1.6 percent to the composite payment rates
effective January 1, 2005.
An add-on to composite rate payments to account for the
difference in payments for separately billable drugs based on a revised
drug pricing methodology compared to the previous method.
A ``basic'' case-mix adjustment to an ESRD facility's
composite payment rate reflecting a ``limited number of patient
characteristics.''
That total payments under the basic case-mix adjusted
composite payment system be budget neutral.
An annual increase to the basic case mix adjusted payment
amounts based on projected growth in expenditures for separately billed
drugs (the ``growth update'').
That payment rates be adjusted by a geographic index, as
determined appropriate by the Secretary (and phased-in to the extent
such index differed from the previous payment system).
Reinstatement of the composite rate exceptions process,
eliminated for most dialysis facilities beginning December 31, 2000
under BIPA, for ESRD pediatric facilities, effective October 1, 2002.
On August 5, 2004 and November 15, 2004, we published a proposed
rule and final rule (69 FR 47487 through 47730 and 69 FR 66235 through
66915), respectively, implementing the provisions affecting the
composite payment system effective January 1, 2005, as set forth in
section 623 of the MMA. We refer to the modified composite payment
system as the ``basic case-mix adjusted composite payment system''. The
development and application of the basic case-mix adjustments, using
regression based adjustment factors for the patient variables of age,
BMI, and low BMI, are explained in each of those rules. (For more
information, we refer readers to 69 FR 47529 and 69 FR 66323,
respectively.) The product of the specific adjusters for each patient,
multiplied by the otherwise applicable composite payment rate, yielded
the basic case-mix adjustment required by the MMA. The basic case-mix
adjusted composite payment system was effective April 1, 2005, and was
developed from research conducted by the University of Michigan Kidney
Epidemiology and Cost Center (UM-KECC) and summarized in its report,
Methodology for Developing a Basic Case-Mix Adjustment for the Medicare
ESRD Prospective Payment System (May 19, 2004 report and April 1, 2005
addendum).
Subsequent to our implementation of the MMA requirements discussed
above, UM-KECC continued its research to develop a case-mix adjusted
ESRD PPS that would combine composite rate and separately billable
services. UM-KECC reported its findings and recommendations in a final
report submitted to CMS in February 2008, End Stage Renal Disease
Payment System: Results of Research on Case-Mix Adjustment for an
Expanded Bundle. That report is available on the internet at: http://www.sph.umich.edu/kecc/assets/documents/UM-KECC%20ESRD%20Bundle%20Report.pdf. UM-KECC's final report formed the
basis for the Secretary's February 2008 Report to Congress, A Design
for a Bundled End Stage Renal Disease Prospective Payment System,
mandated under section 623(f)(1) of the MMA.
The aspects of the basic case-mix adjusted composite payment system
implemented as a result of section 1881(b)(12) of the Act are important
because they provide a foundation for the development of the case-mix
adjusted bundled ESRD PPS required under Public Law 110-275, the
Medicare Improvements for Patients and Providers Act of 2008 (MIPPA).
The basic case-mix adjustment mandated under the MMA is described in
detail in the next section and only affects the composite rate. It does
not reflect costs associated with separately billable services.
Separately billable services, particularly injectable drugs, are a
significant component of the total dialysis resources used for each
patient.
The implementation of the basic case-mix adjustments to the
composite payment system effective April 1, 2005, and the Secretary's
February 2008 Report to Congress, suggested that a bundled ESRD PPS
which combined composite rate and separately billable services to yield
case-mix adjusted payments was technically feasible. The report defined
a payment bundle of dialysis-related services, described the
methodology used to develop the regression based case-mix adjusters and
the base period payment rates to which the case-mix adjusters would be
applied, and discussed numerous other issues relevant to the bundling
of outpatient dialysis services under a system of prospective payments.
As a result of the July 15, 2008 enactment of MIPPA, section 153(b)
of MIPPA amended section 1881(b) of the Act to require the
implementation of an ESRD bundled payment system effective January 1,
2011 (herein referred to as the ``ESRD PPS''). Consistent with the
language under the statute, we will refer to hospital-based and
independent renal dialysis facilities as ``providers'' and
``facilities'', respectively, and when addressing both types of
facilities, we will collectively refer to such entities as ``ESRD
facilities'', as set forth in Sec. 413.171. Section 153(b) of MIPPA
specifies the following:
The Secretary must implement a payment system under which
a single payment is made to a provider of services or a renal dialysis
facility for ``renal dialysis services'' in lieu of any other payment,
and for such services and items furnished for home dialysis and self-
care home dialysis support services.
A definition for the ``renal dialysis services'' that are
included in the payment bundle.
The estimated amount of total payments under the ESRD PPS
for 2011 must be equal to 98 percent of the estimated total amount of
payments for renal dialysis services paid under Medicare, including
payments for drugs, that would have been made with regard to services
in 2011 if the new system was not implemented. Such estimate must be
made based on per patient utilization data from 2007, 2008, or 2009,
whichever year has the lowest per patient utilization.
The ESRD PPS must include adjustments for case-mix
variables, high cost outlier payments, and low-volume facilities and
provide for a four-year transition (phase-in) period, with all
facilities transitioned into the ESRD PPS
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on January 1, 2014. ESRD facilities may make a one-time election before
January 1, 2011, to be paid under the ESRD PPS and not go through the
transition period.
The ESRD PPS may include other payment adjustments, as the
Secretary determines appropriate, including the use of a geographic
index, and potential adjustments for pediatric patients and rural ESRD
facilities, and may provide for a unit of payment as the Secretary
specifies (for example, per treatment or per unit of time).
The ESRD PPS payment amounts must be annually increased by
an ESRD bundled market basket beginning in 2012, and during the
transition.
Section 623(e) of the MMA, which requires a demonstration
project of the use of a case-mix adjusted bundled ESRD PPS, was
repealed.
Section 153(a)(1) of MIPPA also requires that the composite payment
rates be increased by 1.0 percent effective for services furnished on
or after January 1, 2009, and before January 1, 2010, and increased by
1.0 percent for services furnished on or after January 1, 2010. In
addition, section 153(a)(2) of MIPPA requires that the payment rate for
dialysis services furnished on or after January 1, 2009, by ESRD
providers of services, be the same as the payment rate for such
services furnished by renal dialysis facilities. On November 19, 2008,
we published the CY 2009 Physician Fee Schedule final rule (73 FR
69754), implementing the site neutral composite rate for ESRD
facilities and the CY 2009 1.0 percent increase to the composite rate.
On November 25, 2009, we published in the Federal Register the CY 2010
1.0 percent increase to the composite rate in the CY 2010 Physician Fee
Schedule final rule (74 FR 61901).
In the following sections of this final rule, we describe the ESRD
PPS we are implementing effective January 1, 2011, in compliance with
the statutory requirements of MIPPA, and in response to the comments
received in connection with the proposed rule published September 29,
2009.
C. Existing Basic Case-Mix Adjustments
Resources required to furnish routine dialysis such as staff and
equipment time vary by patient. Because of the variation in resources
required to furnish routine dialysis to individuals with varying
patient characteristics, facilities that treat a greater than average
proportion of resource-intensive patients could be economically
disadvantaged if they are paid a rate based on average resources. In
addition, patients who are costlier than average to dialyze may face
difficulties gaining access to care because a fixed composite payment
rate could create a disincentive to treat such patients. The purpose of
a case-mix adjustment based on patient characteristics is to make
higher payments to ESRD facilities treating more resource-intensive
patients, according to objective quantifiable criteria.
The costs of providing the routine maintenance dialysis services
that are paid under the composite rate are reported on the Medicare
cost reports for hospital-based and independent ESRD facilities (Forms
CMS 2552-96 and CMS 265-94, respectively). In order to determine a
basic case-mix adjustment that could be applied to each ESRD facility's
composite rate, UM-KECC further examined the relationship between
facility-level costs for composite rate services based on the Medicare
cost reports for hospital-based and independent facilities, and the
average characteristics of patients treated by the facility. The
research used data from Medicare cost reports for 3,254 ESRD facilities
for 2000 to 2002, patient characteristics/co-morbidity data from CMS's
Medical Evidence Form 2728 (Form 2728) for 1995 through 2002, and
Medicare claims for approximately 360,000 ESRD patients. Based on
standard techniques of multiple regression analysis, UM-KECC found that
age and body size had significant relationships to composite rate
costs. The body size variables were BSA and low BMI, calculated based
on a patient's height and weight which is reported on Medicare claims.
A BMI less than 18.5 kg/m\2\ is considered a clinical measure of
underweight status and is an indicator of patients who are malnourished
or suffering from co-morbidities such as wasting syndrome. BSA is
closely associated with the duration and intensity of dialysis required
to achieve targets for dialysis adequacy. Facilities with a larger
proportion of patients with a greater than average BSA, or with a BMI
lower than 18.5, were found to have greater composite rate costs. The
research also revealed a U-shaped relationship between age and
composite rate costs, with the youngest and oldest age groups incurring
greater costs for composite rate services due to resource needs.
The outcome of UM-KECC's research was a set of basic case-mix
adjusters or multipliers for ESRD patients based on three variables.
These variables were: (1) The patient's age (five groups), (2) BSA (a
patient-specific value based on incremental differences from the
national patient average), and (3) BMI category (two groups, value
either less than, or equal to/greater than 18.5 kg/m\2\). CMS also
developed a special adjuster for pediatric patients outside of UM-
KECC's research methodology based on analysis of a sample of Medicare
cost reports. The adjuster for each of these three variables is
multiplied by the facility's composite rate to yield the current
``basic'' case-mix adjustment for each ESRD patient according to the
specified patient characteristics.
These adjusters are as follows:
[[Page 49035]]
[GRAPHIC] [TIFF OMITTED] TR12AU10.008
The above multipliers were derived from the coefficients of the
regression model used to predict facility differences in composite rate
costs based on UM-KECC's research. For example, the case-mix adjuster
for a 47 year old ESRD patient who is underweight (BMI < 18.5 kg/m\2\)
and has a BSA of 2.0 m\2\ would be calculated as follows:
Age Adjuster 1.055
BSA Adjuster 1.037(2.0-1.84)/0.1 = 1.060
Low BMI Adjuster 1.112
Case-Mix Adjuster 1.055 x 1.060 x 1.112 = 1.244
The resulting case-mix adjustment factor of 1.244 for this patient
would be multiplied by the facility's otherwise applicable wage
adjusted composite payment rate.
The basic case-mix adjustment mandated under the MMA only affects
the composite rate. It does not reflect costs associated with
separately billable services. Separately billable services,
particularly injectable drugs, are a significant component of the total
dialysis resources used for each patient. Prior to the enactment of
MIPPA on July 15, 2008, however, CMS did not have authority to bundle
those services into a case-mix adjusted PPS.
II. Summary of the Proposed Provisions and Responses to Comments on the
Proposed Rule
The proposed rule was published in the Federal Register on
September 29, 2009 with a comment period that ended on November 16,
2009 (74 FR 49922). We received approximately 1475 public comments,
including comments resulting from a large write-in campaign regarding
oral Part D drugs. Interested parties that submitted comments included
numerous dialysis facilities, the national organizations representing
dialysis facilities, nephrologists, and patients, the major chain
facilities, clinical laboratories, pharmaceutical manufacturers,
hospitals and their representatives, individual dialysis patients, and
MedPAC. Following publication of the proposed rule, we received several
requests to extend the comment period to allow time for stakeholders to
understand the proposed ESRD payment changes and to formulate comments
that would be meaningful to CMS. On November 4, 2009 we published a
notice (74 FR 57127) in the Federal Register extending the public
comment period an additional 30 days to December 16, 2009, to provide
additional time for the public to examine the proposed rule and provide
meaningful comments on its provisions. In this final rule we provide a
summary of each proposed provision, a summary of the public comments
received, our responses to them, and any changes to the proposed ESRD
PPS we are implementing in this final rule as a result of comments
received. Below we address general comments received regarding the
proposed rule.
Comment: Clinicians, health systems, medical supply companies,
patients, and hospital-based and independent ESRD facilities from
small, medium, and large dialysis organizations requested that rather
than proceeding by issuing a final rule, CMS issue its next public
notice as an interim final rule with an additional opportunity for
public comment prior to the implementation deadline. Commenters
provided several reasons for this position including:
A lack of clarity and specificity with regard to the
proposals in the proposed rule will make implementation difficult and
compromise ESRD facilities' viability. Specifically, operational
questions remain unanswered such as the way in which billing for
laboratory tests would occur during the transition, the way in which
medical history would be retrieved for purposes of the co-morbidity
adjustments, and the way in which ESRD facilities would provide
patients with oral drugs. Commenters noted that absent additional
clarification in these areas it would be difficult to implement the
provisions of the ESRD PPS in the short timeframe between the expected
publication of a final rule and its implementation on January 1, 2011.
A lack of transparency with regard to the data used in
developing the proposed rule. Specifically, some commenters noted that
they did not have access to Part D data or CMS' rate setting data file
that would have facilitated their ability to fully analyze the impact
of the ESRD PPS.
The absence of administrative or judicial reviews, a
feature mandated by MIPPA, would mean there would be an inability to
challenge payment making it
[[Page 49036]]
even more important that the provisions of the final ESRD PPS rule are
correct.
The additional time associated with issuing an interim
final rule would help bring to light inequities between ESRD provider
types and the level of owned service lines including laboratory,
pharmacy, equipment and supplies.
Concern about the potential for unintended patient and
provider consequences that may result from the ESRD PPS and believed
that issuing an interim final rule would reduce this risk by allowing
additional time to address stakeholder concerns.
Response: We understand the commenters' interest in ensuring that
potential unintended negative consequences associated with the new ESRD
PPS are minimized. However, we believe that we have adequately
reflected the essential elements of the ESRD PPS in the proposed rule
including basic issues associated with implementing the system and have
received a comprehensive collection of public comments from a wide
array of stakeholders to which we have responded in this rule.
Specifically, as noted in section II.K.2. of this final rule, we have
clarified the way in which provider billing for laboratory tests would
occur during the transition. We have also clarified our position with
respect to co-morbidity adjustments and their associated administrative
burden in section II.F.3. of this final rule. As noted in section
II.K.2. of this final rule, we have addressed implementation issues
associated with ESRD facility provision of oral drugs.
With regard to the lack of transparency in sharing the data that
was used in developing the ESRD PPS proposed rule, we note that the
files to which commenters refer contain patient-specific data. To
maintain patient confidentiality and privacy we are unable to share
such data. However, we posted detailed information by facility which
was used for purposes of assessing facility-level impact.
In addition, we note that following publication of the ESRD PPS
proposed rule, we posted the CY 2011 Proposed Rule ESRD PPS Facility
Level Impact File to the ESRD Payment Web site (http://www.cms.hhs.gov/ESRDPayment/PAY/itemdetail.asp?filterType=none&filterByDID=99&sortByDID=4&sortOrder=descending&itemID=CMS1228517&intNumPerPage=10). This file includes facility
level data that was used by CMS to assess the impact of the proposed
ESRD PPS.
Given that we have issued a proposed rule containing a detailed
proposal for an ESRD PPS, allowed for an extended 90-day public comment
period, and carefully considered the comments received, we believe that
a final rule is appropriate. In addition, because of the January 1,
2011 implementation deadline mandated by MIPPA, we believe that
finalizing the rule now will maximize the amount of time ESRD
facilities will have to implement the provisions of this rule prior to
the implementation deadline. For these reasons we are issuing this
document as a final rule.
A. The Proposed ESRD PPS Bundle
Section 1881(b)(14)(A)(i) of the Act, as added by section 153(b) of
MIPPA, specifies that the ESRD PPS must represent a single payment to
ESRD facilities for ``renal dialysis services'' in lieu of any other
payment, and home dialysis supplies, equipment, and support services
furnished pursuant to section 1881(b)(4) of the Act. Section
1881(b)(14)(B) of the Act, which identifies the renal dialysis services
that are to be included in the ESRD PPS payment bundle, provides the
following:
* * * the term ``renal dialysis services'' includes--
(i) Items and services included in the composite rate for renal
dialysis services as of December 31, 2010;
(ii) Erythropoiesis stimulating agents and any oral form of such
agents that are furnished to individuals for the treatment of end
stage renal disease;
(iii) Other drugs and biologicals that are furnished to
individuals for the treatment of end stage renal disease and for
which payment was(before application of this [new ESRD PPS]) made
separately under this title, and any oral equivalent form of such
drug or biological; and
(iv) Diagnostic laboratory tests and other items and services
not described in clause (i) that are furnished to individuals for
the treatment of end stage renal disease.
1. Composite Rate Services
Section 1881(b)(14)(B)(i) of the Act requires that the ESRD PPS
payment bundle include composite rate services. As we indicated in the
proposed rule, the current case-mix adjusted composite payment system
represents a limited PPS for a bundle of outpatient renal dialysis
services that includes maintenance dialysis treatments and all
associated services including historically defined dialysis-related
drugs, laboratory tests, equipment, supplies and staff time (74 FR
49928). Therefore, consistent with the statute, we proposed to include
the items and services included in the composite rate for renal
dialysis services as of December 31, 2010, (including self-dialysis
training services), such as labor, supplies, and equipment.
We proposed to define composite rate services at proposed Sec.
413.171. We also proposed that the composite rate services would not
only include payments for the costs of services directly related to
dialysis, but would also include payments authorized in accordance with
the composite payment rate exception provisions set forth in 42 CFR
413.180 through 413.186 (74 FR 49928). The costs for such composite
rate services were included in our computation of the proposed ESRD PPS
base rate, as explained in section II.E. of this final rule, as well as
in the development of the proposed composite rate regression model used
to create the two equation patient specific case-mix adjusters that
would be applied to the base rate. We did not receive any public
comments on our proposed inclusion of the renal dialysis services
currently covered under the composite payment system for inclusion
under the bundled ESRD PPS. Therefore, we are finalizing our definition
of composite rate services as renal dialysis services as proposed in
Sec. 413.171.
2. ESAs and Their Oral Forms
Section 1881(b)(14)(B)(ii) of the Act requires that ESAs and any
oral form of such agents that are furnished to individuals for the
treatment of ESRD be included in the ESRD PPS payment bundle. We
proposed that payments for injectable ESAs, (for example,
Epoetin[supreg] and ARANESP[supreg]) would be included in the
calculation of the proposed ESRD PPS base rate, as well as in the
separately billable regression model used to create the two equation
patient specific case-mix adjusters for the proposed ESRD PPS (74 FR
49928). Therefore, consistent with our interpretation of the statute,
we proposed that no additional payment would be provided for ESAs and
their oral forms outside of the bundle of renal dialysis services
included in the ESRD PPS. We also noted that oral versions of ESAs do
not currently exist, but we further proposed that to the extent oral
forms are approved after the implementation of the ESRD PPS, those
drugs would be paid under the ESRD PPS (74 FR 49928). We set forth
provisions regarding the inclusion of ESAs and their oral forms as
renal dialysis services in the ESRD PPS payment bundle at proposed
Sec. 413.171.
We received a few comments regarding our proposal to bundle ESAs
and those comments are addressed below.
Comment: Some commenters expressed concern that bundling drugs
[[Page 49037]]
will restrict nephrologists' ability to prescribe necessary
medications. One commenter stated that including medications like EPO
and oral medications will limit nephrologists from prescribing what is
necessary.
Response: We believe that the ESRD PPS will establish a bundled
payment system based on the average cost of care with adjustments that
target more payment to more resource intensive ESRD patients. In
situations where costs for treating patients exceed an established
threshold, the outlier policy would apply. The outlier policy is
discussed in detail in section II.F.4. of this final rule. We expect
that ESRD facilities and health care providers will continue to
advocate on behalf of patients who require more than the average
utilization of ESRD-related items and services. We note that the
responsibility for determining the appropriateness of medical care
resides with the ESRD facility, physicians, and the interdisciplinary
team as stipulated by the ESRD Conditions for Coverage. Under Sec.
494.90, an ESRD facility would be out of compliance if it did not meet
the patient's documented needs as shown in the patient plan of care.
Comment: Several commenters expressed concern that the inclusion of
ESAs in the payment bundle will result in dialysis facilities
decreasing the amounts of EPO given to patients, resulting in an
increase in blood transfusions for anemia management, and increased
stress on the nation's blood supply.
Response: Section 1881(b)(14)(B)(ii) of the Act requires that ESAs
be included in the ESRD PPS. While the inclusion of any item or
dialysis service in the payment bundle provides an incentive for
dialysis facilities to maximize profits by skimping on the provision of
that item or service, we point out that an important part of our
Quality Incentive Program (QIP) is the monitoring of hemoglobin levels
among dialysis patients to ensure that target levels are met, and that
anemia management does not deteriorate under the ESRD PPS (see section
II.M. of this final rule). We also plan to monitor the incidence of
transfusions among dialysis patients subsequent to the implementation
of the PPS to ensure that blood transfusions do not replace effective
anemia management with ESAs as a result of the system's payment
incentives. More information about monitoring efforts planned due to
the implementation of the ESRD PPS appears in section II.L. of this
final rule and in future issuances.
Comment: A few commenters opposed the inclusion of EPO or
intravenous iron in the bundle, claiming that if included, there will
be a decrease in the use of these drugs resulting in decreased
hemoglobin levels, necessitating more in-hospital blood transfusions.
Another commenter stated that bundling would result in a shift to
subcutaneous administration of ESAs with additional needle sticks,
decreases in hemoglobin levels, and an increase in transfusions.
Several commenters cited the USRDS 2008 Annual Data report as showing a
large decrease in the use of red blood cell transfusions since 1992.
One commenter questioned how patients will obtain EPO as it is
expensive. One commenter referenced National Kidney Foundation (NKF)
guidelines to support their statement that ``intravenous iron is * * *
more efficacious at helping patients maintain adequate iron levels in
clinical studies of patients * * * undergoing hemodialysis and
therefore is generally the preferred recommended therapy.'' Another
commenter claimed, based on their analysis of two patients'
reimbursement under the proposed ESRD PPS, that their facility would
face significant financial loss, especially for those receiving large
doses of EPO. Some commenters suggested that we include only
intravenous ESAs. One commenter stated that ESRD-related intravenous
drugs include those used in the treatment of anemia, and therefore,
their oral equivalents should be included in the bundle.
Response: We have no authority to exclude ESAs from the ESRD PPS
bundled payment. As we explained in the proposed rule (74 FR 49928),
section 1881(b)(14)(B)(ii) of the Act requires that ESAs and any oral
form of such agents that are furnished to individuals for the treatment
of ESRD be included in the ESRD PPS payment bundle. We explained that
the payments for injectable ESAs (for example Epoetin alfa
(Epogen[reg]) and darbepoetin (ARANESP[reg]), which are separately
payable outside of the current basic case-mix adjusted composite
payment system, would be included in the calculation of the proposed
ESRD PPS base rate. We also noted in the proposed rule that while we
were currently unaware of any other injectable ESAs or oral forms of
such ESAs used for the treatment of ESRD, if any such agents would
become available subsequent to the implementation of the ESRD PPS on
January 1, 2011, they would be considered renal dialysis services and
subject to payment under the ESRD PPS (74 FR 49928). We are not aware
that a shift to subcutaneous administration of ESAs from intravenous
administration will lead to decreases in hemoglobin levels and
increases in transfusions.
Although several commenters suggested that ESRD beneficiaries may
be denied appropriate and necessary treatment because of the perceived
negative financial impact of the ESRD bundled payment system, we point
out that section 1881(b)(14)(B)(ii) is clear in requiring that ESAs and
any oral forms of ESAs must be included in the ESRD PPS payment bundle.
In addition, as discussed in section II.M. of this final rule, we will
monitor anemia management as part of the ESRD QIP.
Comment: Several commenters expressed concern that the bundling of
ESAs poses a financial disincentive for adequate anemia management, and
will lead to the maintenance of hemoglobins at the lowest possible
level, resulting in worse outcomes for patients.
Response: Section 1881(b)(14)(B)(ii) of the Act is very clear in
requiring that ESAs and any oral equivalent forms of ESAs furnished for
the treatment of ESRD must be included in the ESRD PPS payment bundle.
We have no discretion with respect to their inclusion or exclusion.
We do not understand the commenters' conclusion that maintaining
hemoglobins at the least possible level will result in worse patient
outcomes. We expect ESRD facilities to provide the appropriate
medications at the appropriate dosage to maintain patient hemoglobins
at the required level. We note that we will be closely monitoring the
anemia management of ESRD patients subsequent to the implementation of
the ESRD PPS as part of CMS's QIP.
Therefore, after considering the public comments and for the
reasons stated above, we are not making changes to the proposed
Medicare regulation at Sec. 413.171 and are finalizing the inclusion
of ESAs and their oral forms as renal dialysis services in the ESRD PPS
payment bundle.
3. Other Drugs and Biologicals and Their Oral Forms
Section 1881(b)(14)(B)(iii) of the Act specifies that other drugs
and biologicals that were furnished to individuals for the treatment of
ESRD and for which payment was made separately under this title, prior
to the implementation of the ESRD PPS, and their oral equivalent forms,
must be included in the ESRD PPS payment bundle. In the proposed rule,
we noted the reference to ``this title,'' in the statutory language,
and we interpreted clause (iii) as requiring the inclusion in the ESRD
PPS payment bundle of all drugs and biologicals that were
[[Page 49038]]
separately payable under title XVIII of the Act prior to the
implementation of MIPPA (74 FR 49928). We proposed at Sec. 413.171
that drugs and biologicals used to treat ESRD that were separately
payable prior to January 1, 2011, be included as part of the proposed
ESRD PPS payment bundle (74 FR 50022). Accordingly, we proposed to
include such drugs and biologicals in the development of the proposed
patient-specific case-mix adjusters and in the calculation of the
proposed ESRD base rate to which the adjusters would be applied. In the
proposed rule, we identified the top eleven injectable drugs furnished
to Medicare ESRD beneficiaries which we proposed to include in the
payment bundle (See Table 8 at 74 FR 49940). Table 8 also contained a
category of miscellaneous other injectable drugs, as well as a line
item reflecting other services furnished by ESRD facilities. The
identification and treatment of these other injectable drugs and
services are addressed in later in this section.
We identified specific National Drug Codes (NDCs) for drugs and
biologicals previously payable under Part D that we proposed to include
in the payment bundle. However, we proposed that the ESRD PPS would
apply, regardless of the emergence of new drugs or biologicals or
different NDCs for the classes of drugs and biologicals included in the
ESRD PPS bundle. Finally, we noted that section 1881(b)(14)(B) of the
Act specifically excludes vaccines from the payment bundle and,
therefore, we did not include vaccines in the proposed ESRD PPS. We
requested comments on our proposals above.
We received numerous public comments related to inclusion of ESRD-
related injectable drugs and biologicals; the inclusion of oral
equivalents of ESRD injectable drugs; and the inclusion of oral-only
ESRD-related drugs (that is, drugs for which there is no injectable
equivalent or other form of administration) currently paid under Part D
in the payment bundle. Most of the commenters were opposed to the
inclusion of all oral drugs and biologicals, claiming that their
inclusion would lead to poorer patient outcomes because the proposed
amount per treatment of $12.47 reflected in the calculation of the base
rate (Table 8 at 74 FR 49940) was claimed to be inadequate to cover the
average cost of these drugs. The comments received are summarized
below.
a. Oral-Only ESRD-Related Drugs
Comment: Several commenters agreed with CMS that clause (iii) of
section 1881(b)(14)(B) of the Act can be interpreted broadly to
encompass all drugs furnished to individuals for the treatment of ESRD,
including oral drugs. In particular, the commenters did not interpret
the subsequent reference to ``any oral equivalent form of such drug or
biological'' as limiting the scope of oral drugs that may be included.
Another commenter stated that one possible interpretation of MIPPA
gives CMS authority to broaden the bundle to include former Part D oral
drugs. Finally, another commenter strongly endorsed the agency's
proposal to include all ESRD-related drugs and concurred with CMS's
rationale and statutory interpretation set forth in the proposed rule.
In particular, the commenter stated that the plain language of the
statute with respect to clauses (iii) and (iv) gave CMS clear authority
to include ESRD drugs, regardless of the route of administration,
agreeing with the agency's interpretation of the reference to the word
``title'', and also noting that the phrase ``other drugs and
biologicals'' included no qualifier that would limit clause (iii) to
only separately reimbursable injectable drugs.
Response: We appreciate the comments on our proposal to bundle
oral-only drugs, which support our interpretation of the statute.
Comment: One commenter suggested that CMS implement an expeditious
appeals process for physicians to challenge payment for drugs that may
be excluded from dialysis companies' formularies.
Response: ESRD facility formularies are beyond the scope of this
final rule. However, we expect ESRD facilities to provide the
appropriate medications, at the appropriate dosage, based upon
individual patient needs. We expect the patient's nephrologist and the
interdisciplinary team to identify medication needs in accordance with
the individual patient's plan of care.
Comment: Many comments indicated that CMS's decision to include
oral drugs with no injectable equivalent (``oral-only'' drugs) within
the statutory definition of ``renal dialysis services'' represents a
misreading of statutory intent and violates principles of statutory
construction. One commenter asserted that CMS's inclusion of oral-only
drugs in the ESRD PPS appeared to hinge entirely on the reference to
the words ``this title'' under section 1881(b)(14)(B)(iii) of the Act.
The commenter stated that this interpretation represented too narrow a
reading of the statute, and was inconsistent with the intended meaning
of ``this title'' set forth elsewhere in section 1881 of the Act. Other
commenters stated that CMS's reasoning that the use of ``this title''
in section 1881(b)(14)(B)(iii) of the Act means that all ESRD drugs
payable under title XVIII of the Act must be included in the payment
bundle, including drugs payable under Part D, represents a selective
reading of the statute, and that the more appropriate approach is to
read the language as a whole. The commenters asserted that the entirety
of section 1881(b) of the Act focuses on payments to ESRD facilities,
and that the four categories of renal dialysis services specified in
section 1881(b)(14)(B) of the Act only pertain to services furnished
for which payment is made to ESRD facilities.
A few commenters compared references to ``this title'' in other
subparagraphs of section 1881(b) of the Act and argued that our prior
implementation of payment to dialysis facilities did not include oral-
only drugs when the same reference to ``this title'' was used, stating
that the reference has been interpreted previously to mean separately
billable Part B drugs (with separate payment to dialysis facilities).
Consequently, commenters claimed that such oral-only products do not
fall within clause (iii) because they are not separately billable Part
B drugs (which are limited to those products that cannot be self-
administered by a patient and must be furnished in the facility by
staff), and are not oral equivalents of separately billable drugs.
Commenters claimed that because the oral-only drugs (calcimemetics and
phosphate binders) proposed for inclusion in the ESRD PPS payment
bundle are currently dispensed by a pharmacy for home use, are not
furnished by ESRD facilities, and are not the oral equivalent of an
injectable drug under clause (iii), such drugs must be excluded from
the bundle. Therefore, these commenters maintained that inclusion of
such oral-only drugs in the expanded bundle under the proposed ESRD PPS
is inappropriate. Although most commenters opposed the inclusion of
former Part D drugs, several stated that there appeared to be
sufficient statutory support for including them.
Response: We agree that section 1881(b) of the Act addresses
payments to dialysis facilities for dialysis services furnished
Medicare ESRD beneficiaries, either directly by the facility, by a
supplier (for example, DMEPOS supplier), or under arrangement (for
example, clinical laboratory). However, in our view, the intent of
section 1881(b)(14)(B) of the Act was not to limit the renal dialysis
services included in the ESRD PPS payment bundle to services for which
only ESRD
[[Page 49039]]
facilities are currently paid. Clause (iii) of that section specifies
that drugs and biologicals for which separate payment is made, and
their oral equivalents, must be included in the bundle as renal
dialysis services. We have interpreted clause (iii) as encompassing not
only injectable drugs and biologicals (other than ESAs, which are
included under clause (ii)) used for the treatment of ESRD, but also
all non-injectable drugs furnished under Title XVIII. Under this
interpretation, the ``any oral equivalent form of such drug or
biological'' language pertains to the oral versions of injectable drugs
other than ESAs. All other ESRD-related drugs and biologicals,
regardless of the route of administration, are addressed by the ``other
drugs * * * under this title'' portion of clause (iii). We disagree
with the commenters' argument that we have incorrectly expanded the
scope of clause (iii) to include drugs and biologicals based on an
inconsistent interpretation of ``this title'' as used elsewhere in the
Act. Accordingly, we continue to believe that the entirety of clause
(iii) gives us sufficient statutory authority to include all ESRD-
related drugs and biologicals, regardless of whether they are furnished
by a dialysis facility, under the ESRD PPS payment bundle.
Another issue is whether the ``other items and services'' language
in clause (iv) of section 1881(b)(14)(B) of the Act encompasses oral-
only drugs furnished for the treatment of ESRD. Commenters argue that
oral-only drugs would not be excluded from the definition of renal
dialysis services under the reasoning that the scope of the bundle was
intended to cover only services for which ESRD facilities currently are
being paid, as payments for the oral equivalents of injectables are not
made to ESRD facilities.
We do not believe that construing the ``other items and services''
language in clause (iv) as applying to oral-only drugs violates a
principle of statutory construction, by making clauses (ii) and (iii)
otherwise redundant. The language in clause (iv) does not mean all
drugs currently available to Medicare beneficiaries for the treatment
of ESRD as the commenters suggest. Rather, we believe that it can be
interpreted as a residual or catch all category for drugs which do not
fall under the scope of those specified renal dialysis services
identified in clauses (ii) and (iii). Medicare regulation under Sec.
400.202 defines ``services'' as follows in pertinent part:
Services means medical care or services and items, such as
medical diagnosis and treatment, drugs and biologicals, * * *
Thus, we are interpreting the use of the word services in clause
(iv) consistent with how we interpret and define services under
Medicare which supports including other oral-only drugs not specified
in the preceding clauses in the bundle, not the exclusion of those
drugs from the payment bundle. We believe that this interpretation of
clause (iv) neither represents a selective reading of the statute, nor
an overly expansive definition of the scope of the renal dialysis
services intended to be included in the payment bundle.
Comment: Another commenter stated that the reference to ``separate
payment'' under section 1881(b)(14)(B)(iii) of the Act would exclude
Part D drugs because under Part D, Medicare is not making separate
payment for drugs. The commenter reasoned that the Medicare program
makes per beneficiary payments to plans, and plans use such payments to
reimburse pharmacies that fill prescriptions for covered Part D drugs.
The commenter argued that the focus of section 1881(b) of the Act is on
payments to dialysis facilities for services furnished to
beneficiaries. Therefore, the first part of clause (iii) pertains to
Medicare payments separately made to dialysis facilities for separately
payable Part B drugs and biologicals, and does not include Part D
products.
Response: We disagree with the commenter with regard to the meaning
of the language in clause (iii) of the statutory definition for renal
dialysis services under section 1881(b)(14)(B) of the Act. We believe
that such language was intended to be broadly interpreted given that
all drugs are reimbursable under Medicare by virtue of being authorized
for payment under Title XVIII. Therefore, drugs covered under Part B
and formerly covered under Part D would be included regardless of
whether payment was made directly by us or by a plan.
Comment: Several commenters agreed with CMS that clause (iv) of
section 1881(b)(14)(B) of the Act is a catch all provision that permits
inclusion of any additional products and services, including oral drugs
furnished to treat individuals with ESRD, and agreed with the agency's
interpretation and rationale that the inclusion of oral-only drugs in
the bundle is supported by clause (iv). One commenter noted that the
term ``services'' is used in clause (iv) of the definition for renal
dialysis services, and that for purposes of Medicare such term is
defined under Sec. 400.202 as ``medical care or other services and
items, such as medical diagnosis and treatment, drugs and biologicals,
supplies, appliances, and equipment, medical social services, and the
use of hospital, CAH, or SNF facilities [emphasis added].'' The
commenter noted that services and items encompass drugs and
biologicals. The commenter further stated that a plain reading of
clause (iv) leads to the conclusion that clause (iv) is inclusive of
all other drugs and biologicals not reimbursed under the ESRD composite
rate as of December 31, 2010, that are furnished to individuals for the
treatment of ESRD.
Other commenters disagreed with our interpretation, stating that
clause (iv) should not apply to oral-only drugs, as it would render the
other clauses of the definition unnecessary. Those commenters claimed
that an interpretation of clause (iv) that includes all drugs and
biologicals fails to consider the entire context of the statute, and
that this reading would negate clauses (ii) and (iii) of the statutory
definition for renal dialysis services. Commenters stated that under
rules of statutory construction, a statute should be construed to give
meaning to all aspects of it, such that ``other items and services''
cannot be read to include drugs that are currently used for treatment
of chronic renal failure, but are excluded from clauses (ii) and (iii).
Response: We believe that clause (iv) of the definition for renal
dialysis services under section 1881(b)(14)(B) of the Act could include
certain other items and services such as ``oral-only'' drugs. We agree
with the commenter that the definition should be viewed as a whole when
considering each of the four clauses, and particularly, clause (iv).
With regard to the concerns of statutory interpretation that commenters
have identified, we believe we have followed them when interpreting the
statute. We note, however, that such rules must be taken into context
based on the underlying statutory language at issue. In particular, we
note that the definition for renal dialysis services has overlapping
categories of services, and that certain clauses included arguably are
unnecessary. For example, given that several clauses of the definition
contain similar types (or categories) of items and services, we find
unconvincing the commenter's suggestion that clause (iv) cannot include
drugs or biologicals. We note that drugs and biologicals are not
limited to clauses (ii) and (iii) of the definition. In particular,
clause (i) covers the composite rate, which contains some drugs.
[[Page 49040]]
We also agree with the commenter who pointed to the Medicare
definition for ``services'' that such term includes drugs and
biologicals. Given that clause (iv) addresses laboratory tests and
other items and services not described in clause (i) (that is, non-
composite rate labs, items, services, etc.), we believe that a
reasonable interpretation of clause (iv) is that certain non-composite
drugs and biologicals are included. We agree with commenters, however,
that to ensure that meaning is attached to the other clauses, such
drugs and biologicals included in clause (iv) would not be the same as
those included in clauses (ii) and (iii). Accordingly, if oral-only
drugs are not considered to fall within clause (iii) of the statutory
definition (or clause (ii) for that matter), we believe that such drugs
would appropriately fall under clause (iv), and would constitute other
items and services used for the treatment of ESRD that are not
described in clause (i).
In addition, as we noted, several of the clauses of the definition
could be viewed as superfluous. Therefore, we believe the definition as
a whole must be considered when determining whether an item or service
constitutes a ``renal dialysis service.'' In particular, we note that
clause (iii) would have been broad enough to include the erythropoiesis
stimulating agents (ESAs) identified in clause (ii), given that such
agents would constitute ``drugs and biologicals that are furnished for
the treatment of ESRD and for which payment was made (before the ESRD
PPS) separately under this title, and any oral equivalent of such drug
or biological.'' Hence, clause (ii) arguably is unnecessary. Congress
decided, however, to nevertheless specifically identify these agents as
a separate category under the definition. Given the structure of the
definition, we do not believe Congress' identification of certain
``other drugs and biologicals'' in clause (iii), limits the definition
such that it excludes other types of drugs or biologicals from clause
(iv) of the definition, if such drugs otherwise meet that prong (and
are not included in clause (iii) or clause (ii)).
Moreover, we believe that when the definition is viewed as a whole,
it suggests a comprehensive definition that wraps in all items and
services related to outpatient renal dialysis that are furnished to
individuals for the treatment of ESRD. Although the definition is
perhaps overlapping or redundant, we find clause (iv) to be a catchall
category, and one that provides sufficient authority for bundling oral-
only drugs (if such drugs do not fall under clause (iii)). For a
discussion of the other items and services under clause (iv), please
see the next section below.
Comment: One commenter pointed to recent legislative proposals and
an analysis by the Congressional Budget Office as support that oral-
only drugs are not included in the statutory definition for renal
dialysis services. Another commenter pointed to legislative history by
citing floor statements as evidence of Congressional intent behind the
creation of a broad payment bundle, including all oral dialysis-related
drugs, such as calcimimetics and phosphate binders.
Response: We are not persuaded by recent legislative proposals. We
continue to interpret section 1881(b)(14)(B) of the Act as including in
the ESRD PPS, all drugs and biologicals furnished for the treatment of
ESRD, and we believe this interpretation reflects the intent of the
statute. With regard to recent legislation, we note that the ESRD PPS
proposed rule, in which we set forth our interpretation of the statute
and our proposal for the scope of the bundle, was specifically noted
and acknowledged by Congress in section 10336 of the Affordable Care
Act passed on March 23, 2010 (Pub. L. 111-148), which requires a study
by the GAO on the impact on Medicare beneficiaries of including oral-
only drugs in the bundled ESRD PPS. Significantly, this new legislation
imposes no restrictions or additional requirements with regard to our
proposal to bundle such products.
Comment: Some commenters stated that the exclusion of oral-only
drugs from the payment bundle would not make the bundle of services
less comprehensive, nor would it defeat the purpose of the new payment
system as CMS suggests. These commenters claim that the comprehensive
bundle of renal dialysis services the Congress envisioned is a bundle
of services furnished by ESRD facilities. Therefore, some commenters
believed that since calcimimetics and phosphate binders are not
furnished by ESRD facilities, their exclusion would not make the bundle
less comprehensive than Congress intended. Commenters also stated that
no cost shifting would occur between Part B and Part D, because these
oral-only drugs have no Part B equivalent.
Response: We do not agree with the commenters' assertion that the
intent of the payment bundle under the ESRD PPS was to include only
those services furnished by dialysis facilities. For example, inclusion
of diagnostic laboratory tests (which may be performed by laboratories
under arrangements with dialysis facilities, for those facilities that
do not have their own laboratories), and oral equivalent forms of
injectable drugs, which are currently furnished by pharmacies under
Part D, belie this interpretation. Therefore, we believe the exclusion
of an item or service from the payment bundle solely because it is not
furnished (or traditionally furnished) by ESRD facilities is
inappropriate. We also disagree with the argument that excluding drugs
from the bundle for which there currently is no injectable equivalent
is acceptable because there is no issue of cost-shifting between Part B
and Part D. Notwithstanding that there may not be injectable
equivalents of certain drugs widely used for the treatment of ESRD
currently that may not be the case in the future as new drugs and
treatments are developed.
We also point out that apart from the goal of avoiding cost-
shifting, we believe the purpose of a bundled payment system is to
ensure that patient care is not skewed by financial incentives. We
believe that access to and compliance with recommended care can be
negatively impacted if certain drugs remain outside of the payment
bundle. Although many Medicare beneficiaries may have oral-only drug
coverage under Medicare Part D, others have private sources, and some
lack reliable sources of coverage altogether. We do not wish to
continue an uneven payment policy that favors certain types of drugs by
permitting them to remain separately payable outside of the payment
bundle.
Comment: Commenters indicated that several of the oral-only drugs
which CMS proposes to include in the payment bundle are relatively
expensive, and that the associated payment amount per treatment ($12.48
as calculated from Table 8 at 74 FR 49940) for these drugs was
inadequate. Commenters stated that this will result in unintended
clinical consequences for patients as ESRD facilities seek to maximize
profits by resorting to cheaper but less effective alternatives.
Response: We believe that by including all drugs widely used for
the treatment of ESRD in the payment bundle, we will be providing a
level playing field that will benefit patient care. The purpose of a
bundled payment system is to make available all treatment options under
the same payment system. When drugs remain outside of the payment
bundle, financial issues can influence both facility and patient
behavior, as the over-utilization of EPO to the detriment of patient
care in the past has demonstrated. We acknowledge
[[Page 49041]]
that the contrary effect can occur whereby drugs included in the
payment bundle could also influence behaviors with potential
underutilization. However, we expect ESRD facilities and monthly
capitation payment (MCP) physicians will evaluate the potential use of
less expensive equally effective alternatives for the treatment of
conditions associated with ESRD, where those alternatives are available
and not contraindicated by the patient's clinical status.
Notwithstanding the availability of less expensive alternatives, we
expect that patient care regimens will always be selected solely based
on patient needs as identified in the patient's plan of care. We
believe that we have developed the bundle, with the inclusion of all
oral drugs, to account for the costs that ESRD facilities will incur in
furnishing these drugs to patients.
Comment: Several commenters expressed concern that the inclusion of
oral-only drugs in the ESRD PPS payment bundle could adversely impact
beneficiaries through increased co-payments. Because the cost of these
oral-drugs would be included in the payment for all of the renal
dialysis services included in the bundle, commenters noted that the
beneficiary would be responsible for 20 percent of the total bundled
payment amount, and that this has the potential to increase the co-
payment amount owed by the beneficiary. In addition, commenters stated
that patients, who currently have Part D coverage and qualify for the
low income subsidy, would be required to pay coinsurance on these drugs
for the first time, as Part D coverage limits their financial
responsibility at very low dollar amounts. The commenters believe that
this will pose a financial hardship for these low income patients who
will be unable to meet their new coinsurance obligation, caused by
including these drugs under Part B. In addition, commenters stated that
patients who are dually eligible for both Medicare and Medicaid would
also see an increase in their coinsurance liability, as minimal
prescription drug copayment amounts are replaced with a 20 percent
coinsurance requirement under the ESRD PPS.
Response: It is inherent with the implementation of any PPS that
patients who incur costs greater than the amount covered by the average
PPS payment will benefit from the ESRD, because their coinsurance
liability will be based on that lower average payment amount compared
to the actual costs for resources consumed. Patients whose actual costs
for services furnished are less than the PPS payment amount will see an
increase in their coinsurance liability, because the actual payment
exceeds the actual utilization of resources. Table 2 shows total Part D
expenditures for drugs for CYs 2007, 2008, and the first nine months of
2009 currently available. The table reveals that the portion of these
expenditures for ESRD drugs borne by the beneficiary, or otherwise paid
on behalf of the beneficiary, ranges from 38 to 41 percent.
[GRAPHIC] [TIFF OMITTED] TR12AU10.009
These amounts compare to the 20 percent coinsurance liability under
Part B. We believe that this difference in coinsurance liability
between Part B drugs and Part D drugs is largely caused by the
beneficiary obligation incurred under the Part D ``donut hole'', and by
various coinsurance amounts imposed by the drug plans because of
formulary differences. Based on this comparison, some beneficiaries
will be better off with a 20 percent coinsurance obligation under Part
B compared to the range of 37.9 to 41.0 percent liability under Part D,
particularly if their utilization of Part D drugs is high, and they
have no low income subsidy. While there is no equivalent low income
[[Page 49042]]
subsidy under Part B for those patients who currently receive this
benefit under Part D, we believe our interpretation of the statute is
consistent with the statutory intent to bundle all renal dialysis
services under Part B.
In addition, ESRD beneficiaries who currently have private market
coverage of the ESRD drugs that would be included in the ESRD PPS and
minimal copayments will see an increase in their copayments because of
the classification of these drugs under Part B as renal dialysis
services, for which the 20 percent coinsurance obligation applies. We
would expect that the shift in coverage for oral drugs formerly Part D
to Part B will result in drug plans and insurers modifying the scope of
their drug coverage, formularies, premiums, and benefits to reflect
this shift in coverage, in a competitive environment to maintain and
attract beneficiaries. With respect to patients dually eligible for
Medicare and Medicaid with minimal prescription drug copayment amounts
under Part D, we expect that the 20 percent coinsurance for renal
dialysis services included in the payment bundle under the ESRD PPS
will be covered by the beneficiary's Medicaid benefit, just like other
Part B coinsurance obligations. We will conduct outreach efforts to the
States to ensure that States understand the changes due to the ESRD
PPS, and their responsibility to process Medicare claims and determine
their financial obligations under the new payment system.
Comment: One commenter proposed that oral equivalents of injectable
drugs be included in the ESRD PPS effective January 1, 2011, and that
CMS clearly indicate that the only currently available oral drugs with
an injectable version are oral iron and oral vitamin D. The commenter
suggested that if oral drugs without an injectable version are included
in the payment bundle, their inclusion should not occur until the
transition period expires in 2014, or later. The commenter proposed
that the payment rate for oral drugs included in the bundle be set at
the price which a small dialysis organization would need to pay to
obtain the drug from a pharmacy under arrangements.
Response: Consistent with section 1881(b)(14)(B)(iii) of the Act,
we are including the oral equivalents of ESRD injectable drugs in the
payment bundle effective January 1, 2011. These drugs include the oral
Vitamin D analogues (calcitriol, doxercalciferol, and paracalcitol) and
levocarnitine. Oral iron is generally available over the counter and
not covered under Parts B or D. Therefore, it is not included in the
payment bundle. There are currently no oral versions of ESAs for
inclusion in the ESRD PPS. For reasons set forth in greater detail
response to the comment below, we have adopted the commenter's
suggestion that the inclusion of oral-only drugs be delayed until after
the end of the transition period, or until January 1, 2014.
Comment: Several commenters expressed concern that the inclusion of
certain oral-only drugs and laboratory tests unrelated to dialysis in
the payment bundle represented an inappropriate shifting of costs to
dialysis facilities for services unrelated to the dialysis treatment.
Response: Oral-only drugs will not be implemented under the ESRD
PPS until January 1, 2014 for reasons set forth in greater detail
below. Neither will laboratory tests unrelated to the treatment of ESRD
be included in the payment bundle. Laboratory tests ordered by a
dialysis patient's MCP, nephrologist, or other practitioner for reasons
unrelated to ESRD will be excluded from the ESRD PPS and will continue
to be reimbursed separately.
Comment: One commenter urged CMS to implement its proposed policy
to bundle all drugs January 1, 2011, as mandated by Congress, stating
that statutory authority, sound public policy, and patient clinical
needs support inclusion of such drugs in the bundle. The commenter
stated that any delay would potentially create unintended financial
incentives, leading to adverse clinical outcomes.
Other commenters stated that CMS lacks pricing data from all payers
to accurately determine the payments for the inclusion of oral drugs in
the bundle, and recommended that CMS should exercise its authority to
delay the inclusion of oral drugs. Some commenters argued that
expanding the bundle to include oral-only drugs when it had
insufficient data and support would have the potential to hamper future
bundling efforts. Many commenters cited various policy and operational
reasons in support of a decision to delay the inclusion of oral drugs
in the ESRD PPS bundle. In particular, several commenters asserted that
if CMS determines that it has sufficient legal authority to include
oral-only Part D drugs in the payment bundle, it should nonetheless
delay the inclusion of these drugs to a subsequent year in order to
permit an orderly implementation of the ESRD PPS. Commenters claimed
that a delay would also give CMS the necessary time to ensure that its
billing systems and software are appropriately developed and tested to
make sure that the conversion of payment for Part D ESRD drugs to renal
dialysis services under Part B goes smoothly for beneficiaries,
facilities, and pharmacies.
Several commenters stated that CMS has the discretion to defer the
inclusion of Part D oral drugs in the payment bundle and asserted
various statutory bases. In particular, commenters stated that the
requirement to implement the ESRD PPS on or after January 1, 2011, does
not specifically state that CMS must include all drugs for which
payment is made under Title XVIII prior to implementation of the ESRD
PPS. Commenters pointed out that section 1881(b)(14)(B) of the Act does
not time limit CMS's discretion to define renal dialysis services for
the ESRD PPS, and argued that the definition of ``renal dialysis
services'' under section 1881(b)(14)(B)(iv) provides discretion to the
agency about what items and services to include in the ESRD PPS and
when to include them, claiming that Congress likely would not have
enacted a provision that did not allow new items and services to be
added. Some commenters argued that the ``breadth of the language in
subparagraph (iv)'' of the statutory definition suggested broad
discretion to the agency in making this determination, such that we may
define renal dialysis services to exclude oral drugs in 2011, while
maintaining authority to define renal dialysis services as including
oral drugs in a subsequent year.
Other commenters cited the 4-year phase-in (section 1881(b)(14)(E)
of the Act) as permitting full implementation of that portion of the
single payment at any time before January 1, 2014, provided the
implementation occurs in equal increments. Commenters argued that
implicit in our interpretation of section 1881(b)(14)(E) of the Act is
our authority to delay inclusion of oral drugs in the new bundled
payment system. Commenters maintained the position that the phase-in
over equal increments relates to coverage and payment, and that if CMS
interpreted the provision to include oral drugs entirely at the
beginning, CMS could implement the inclusion of oral drugs in the ESRD
PPS in the fourth year of the transition period and still comply with
the statute, including the requirement to implement the payment system
in ``equal increments''.
Finally, some commenters argued that CMS has a statutory obligation
to defer inclusion of oral drugs in the bundle, claiming that there is
an obligation to delay under section 1881(b)(14)(ii) of the Act,
because it requires CMS to determine the total amount of payments for
renal dialysis services. If the agency
[[Page 49043]]
cannot do so because of a lack of data, it would be improper to include
those items and services in the definition until it is able to do so.
Response: As we stated above and in the proposed rule, we continue
to believe that section 1881(b)(14)(B) of the Act supports our
interpretation that ESRD drugs and biologicals, including oral-only
ESRD drugs, used for the treatment of ESRD, meet the definition of
``renal dialysis services'' under section 1881(b)(14)(B) of the Act,
and should be included under the ESRD PPS (74 FR 49928 through 49929).
For this reason, we have specified that oral ESRD drugs, including
oral-only ESRD drugs, are included in the ESRD PPS.
However, we disagree with commenter's claims that this statutory
definition is not ``time-limited'' such that we could delay including
under this definition certain items or services that are currently in
existence. We believe that the statutory definition dictates what
services constitute ``renal dialysis services'' and does not afford us
discretion to postpone such a determination for purposes of
implementing the ESRD PPS. This is not to say, as some commenters have
suggested, that the definition is static with regard to new items and
services. To the extent new renal dialysis items or services come onto
the market in the future and meet the definition, such services would
be considered ``renal dialysis services'' and bundled under the ESRD
PPS. For example, as we pointed out in the proposed rule, if other
types of injectable ESAs or new oral forms of ESAs become available
subsequent to the implementation of the ESRD PPS on January 1, 2011,
such agents would be considered renal dialysis services and be subject
to the ESRD PPS (74 FR 49928). Accordingly, for the reasons we set
forth above and in the proposed rule, and after careful consideration
of the public comments, we are finalizing the proposed policy decision
that ESRD drugs and biologicals, including oral drugs, be identified as
renal dialysis services under section 1881(b)(14)(B) of the Act.
With regard to the issue of inadequate data to price for payment
oral drugs and biologicals, including oral-only drugs used for the
treatment of ESRD, we agree with the commenters in part. We have
included the Part B injectable drugs and biologicals used for the
treatment of ESRD in the calculation of the base rate. Total payments
for these drugs and biologicals were divided by the total number of
hemodialysis (HD) equivalent treatments to obtain the amount of the
payment per treatment for these drugs and biologicals reflected in the
base rate. Injectable drugs are priced at ASP + 6 percent. Oral drugs
with an injectable version were included in the payment bundle by
taking total payments for these drugs based on Part D claims, and
dividing that total by the total number of HD-equivalent treatment for
Medicare ESRD beneficiaries enrolled in Part D. As explained in section
II.K. of this final rule, prices for these drugs will be based on the
national average drug prices developed from the Medicare Prescription
Drug Plan Finder. These prices reflect pharmacy dispensing and
administration fees and will be applied to only a limited number of
drugs (three vitamin D analogues and levocarnitine).
While this pricing mechanism is also available for oral-only ESRD
drugs, we believe that before we consider its adoption in connection
with pricing these drugs for payment, we should evaluate its potential
impact on dialysis facilities, particularly small dialysis facilities
who may not be able to obtain drugs and biologicals at prices similar
to those of the larger chains with greater purchasing power. Because
payments for oral ESRD drugs with an injectable version in 2007 was
about $10.7 million, while total payments for all oral ESRD drugs was
about $455.7 million, we believe a careful assessment of the use of the
Medicare Prescription Drug Plan Finder as a basis for pricing oral-
equivalent ESRD drugs is appropriate before extending its application
to oral-only drugs. Accordingly, we are delaying the implementation of
oral drugs with no injectable equivalent or other form of
administration (oral-only drugs), pending this evaluation.
As we discuss in more detail below and in the section II.K.2. of
this final rule, we also agree that commenters' concerns about
operational and safety issues with regard to furnishing oral-only
agents should be further examined. We believe a delay would allow time
to examine such issues and address as appropriate. For example, we
agree with the commenters that a delay in implementing the inclusion of
oral-only drugs under the ESRD PPS would provide sufficient time for
ESRD facilities to establish a pharmacy in accordance with state
licensure requirements, or establish arrangements with pharmacies to
provide oral-only drugs to their patients and ensure a smoother
transition to the dispensing of these drugs under Part B.
We disagree with the commenters who have suggested that the 4-year
phase-in under section 1881(b)(14)(E)(i) of the Act provides authority
to delay inclusion of certain types of renal dialysis services such as
oral-only drugs beyond January 1, 2014. We believe that section
1881(b)(14)(E)(i) of the Act requires a phase-in of payments under the
new system for facilities that do not opt to go all-in under the new
ESRD PPS, allows for a blended payment under the old and new payment
systems in equal increments over a 4-year period to allow facilities
opportunity to transition to the new payment under the ESRD PPS. It
does not, however, authorize a phase-in of renal dialysis services.
We also do not agree that the requirement under section
1881(b)(14)(A)(i) of the Act that the ESRD PPS be implemented by
January 1, 2011, affords the agency discretion to delay identification
of renal dialysis services to be included in the ESRD PPS. Section
1881(b)(14)(A)(i) of the Act requires implementation of a payment
system in which a single payment is made for home dialysis and renal
dialysis services which, as we discussed above, represent a specific
set of services currently in existence that must be identified as renal
dialysis services for the payment bundle.
We agree, however, with commenters with regard to our obligations
under section 1881(b)(14)(A)(ii) of the Act, which requires that we
make certain estimates about total payments for renal dialysis services
based on certain data (that is, per patient utilization data). We agree
that we must perform an assessment of the use of the Medicare
Prescription Drug Plan Finder as a basis for the pricing of oral
equivalent ESRD drugs before that pricing mechanism is potentially
extended to oral-only ESRD drugs in order to develop payment rates for
those drugs. Therefore, it would not be appropriate to implement oral-
only ESRD drugs in the ESRD PPS at this time.
We believe that there are several advantages to delaying the
implementation of oral-only drugs. A delay would--
Provide additional time to determine the propriety of the
Medicare Prescription Drug Plan Finder for the pricing of oral-
equivalent ESRD drugs, before we consider extending that pricing
mechanism to include all oral ESRD drugs and biologicals. CY 2007 data
reveal that expenditures for the oral equivalents of injectable ESRD
drugs totaled $10,700,083 for Medicare ESRD beneficiaries enrolled in
Part D. See Table 9. Subtracting this amount from the total figure of
$455,683,740, the total payments for all ESRD Part D drugs identified
in Table 8 of the proposed rule (74 FR 49940), reveals that the
comparable figure for oral-only ESRD drugs was $444,983,657. Given the
[[Page 49044]]
potential impact on the oral drug component of the payment bundle,
evaluating the Medicare Prescription Drug Plan Finder and other
potential alternative data sources for the pricing of oral ESRD drugs
is essential.
Allow ESRD facilities additional time to develop the
arrangements or infrastructure necessary to provide oral-only drugs and
negotiate prices with drug companies.
Provide additional time for CMS to thoroughly educate
beneficiaries, ESRD facilities, and pharmacies on those aspects of the
bundled ESRD PPS involving the furnishing of non-injectable drugs to
ensure as smooth a transition as possible.
Given that oral drugs with an injectable version are
included in the payment bundle as of January 1, 2011, provide CMS an
opportunity to assess potential problems which may arise in connection
with the provision of oral drugs prior to the system's expansion to
include oral-only ESRD drugs beginning January 1, 2014.
Allow time for additional analysis regarding the ability
of ESRD facilities to provide oral-only ESRD drugs.
Provide additional time to evaluate the need for
additional clinical indicators applicable to the monitoring of certain
patient conditions treated with oral-only drugs, such as bone loss and
mineral metabolism associated with the provision of calcimimetics and
phosphate binders. This could assist in determining the impact of the
fully bundled ESRD PPS, and any unintentional consequences that might
ensue, on quality of care.
Allow Part D plans sufficient time to prepare bids for
2014 that excludes those oral-only drugs identified as ``ESRD
related''. CMS will specify the oral-only drugs that are for the
treatment of ESRD in connection with a proposed rule Beneficiaries will
have access to more accurate premium quotes to assist them in making
decisions about their Part D coverage.
Allow Part D plans and pharmacies additional time to
establish, test, and modify the infrastructure necessary to identify
ESRD patients, as the oral equivalents of injectable drugs are bundled
beginning January 1, 2011. Part D sponsors will gain several years of
experience in identifying ESRD patients within CMS systems in order to
ensure that Part D payments are not made for ESRD related drugs.
Beginning January 1, 2011, 18 oral drugs (as discussed below), will
be included in the ESRD PPS base rate. Specifically, facilities will
furnish such oral drugs beginning January 1, 2011. Until comprehensive
beneficiary protections can be developed in anticipation of the
inclusion of all ESRD-related oral-only drugs in the payment bundle
under the ESRD PPS beginning January 1, 2014, patients will have access
to these drugs under Part D. After considering the public comments and
for the reasons we discussed above, we are retaining the definition of
renal dialysis services as proposed in Sec. 413.171, including with
respect to the inclusion of oral-only drugs and biologicals. However,
we are revising the implementation date for oral-only ESRD drugs and
biologicals to be January 1, 2014 in Sec. 413.174(f)(2). We believe
that the transition period will give us sufficient time to address the
data/pricing issues identified above, and to evaluate and correct any
potential concerns that may emerge as a result of the inclusion of the
oral drugs and biologicals with other forms of administration in the
payment bundle effective January 1, 2011.
b. Other Drugs and Biologicals
Below we discuss comments regarding drugs and biologicals other
than oral-only drugs and biologicals (for example, injectable drugs,
oral drugs with some other form of administration, etc.). Oral-only
drugs are separately addressed above.
Comment: Most commenters who expressed opposition to our proposed
inclusion of oral-only Part D drugs in the ESRD PPS payment bundle were
careful to distinguish these drugs from oral equivalents of injectable
drugs, for which they conceded statutory authority existed for their
inclusion under section 1881(b)(14)(B) of the Act. Although the
commenters maintained that the inclusion of any oral drugs in the
payment bundle would pose administrative burdens on dialysis
facilities, they generally did not challenge our authority to include
in the payment bundle the oral equivalents of injectable drugs used to
treat ESRD in order to prevent the shifting of costs from Medicare Part
B to Part D. The commenters, however, stated that if such drugs and
biologicals were included in the payment bundle, their inclusion should
be adequately funded.
Response: We agree with the commenters that section 1881(b)(14)(B)
of the Act specifically requires that oral equivalents of injectable
drugs used in the treatment of ESRD must be considered renal dialysis
services for inclusion in the payment bundle. Accordingly, we have
included those drugs, as described later in this section of this final
rule. We have also revised the methodology for calculating the average
amount per treatment for these drugs and biologicals included in the
base rate, as described elsewhere in this final rule.
Comment: One commenter pointed out that dialysis patients take
numerous oral medications, many of which are not related to ESRD. The
commenter stated that the inclusion of oral equivalent drugs with an
injectable version in the payment bundle could result in the patient
receiving these drugs from a pharmacy with which the dialysis facility
has established a relationship for the dispensing of these drugs to its
patients, while the other medications are received from a different
pharmacy of the patient's choice. Because multiple pharmacies would be
involved, this could result in less attention paid to potential adverse
consequences resulting from drug interactions and less coordination of
care.
Response: We agree that under the circumstances which the commenter
has described, multiple pharmacies could be involved in the dispensing
of drugs to dialysis patients. However, the prescriptions for these
drugs are prepared by the patient's nephrologist, primary care
physician, or specialist, each of whom should be aware of the patient's
medications for potential adverse interactions. The dialysis facility
should also be aware of the patient's oral medications as an additional
safeguard and therefore, we expect dialysis facilities to collect
comprehensive information on patients' oral medications to identify any
potential drug interactions that might otherwise occur. Finally,
patients can always advise their pharmacist of the oral drugs they take
when filling a prescription, and inquire about potential drug
interactions as well. Therefore, we believe that there are sufficient
safeguards to ensure that the use of several pharmacies to obtain oral
drugs does not result in adverse consequences for dialysis patients.
Comment: Many commenters expressed concern about what they believed
would occur if drugs were included in the ESRD PPS. Some commenters
were opposed to including oral drugs in the bundled payment,
particularly vitamin D used for bone and mineral metabolism. Commenters
cited negative effects on patients' health because ESRD facilities may
consider cost saving measures such as purchasing less costly and less
effective drugs (for example, over-the-counter calcium binders or
vitamin D); limiting the use of the more expensive drugs; using oral
drugs which they believe are not as effective as intravenous drugs;
switching to generic drugs or to drugs used in the past, which the
commenters believed are not as effective; and using
[[Page 49045]]
lower cost oral drugs instead of intravenous drugs resulting in various
complications as vascular calcification, anemia, blood transfusions,
and hospitalizations. Some commenters predicted an increase in the
number of parathyroidectomies due to poor control of
hyperparathyroidism. One commenter expressed concern that cost cutting
changes in medication practices at his ESRD facility have already begun
to occur in preparation for the implementation of the ESRD PPS.
Some commenters indicated that certain patients would be negatively
affected by the inclusion of drugs in the ESRD PPS bundled base rate.
The commenters believed that older patients would be discriminated
against by being given less expensive and less effective medications.
Others believed patients needing more medications than others would be
unable to receive the appropriate dose of their medications. One
commenter believed that patients receiving dialysis twice weekly or
those who miss treatments will be considered financially undesirable
because ESRD facilities will be responsible for the entire month for
their medications while receiving payment for the dialysis treatments
only.
Response: We are concerned by the issues raised by commenters who
believe ESRD facilities would intentionally and knowingly deny
medications or provide less effective drugs because of the inclusion of
drugs in the ESRD PPS bundle. We do not agree that the inclusion of
drugs in the ESRD PPS would result in facilities denying drugs to
patients or necessarily using less effective drugs. In particular, we
do not agree that the use of alternative less costly drugs necessarily
constitutes the use of less effective drugs. We expect that ESRD
facilities will continue to provide necessary care to patients with
ESRD, and we will be monitoring the implementation of the ESRD PPS very
closely.
As with any prospective payment system, there are patients whose
medical treatment results in more costly care as well as those with
less costly care. As we have discussed in other sections of this final
rule, the ESRD PPS bundled base rate reflects Medicare payment for the
average ESRD patient. We have incorporated payments under the current
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. We have provided for higher acuity patients with patient
case-mix adjusters as discussed in section II.F. and with outlier
payments for high cost patients as discussed in section II.H. of this
final rule.
Section 494.80(a)(5)of the regulations requires an ESRD patient's
comprehensive assessment include an ``[e]valuation of factors
associated with renal bone disease.'' Section 494.80 outlines other
requirements for assessing and reassessing patients, as well as
creating and implementing an individual patient plan of care as
described in Sec. 494.90. Section 494.90(a)(3) requires all ESRD
facilities to ``* * * provide the necessary care to manage mineral
metabolism and prevent or treat renal bone disease.'' Patient rights,
including the mechanisms for filing grievances, are established at
Sec. 494.70. This means that ESRD facilities are required to provide
care necessary to treat patients. We are confident that ESRD facilities
will act responsibly to provide appropriate care under the ESRD PPS and
oversight activities will identify any ESRD facility that may not do
so. Therefore, we plan to monitor utilization of renal dialysis items
and services to ensure that quality care is being provided. We will
discuss monitoring in the implementation section II.K. of this final
rule and in the future.
Comment: One commenter believed that separating the dispensing of
oral renal drugs from oral drugs used for non-renal conditions will
cause confusion for patients, their families, and other providers that
provide care to ESRD patients.
Response: We believe the commenter is referring to ESRD-related
drugs and biologicals included in the ESRD PPS base rate. We do not
agree that the bundling of ESRD-related drugs or biologicals will
result in confusion. Currently patients may receive medications or
prescriptions from multiple sources especially if they require medical
specialists for non-ESRD conditions. We do not see any difference in
this process under the ESRD PPS.
Comment: Some commenters believe patients will be involuntary
discharged from ESRD facilities if the patients are noncompliant and
drugs are included in the ESRD bundle.
Response: As discussed earlier in this section of the final rule,
the statute requires that renal dialysis services included in the ESRD
PPS include specified ESRD-related services including injectable and
oral drugs and biologicals. Because ESRD-related drugs and biologicals
are in the ESRD PPS bundle, ESRD facilities will be responsible for
furnishing ESRD-related drugs and biologicals that their patients
require. We appreciate the commenter's concern that patients may be
involuntarily discharged. However, Sec. 494.180 of the ESRD Conditions
for Coverage explicitly addresses the discharge procedure, the
acceptable circumstances for an involuntary discharge or transfer, the
required actions that must be completed by the ESRD facility prior to
ceasing treatment, as well as the requirement to inform patients of
their rights and protections.
Comment: One commenter stated that because of the ESRD PPS,
patients with vascular access dysfunction, who are currently treated in
the ESRD facility, would instead be referred to the emergency
department in order to be able to receive separate payment for drugs
used to maintain vascular access. Other commenters indicated that
patients would be referred to other health care settings such as
infusion centers or other health care providers to administer
medications such as antibiotics and thrombolytic agents, for the
purpose of being reimbursed for medications.
Response: We believe that the commenter is implying that as a
result of including anti-thrombolytic drugs and antibiotics in the
bundled ESRD PPS base rate, ESRD facilities would refer patients with
any difficulties with vascular access to the emergency department or to
other settings rather than ensuring that vascular access patency is
addressed in the ESRD facility at the time of dialysis (as is currently
being done). We believe that maintaining vascular access is a renal
dialysis service and therefore, would be included in the ESRD PPS and
ESRD facilities would continue to be responsible for furnishing the
service. In other words, as ESRD facilities have been maintaining
vascular access sites under the current basic case-mix adjusted
composite rate system and receiving separate payment for anti-
thrombolytic drugs, we will expect that they would continue to maintain
vascular access under the ESRD PPS, with payment for anti-thrombolytic
agents included in the ESRD PPS base rate. Accordingly, we expect that
ESRD facilities would not refer patients to another health care setting
for the purpose of maintaining vascular access. We note, we would
expect patients to be referred to another setting if medically
necessary and we are not implying that ESRD facilities are expected to
address any and all vascular access complications, if doing so would be
[[Page 49046]]
unsafe for the patient. We merely are indicating that we expect ESRD
facilities to perform the same procedures to maintain vascular access
that they currently perform, and not refer patients to other settings
for the purpose of obtaining additional payment. We will monitor ESRD
facilities to determine whether they are continuing to perform the same
procedures to maintain vascular access that they currently perform.
Comment: Some commenters cited patient non-compliance for their
opposition to including oral drugs in the bundle. The commenters
believed that dialysis facilities could control intravenous drugs and
dosing but could not determine patient compliance with pill taking;
that inclusion of oral drugs would require patients to take
responsibility for their own care; and that patient compliance in inner
cities is already poor. Others stated that reverting to oral
medications in place of their intravenous forms, would result in an
increase in the number of pills patients with ESRD, who are already
required to take multiple pills with limited daily fluid allowance,
would be required to take. Other commenters were concerned that
patients might not receive their medications if they forget to obtain
them during their dialysis treatment. Several commenters claimed
patient non-compliance would increase due to the bundling of oral
drugs. The commenters believed there would be higher spending on
hospitalizations and outpatient care because of decreased control of
patient's anemia and bone disease.
Response: We appreciate the concerns about patient compliance and
pill burden. We do not understand the commenter's statement indicating
that inner city compliance is already poor and therefore, we regret
that we are unable to respond to the comment.
We do not agree that including oral drugs in the bundle will result
in increased patient compliance difficulties, increased pill burden or
poor control of anemia and bone disease because under the ESRD PPS
there is no requirement that drugs must be administered in any
particular form or by any particular route. It is the responsibility of
the ESRD facility, the patient's physician, and the ESRD
interdisciplinary team to develop a plan of care that is appropriate
and meets each patient's needs. That includes determining the most
appropriate route of administration of a drug. Although we believe we
are required by statute to include oral drugs and biologicals in the
payment bundle, the use of oral equivalents remains a medical decision.
Section 494.90 of the ESRD Conditions for Coverage requires the
development of an individualized patient plan of care to address the
patient's needs. Therefore, we believe ESRD facilities should make
medical decisions based on patient needs and not solely on a financial
basis.
As we discussed in several responses above, we believe that ESRD
facilities will act responsibly to provide appropriate care under the
ESRD PPS and that continued monitoring may serve to help identify the
ESRD providers who do not. Therefore, we plan to monitor utilization of
renal dialysis items and services to ensure the quality care continues
to be provided. We will discuss monitoring in the implementation
section II.K. of this final rule and in the future.
Comment: Commenters were divided in expressing their support or
opposition to the inclusion of intravenous drugs and their oral
equivalents in the ESRD PPS base rate. Some commenters expressed
concern that bundling drugs will restrict nephrologists' ability to
prescribe necessary medications. One commenter suggested removing all
oral drugs from the bundle to allow nephrologists to decide what is in
the best clinical interest of the patient without reimbursement
concerns. Others expressed concern that physicians would not prescribe
drugs that could put a facility at financial disadvantage or would be
forced to use the ``cheapest available therapy which might be harmful
to patients and further increase their cardiovascular mortality.''
Another commenter believed that disparities in care will occur when
physicians will need to determine which patients are ``most deserving
or have the greatest need for certain medications'' placing physicians
in an adversarial position with ESRD facilities. Several commenters
believed physicians should have autonomy to prescribe the most
appropriate drugs within classes of medications.
Some commenters supported inclusion of all drugs and biologicals
used to treat ESRD regardless of the route of administration noting
that oral and injectable drugs are routinely given during the course of
dialysis treatment. Other commenters indicated that inclusion of all
drugs, regardless of route of administration in the bundle was `` * * *
critical to achieving optimal patient care.'' These commenters believed
that allowing certain drugs and biologicals to be unbundled while
others are bundled would establish incentives to select treatment
options contrary to patient's clinical needs and results in medications
from different sources jeopardizing adherence to care regimens and
undermining quality of care.
Response: We thank the commenters for their views of the impact of
including ESRD-related drugs and biologicals in the bundle. The general
premise of the ESRD PPS is that the ESRD payments reflect the average
cost of furnishing renal dialysis items and services to patients. In
situations where costs for treating patients exceed an established
threshold under the ESRD PPS, the outlier policy would apply. The
outlier policy is discussed in detail in section II.H. of this final
rule.
We continue to believe that the responsibility for determining the
appropriateness of medical care resides with the ESRD facility,
physicians, and the interdisciplinary team as stipulated by the ESRD
Conditions for Coverage. We also believe that physicians, the
interdisciplinary team, and ESRD facilities should make medical
decisions based on patient needs and not solely on a financial basis.
We plan to monitor utilization of renal dialysis items and services to
ensure the quality care continues to be provided. We will discuss
monitoring in the implementation section II.K. of this final rule and
in the future.
We note that we do not have the discretion to exclude services from
the ESRD payment system that meet the statutory definition of a renal
dialysis service. We discuss the definition of renal dialysis services
earlier in this section and in section II.D. of this final rule. We
also discuss the delay in implementation of oral-only drugs earlier in
this section.
Comment: Several commenters expressed concern that there are no
quality measures for calcium, phosphorus, and parathyroid control.
Others recommended tracking changes in transfusion utilization. One
commenter urged that necessary steps be taken to ensure access to drugs
appropriate for patients and not the ``least costly alternative.''
Another commenter suggested that MedPAC and other entities track drug
utilization to avoid unintended consequences.
Response: We agree with the commenters that there needs to be
overall monitoring, tracking measures to monitor utilization and
measure outcomes, and specifically to eventually track and report
patient levels of calcium, phosphorus and parathyroidism prior to
implementing the oral-only drugs in the ESRD PPS in 2014. We are
currently working to develop measures for the initial year of the QIP
and beyond. We note that, as set
[[Page 49047]]
forth in section 1881(h)(2)(A) of the Act, additional measures are
being considered and developed such as patient satisfaction, iron
management, bone mineral metabolism, and vascular access.
We are currently developing a comprehensive monitoring plan which
includes tracking drug utilization. We will discuss monitoring in the
implementation section II.K. of this final rule and in the future. We
also plan to ensure that patients are educated about the ESRD PPS
including the mechanisms they can use to report grievances. We believe
that other entities such as MedPAC, the GAO, and the OIG will be
looking into the effects of the ESRD PPS. We note that quality measures
are discussed in section II.M. of this final rule. Additionally, we
will include a discussion of future QIP measures forecasting in the
ESRD QIP proposed rule.
Comment: One commenter believed that if the concern is cost
shifting from injectable vitamin D to the oral vitamin D analogs, it
would be better to address that issue directly.
Response: We do not understand what the commenter is suggesting
with the statement about addressing the issue of injectable versus the
oral version of vitamin D directly. However, we believe that the ESRD
PPS provides an opportunity for ESRD facilities to make financially
sound decisions while providing necessary care recognizing that some
patients may utilize less renal dialysis items and services while
others may use more. In addition, under the QIP, we are working towards
developing quality measures for bone and mineral metabolism. Further
discussion on quality measures are found in section II.M. of this final
rule.
Comment: One commenter stated that certain injectable drugs used to
treat ESRD may not have oral equivalents. Therefore, the patient would
not be able to afford obtaining these drugs outside of the payment
bundle, resulting in a lower quality of care.
Response: We are not clear about the point the commenter was
attempting to make, as ESRD-related injectable drugs without oral
equivalents would be furnished by the dialysis facility. In addition,
all injectable drugs used to treat ESRD are included in the payment
bundle as Part B renal dialysis services, regardless of whether they
have an oral equivalent.
Comment: Many commenters indicated that they did not know which
drugs were in the bundled base rate. Some commenters questioned whether
non-dialysis-related drugs are included, such as those drugs used to
treat diabetes, high blood pressure, cardiac drugs, or renal vitamins.
Response: We thank the commenters for their suggestions on which
drugs should be included in the ESRD PPS. We also agree that in the
proposed rule, we did not explicitly indicate which drugs would be in
the proposed ESRD PPS base rate.
We proposed that payments for all drugs and biologicals furnished
to ESRD patients and separately billable prior to January 1, 2011,
would be included in the ESRD PPS payment bundle as renal dialysis
services (74 FR 49929). Therefore, in the proposed rule, we included
all drugs and biologicals on ESRD claims for 2007 for which separate
payment was made in computing the proposed ESRD PPS base rate because
the presumption was that all drugs and biologicals on ESRD claims were
ESRD-related. We explained in the proposed rule (74 FR 49940 through
49941), our methodology of using CY 2007 claims data for determining
the Medicare Allowable Amounts (MAPs) for the Part B and former Part D
ESRD-related drugs and biologicals components of the ESRD PPS bundle,
including the use of NDC codes for purposes of identifying by oral
drugs covered under Part D by class.
With regard to the drugs and biologicals we proposed to bundle in
the ESRD PPS, we identified in the proposed rule the top 11 Part B
drugs and biologicals that accounted for 99.7 percent of total spending
for Part B ESRD drugs and biologicals and identified the classes of
oral ESRD-related drugs and biologicals currently covered under Part D
that would be bundled. When listing the amount of spending for ESRD-
related drugs and biologicals, we combined the products that accounted
for the remaining 0.3 percent of total spending for Part B ESRD drugs
and biologicals in a general category (``Other injectables'' Part B
drugs and biologicals) included in the proposed base rate (74 FR 49940
through 49941).
With regard to commenters' concerns about the inclusion of certain
drugs, including non-ESRD related drugs, in the proposed bundle, in
developing the proposed rule, we presumed that all separately billable
items were drugs and biologicals on the ESRD claims were ESRD-related
and therefore, all separately billable items on ESRD claims were
included in the proposed ESRD PPS bundled base rate.
As a result of comments, for this final rule, we performed an
extensive analysis of Medicare payments for
Part B drugs and biologicals billed on ESRD claims in 2007, 2008,
and 2009 to identify drugs or biologicals that are ESRD-related and
therefore meet the definition of renal dialysis services under section
1881(b)(14)(B) of the Act, and would be included in the ESRD bundled
base rate. Drugs and biologicals that are generally not ESRD-related
(for example drugs and biologicals used to treat diabetes, cardiac
conditions and hypertension), would not be renal dialysis services and
would be excluded from the ESRD bundled base rate.
We believe that categorizing drugs and biologicals on the basis of
drug action would allow us to determine which categories (and
therefore, the drugs and biologicals within the categories) would be
ESRD-related. We evaluated each drug and biological to identify its
category by indication or mode of action. We then analyzed the
categories to determine those that would be expected to be utilized for
ESRD-related conditions in a dialysis unit (and therefore would be a
renal dialysis service).
We note that the current ESRD claims form does not differentiate
between drugs and biologicals administered for an ESRD condition from
drugs and biologicals administered during dialysis for non-ESRD related
conditions. During this extensive analysis, we discovered that our
presumption that all drugs and biologicals on the ESRD claims were
ESRD-related was incorrect. In fact, there were categories of drugs and
biologicals (and therefore specific drugs on ESRD claims for which
separate payment had been made) that were not ESRD-related. These non-
ESRD-related drugs and biologicals are discussed in detail below. Later
in this section, we also discuss in detail the method used to identify
ESRD-related drug and biological categories and drugs and biologicals
included in the final ESRD PPS base rate below. Table C in the Appendix
provides a listing of the specific drugs which were included in the
proposed ESRD PPS base rate and how those drugs were treated in the
final ESRD PPS base rate.
Specifically, we identified drugs and biologicals on the ESRD
claims which are classified as chemotherapeutic drugs,
immunosuppressant drugs, and vaccines. These drugs and biologicals,
with the exception of hepatitis B and flu vaccines, had been included
in the proposed ESRD PPS base rate. As these are not ESRD-related drugs
and biologicals because they are not used for ESRD-related conditions
and therefore, are not renal dialysis services, we excluded them from
the final ESRD bundled base rate. As a result, we excluded the payments
from the 2007 ESRD facility claims for these drugs and
[[Page 49048]]
biologicals in computing the final ESRD PPS base rate.
In performing our analysis of the ESRD claims for this final rule,
we also identified drugs and biologicals that are included in the
current composite payment rate but for which ESRD facilities received
separate payment in addition to the composite rate payment. Because
these composite rate drugs and biologicals were listed separately on
the ESRD claims, separate payment was inadvertently made and we
included these payments in the proposed ESRD PPS base rate. However,
for this final rule, we excluded those inadvertently made payments from
the final ESRD PPS base rate calculation.
We note that the Medicare Benefit Policy Manual, Pub. 100-02,
chapter 11, section 30.4.1 lists the drugs and fluids included under
the current 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, verapamil and antibiotics used at home by
patients being treated for catheter site infection or peritonitis
associated with peritoneal dialysis. 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 staff time and supplies) is covered under the current
composite rate and may not be billed separately.''
Also, in our analysis of drugs and biologicals for this final rule,
we identified ESRD claims that included payments for drugs and
biologicals, but did not include any dialysis treatments. Because ESRD
facilities receive a payment under the current basic case-mix adjusted
composite payment system which is treatment based (that is, based on
the provision of a dialysis treatment) and separate payment is made for
any items or services provided that are not considered part of the
composite rate, payment for claims without treatments should not be
paid. Therefore, for this final rule, payments for drugs and
biologicals listed separately on the ESRD claim where there was no
dialysis treatment included on the claim were excluded from the
computation of the base rate.
In the analysis conducted for this final rule, we also identified
drugs and biologicals on ESRD claims that were not identifiable because
they were billed using unspecified or unclassified HCPCS codes. These
codes are used when a HCPCS code has not yet been assigned. As a
result, we were unable to determine the name of the drug or biological
or if they were ESRD-related or administered for non-ESRD-related
conditions. Because ESRD-related drugs and biologicals have HCPCS
codes, we considered any drug or biological billed using an
unclassified or unspecified HCPCS code as being non-ESRD-related.
Therefore, any payments attributed to these unspecified codes were not
included in computing the final ESRD base rate. We note that ESRD
facilities should be using valid HCPCS codes for the drugs that they
administer and should only use the unclassified codes for those drugs
that do not have codes.
During our analysis for this final rule, we also identified drugs
and biologicals as well as procedures which would not be considered
renal dialysis services. For example, low molecular weight contrast
administered for radiological purposes; pharmacy and administrative
pharmacy code for administration of oral anti-emetics for cancer
treatment; chemotherapy; and chest x-rays were reported on the ESRD
claims. Because these procedures are not renal dialysis services (that
is, they are not procedures that are used for the treatment of ESRD),
we excluded the payments associated with these procedures from the
final ESRD PPS base rate.
We also identified drugs, biologicals and procedures reported on
ESRD claims which are unlikely to be performed or provided in an ESRD
facility. For example, there were claims that included paralytic agents
used to intubate patients. Because we do not believe that these drugs
would be used to treat ESRD-related conditions, they would not be
considered to be renal dialysis services. As a result, we excluded the
payments made for these drugs in computing the final ESRD PPS bundled
base rate.
We list the categories of drugs and biologicals that we would not
consider ESRD-related and therefore would not be renal dialysis
services included in the ESRD PPS base rate in Table 3 below. We note
that the drugs, biologicals, and procedures that were excluded from the
final ESRD PPS base rate represent a very small dollar amount
accounting for less than one cent per dialysis treatment and represent
less than 0.2 percent of payments made for separately billable drugs
and biologicals. Table C in the Appendix identifies the Part B
injectable drugs that were included in the proposed base rate and in
the final base rate.
BILLING CODE P
[[Page 49049]]
[GRAPHIC] [TIFF OMITTED] TR12AU10.010
BILLING CODE C
Comment: Commenters noted that CMS needs to clearly delineate what
is covered in the bundle. One commenter suggested differentiating
between medications used for acute rather than chronic complications.
One commenter recommended that a list of specific ESRD-only related
drugs for inclusion in the bundle and that these be periodically
updated to account for new technology and innovation. Some commenters
suggested that we include only intravenous ESAs, iron, and vitamin D.
One commenter stated that ESRD facilities separately bill and are
reimbursed for ESAs, iron, vitamin D, alteplase and antibiotics for the
treatment of access-related infections and peritonitis. Other
commenters suggested that we include only intravenous ESAs, iron and
vitamin D. One commenter believed that ESRD-related drugs used in the
treatment of anemia, bone disease and iron deficiency should be
included in the bundle. Some commenters suggested that only oral drugs
that have ``equivalent injectables'' or other ``equivalent non-oral
forms'' should be in the bundle. One commenter suggested that only ESRD
intravenous drugs and their oral equivalents that are well known and
most manageable be included.
Response: As we discussed in the previous response, we identified
categories of drugs and biologicals which were not ESRD-related and
[[Page 49050]]
therefore, we excluded the payments for drugs in those categories from
the final ESRD PPS base rate. We agree with the commenters that drug
categories used for the treatment of anemia and iron deficiency (which
includes ESAs and intravenous iron), access management (which includes
alteplase), and bone and mineral metabolism (which includes vitamin D)
would be renal dialysis services under the ESRD PPS. We also agree that
antibiotics used for the treatment of venous access infections and
peritonitis (specifically, vancomycin and daptomycin) and cellular
management (specifically, levocarnitine) are renal dialysis services
under the ESRD PPS. Therefore, payments for drugs in these categories
in injectable forms (covered under Part B) and oral or other forms of
administration (covered under Part D), were included in computing the
final ESRD PPS base rate. We note one exception. We understand that the
oral versions of vancomycin are not used for ESRD-related conditions
and therefore, would not be a renal dialysis service. It is also our
understanding that daptomycin does not have an oral equivalent. The
categories and drugs which are renal dialysis services under the ESRD
PPS are shown in Table 4 below.
[GRAPHIC] [TIFF OMITTED] TR12AU10.011
With regard to the suggestion that there be a differentiation
between acute and chronic complications, we do not believe that such a
differentiation is required as the definition of renal dialysis
services does not distinguish between renal dialysis services provided
for acute or for chronic conditions. For example, anemia management is
a chronic condition and access management is more acute and the drugs
and biologicals used for both are considered renal dialysis services.
With regard to the commenter's request to provide a list of
specific ESRD-only drugs, we recognize that drugs and biologicals used
for ESRD-related conditions may change over time based upon many
factors including new developments, evidence-based medicine, and
patient outcomes. By categorizing drugs and biologicals based on
mechanism of action, we will account for other drugs and biologicals
that may be used for those actions in the future under the ESRD PPS. In
other words, while we have included drugs and biologicals used in 2007
in the final ESRD base rate, we recognize that these may change.
Because there are many drugs and biologicals that have many uses and
because new drugs and biologicals are being developed, we do not
believe that a drug-specific list of drugs would be beneficial. We have
provided a list of the specific drugs that were included in the ESRD
PPS base rate in Table C in the Appendix. However, any drug or
biological furnished for the purpose of access management, anemia
management, vascular access or peritonitis, cellular management and
bone and mineral metabolism will be considered renal dialysis services
under the ESRD PPS.
We note that any ESRD drugs developed in the future that are
administered by a route of administration other than injection or oral
would be considered renal dialysis services and would be in the ESRD
bundled base rate. 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.
We believe that categories of drugs and biological used for access
management, anemia management, bone and mineral metabolism, and
cellular management would always be considered ESRD-related when
furnished to an ESRD patient unless the ESRD facility indicates a drug
or biological is non-ESRD-related through the use of a modifier.
However, because anti-infectives are routinely furnished for ESRD-
related reasons related to access infections and peritonitis, we
included vancomycin and daptomycin and all other antibiotics on the
2007 ESRD claims in computing the final ESRD PPS base rate. Therefore,
if any other anti-infective (including oral or other forms used as a
substitute for an injectable anti-infective) is used for vascular
access infections or peritonitis, the drug would be a renal dialysis
service and separate payment would not be made.
Under this approach, we are presuming these drugs and biologicals
are renal dialysis services because they were included on the ESRD
facility claims and furnished in conjunction with a dialysis treatment.
In addition, these drugs represent 99.8 percent of payments for
separately billable drugs and biologicals furnished to ESRD patients.
In our analysis for this final rule of the drugs and biologicals on
the ESRD facility claims, we analyzed the remain 0.2 percent of
payments for separately billable drugs and identified drug categories
that we believe could be ESRD-related, but are commonly used for non-
ESRD-related conditions (for example, antiemetics and pain
medications). These are shown in Table 5. Because these drug and
biological categories could be ESRD-related, we included the payments
made under Part B for these drugs and biologicals in 2007 in the final
ESRD bundled base rate. In other words, for the purpose of the ESRD
bundle, as of January 1, 2011, these drugs are presumed to be renal
dialysis services unless the ESRD facility indicates on the claim (by
using
[[Page 49051]]
a modifier) that a drug or biological in these categories is not ESRD-
related and, separate payment would be made. (We discuss the use of the
modifier in section II.K. of this final rule.)
Where these drugs are furnished and billed by ESRD facilities in
conjunction with dialysis treatments, we presume these drugs and
biologicals in whatever form they are furnished, to be renal dialysis
services. As a result, we identified the drugs and biologicals for
these categories and included the payments made under Part B for these
drugs in computing the final ESRD PPS base rate. As ESRD facilities are
required to report all drugs and biologicals they furnish and will be
able to designate drugs and biologicals as being ESRD-related or non-
ESRD-related through the use of a modifier, we will be able to monitor
the drugs and biologicals to identify those that are being used for
ESRD-related conditions and those that are not.
However, as the oral (or other form of administration) substitutes
for the drugs and biological described above were not furnished or
billed by ESRD facilities nor furnished in conjunction with dialysis
treatments, we presume that these drugs and biologicals currently paid
under Part D were prescribed for non-ESRD-related conditions and are
not renal dialysis services. Therefore, we did not include payment for
these oral drugs and biologicals with other forms of administration in
the ESRD PPS base rate. However, if these drugs and biologicals
currently paid under Part D are furnished by an ESRD facility for ESRD-
related purposes, they would be considered renal dialysis services.
We will monitor the use of drugs and biologicals in these
categories for the treatment of ESRD and may add categories of drugs
and biologicals that constitute renal dialysis services (or if
applicable, eliminate categories of drugs and biologicals that no
longer constitute renal dialysis services) in the future.
[GRAPHIC] [TIFF OMITTED] TR12AU10.012
Comment: One commenter questioned whether midodrine used to
maintain blood pressure on dialysis was included in the bundle and
would the bundle be expanded to include all blood pressure medications.
Another commenter noted that the average patient is on 3 to 5 different
anti-hypertensive drugs and suggested that if anti-hypertensive drugs
were in the bundle, that more focus on optimal fluid management should
occur.
Response: As we discussed above, the separately billable Part B
payments made for cardiac drugs (including anti-hypertensive drugs)
were not included in the final ESRD PPS base rate because cardiac drugs
are included under the current basic case-mix adjusted composite
payment rate. In addition, we note that we did not see midodrine
reported in the 2007 ESRD claims data. However, to the extent that that
any cardiac drug or biological (including anti-hypertensive drugs and
biologicals) are furnished by an ESRD facility for ESRD-related
conditions, the drug or biological would be considered a renal dialysis
service and separate payment will not be made.
Comment: Some commenters indicated that in cooperation with other
physicians and transplant centers and in the patients' interest, they
administer medications that are not part of dialysis care, such as
immunosuppressants and antibiotics. One commenter indicated that
providers will have to undertake an expensive appeals process that
could impair access if there is no recognition of non-ESRD-related
drugs. The commenter further stated if the ESRD PPS does not consider
that non-ESRD-related drugs and biologicals are furnished by ESRD
facilities, nephrologists will only be permitted to order medications
that are included in the final ESRD PPS base rate, and directly related
to dialysis. This outcome would make it impossible for nephrologists to
serve as primary care physicians and would force patients to see
internists and family practice physicians incurring additional costs to
insurers and patients. The commenter believed that this will result in
repetition of unnecessary and expensive procedures resulting in higher
costs, morbidity, and mortality.
Response: We are aware that drugs and biologicals may be
administered for reasons unrelated to the treatment of ESRD or dialysis
and would not be renal dialysis services covered under the ESRD PPS. As
discussed above, because the 2007 ESRD claims do not distinguish
between ESRD-related and non-ESRD-related drugs and biologicals, we
were unable to exclude payments for those drugs and biologicals from
the base rate with certainty. To the extent that we were able to
presume a drug or biological was not ESRD-related, we excluded the
payments. We identify the drugs and biologicals that were included in
the base rate in Table C in the Appendix. We have developed a mechanism
to be used by ESRD
[[Page 49052]]
facilities to identify and be paid separately for non-ESRD-related
drugs and biological which is discussed in section II.K. of this final
rule.
Comment: One commenter recommended that we develop a list of
specific ESRD-only related drugs for inclusion in the bundle and that
the list be periodically updated to account for new technology and
innovation.
Response: As discussed above, rather than specifying the specific
ESRD-related drugs and biologicals, we identified categories based on
the mechanism of action of these drugs and biologicals. We did not
specify all of the drugs and biologicals within these categories
because, as we noted above, we did not want to inadvertently exclude
drugs that may be substitutes for drugs we identified and we wanted the
ability to reflect new drugs and biologicals developed or changes in
standards of practice. Therefore, we are not restricting or limiting
the tables to specific drugs or biologicals. However, the categories of
drugs and biologicals which we identified as renal dialysis services
were included in the final ESRD PPS base rate and are shown in Table 5.
We will monitor the use of drugs and biologicals for the treatment of
ESRD and may add categories of drugs and biologicals that constitute
renal dialysis services (or if applicable, eliminate categories of
drugs and biologicals that no longer constitute renal dialysis
services) in the future.
Comment: Some commenters suggested that we include levocarnitine in
the ESRD bundle.
Response: We agree that levocarnitine is used in the treatment of
ESRD and meets the definition of a renal dialysis service.
Levocarnitine is included in the drug categories shown in Table 4.
Comment: Some commenters indicated that the top 11 ESRD drugs and
biologicals account for 99.7 percent of Part B payments for intravenous
drugs and biologicals furnished to ESRD patients in 2007. The
commenters believed that the Congress intended that only these drugs
and their equivalents be included in the bundled rate, as these drugs
normally are administered during the course of dialysis treatment.
Response: We do not agree with the commenters that only the top 11
drugs and biologicals should be included in the ESRD base rate. As we
discussed above, the top 11 drugs, which in the analysis conducted for
this final rule account for 99.8 percent of ESRD Part B separately
billable drug payments, are included in the ESRD bundled base rate.
However, there are drugs and biologicals (and therefore, categories
of drugs and biologicals) that were not among the top 11 ESRD drugs and
biologicals, but were determined to be renal dialysis services. We
discuss these categories of drugs and biologicals (for example, the
pain management category), in the discussion above concerning
categories of drugs that are ESRD-related but could be used for non-
ESRD conditions.
Comment: A few pediatric dialysis facilities noted that drugs
administered to children usually include antibiotics for peritonitis;
peritoneal dialysis or hemodialysis central venous catheter infections;
hemodialysis catheter related septicemia; alteplase for hemodialysis
catheter de-clotting; anti-seizure medications; ESAs; and vitamin D
analogs. The commenters indicated that antibiotic and alteplase use was
more prevalent in younger children as well as higher ESA dosing per
kilogram of body weight. Some of these commenters provided a list of
the pediatric drugs and their costs.
Response: As we discussed above, we concur that drugs and
biologicals that are used for anemia management (ESAs), bone and
mineral management (vitamin D), access infections and peritonitis
(vancomycin and daptomycin), and access management (alteplase) are
renal dialysis services and payments for the drugs in these categories
have been included in the ESRD PPS base rate. However, we did not
include anti-seizure medications in the ESRD PPS base rate because we
believed that anti-seizure drugs and biologicals were used for many
conditions and were not likely to be renal dialysis services. We are
not clear if the commenter was indicating that anti-seizure medications
were administered to pediatric patients because of ESRD-related
conditions or for other non-ESRD-related conditions.
However, we will monitor the use of anti-seizure drugs and
biologicals for the treatment of ESRD and may add this category of
drugs and biologicals that constitute renal dialysis services in the
future. We expect that ESRD facilities that treat ESRD patients under
the age of 18 will report the ESRD-related seizure medications on the
ESRD claims. Where an anti-seizure drug or biological is furnished by
the ESRD facility and reported without a modifier, separate payment
would not be made. Further discussions on pediatric ESRD patients are
in section II.G. of this final rule.
Comment: Many commenters opposed the inclusion of antibiotics in
the bundled payment indicating that antibiotics are often administered
during dialysis for non-renal reasons such as pneumonia or wound
infection and, therefore, should remain separately billable. Others
explained that antibiotics are administered when an infection is
suspected in patients receiving dialysis treatment, noting that
administration of antibiotics decreases hospitalizations, emergency
room visits, shortens hospital days, and decreases mortality. These
commenters believed that if antibiotics are included in the bundle, it
would serve as a disincentive for early infection intervention. Others
explained that antibiotics are often not prescribed by nephrologists
and, therefore, would not be renal dialysis services. Still others
noted that administering antibiotics during dialysis is less expensive
to administer because there is vascular access readily available.
Another commenter indicated that antibiotics are administered to
severely ill patients prior to transfer to the emergency department.
Several commenters explained that dialysis ``clears many antibiotics''
and indicated that if patients do not receive antibiotics during or at
the end of dialysis, there is a likelihood that their blood levels
would be subtherapeutic, increasing the risk of recurrent infection and
hospitalization. One commenter provided a case example. Some commenters
predict that providers will decline to administer medications not
directly related to kidney failure, such as antibiotics for infected
foot ulcers, or will use less proven oral regimens to complete
treatment.
Response: We acknowledge that antibiotics may be administered in an
ESRD facility for purposes other than dialysis or ESRD-related
conditions as well as for treatment of vascular access infections.
Included in the top 11 drugs and biological are vancomycin and
daptomycin. We believe that there are other antibiotics that may be
administered for vascular access related infections and peritonitis.
Therefore, we included all antibiotics, with the exception of
antivirals, that were on the 2007 ESRD claims, into the ESRD bundled
base rate. ESRD facilities will be able to identify on the ESRD claims
any antibiotic administered for non-ESRD related reasons, and receive
payment for those non-ESRD related antibiotics. We note, if an anti-
infective (including anti-bacterials and anti-fungals) are administered
for the purpose of a vascular access infection or peritonitis, the drug
would be considered a renal dialysis service and not eligible for
separate payment. This also applies to any drugs or biologicals that
may be developed in the future.
Comment: In general, commenters supported the agency's reading of
the
[[Page 49053]]
statute with regard to oral drugs with injectable equivalents (or some
other form of administration). In particular, several commenters fully
supported inclusion of oral drugs that are equivalent, full replacement
products for injectable Part B drugs in the ESRD PPS.
Response: We appreciate these comments and agree that such oral
drugs are required to be included in the ESRD PPS because such drugs
meet the definition of ``renal dialysis services'' under section
1881(b)(14)(B) of the Act.
Comment: One commenter suggested that the bundle include oral drugs
with intravenous equivalents, phosphate binders, and calcimimetics
essential for bone health and mineral metabolism. A few commenters
provided a list of drugs and cost amounts. One commenter believed
bundling of intravenous drugs is straightforward with bundling of oral
equivalents being less logical. Some commenters believed that oral
drugs such as cinacalcet HCL, lanthanum carbonate, calcium acetate,
sevelamar HCL, and sevelemar carbonate commonly taken by patients on
dialysis and non-dialysis days, should not be in the bundle. One
commenter acknowledged that zemplar and other vitamin D products belong
in the bundle as they are oral equivalents of intravenous vitamin D.
Another commenter believed that vitamin D and oral iron were the only
currently available oral drugs with intravenous equivalents and
therefore the only oral drugs in the bundle. One commenter stated that
oral drugs with injectable equivalents are primarily prescribed for
peritoneal dialysis and home hemodialysis patients. Other commenters
supported the need to revisit the issue and ensure that the only drugs
in the bundle are those that are separately billable by dialysis
facilities and have an intravenous equivalent.
Response: As explained in section II.A.3. of this final rule, oral-
only ESRD-related drugs and biologicals currently paid under Part D
meet the definition of a renal dialysis service, but implementation of
these drugs under the ESRD PPS is delayed until January 1, 2014. We do
not agree with the comment that bundling of oral equivalents is less
logical than bundling injectable drugs. As we have discussed above,
section 1881(b)(14)(B)(iii) of the Act specifies that other drugs and
biologicals that were furnished to individuals for the treatment of
ESRD, and for which payment was made separately under this title, prior
to the implementation of the ESRD PPS, and their oral equivalent forms,
must be included in the ESRD PPS payment bundle.
Based upon our determination of the categories of drugs and
biologicals that are renal dialysis services, at this time there are
oral or other forms of injectable drugs only for the bone and mineral
metabolism and cellular management categories. As discussed earlier in
this section, we did not include the non-injectable form of vancomycin
because we believe that the oral or other forms of these anti-
infectives are not used for ESRD-related access infections. In
addition, we were not able to identify any oral or other form of
administration for iron prescriptions. Therefore, payments related to
the oral or other forms of these injectable drugs were not included in
the ESRD PPS base rate. As a result, for purposes of calculating the
ESRD PPS base rate, we included the payments under Part D for oral
vitamin D (calcitrol, doxercalcitrol and paracalcitrol) and oral
levocarnitine. To the extent an ESRD facility furnishes an injectable,
oral or other form of a drug or biological that is ESRD-related, the
facility should report the drug or biological on the ESRD claim without
a modifier and no separate payment would be made.
Therefore, we are finalizing the definition of renal dialysis
services under Sec. 413.171 as proposed.
4. Diagnostic Laboratory Tests and Other Items and Services
Section 1881(b)(14)(B)(iv) of the Act requires that diagnostic
laboratory tests not included under the composite payment rate (that
is, currently separately billable laboratory tests) must be included as
part of the ESRD PPS payment bundle. We proposed to define such
laboratory tests as laboratory tests that are separately billed by ESRD
facilities as of December 31, 2010, and laboratory tests ordered by a
physician who receives monthly capitation payments (MCPs) for treating
ESRD patients that are separately billed by independent laboratories
(74 FR 49929). We proposed that payments for these laboratory services
would be included in the development of the proposed patient-specific
case-mix adjusters and in the proposed ESRD base rate to which the
adjusters would be applied.
Section 1881(b)(14)(B)(iv) of the Act also requires that the ESRD
PPS payment bundle include ``other items and services not described in
clause (i).'' In the proposed rule, we noted that this language can be
reasonably interpreted to include other separately billable items and
services used in the treatment of ESRD, such as supplies and other
self-dialysis services (74 FR 49929). We noted that examples of such
items and services would include, but would not be limited to, items
such as syringes, specialized tubing, as well as blood and blood
products, which facilities may furnish during the dialysis treatment.
We also stated that we believe that the statutory language can be
interpreted to include the cost of other self-dialysis training
services in the ESRD PPS (for further detail on self-dialysis training
(74 FR 49930)). We proposed that such items and services be included in
the ESRD PPS bundle and that the inclusion of diagnostic laboratory
tests and other items and services as renal dialysis services in the
ESRD PPS payment bundle is set forth in proposed Sec. 413.171.
The comments we received on this proposal and our responses are set
forth below.
Comment: We received many comments addressing our methodology for
the inclusion of diagnostic laboratory tests in the ESRD PPS payment
bundle. Commenters noted that the inclusion of such tests in the
bundled ESRD PPS will subject Medicare beneficiaries for the first time
to a 20 percent coinsurance payment obligation. The commenters reasoned
that our proposal that Medicare pay for 80 percent of diagnostic
laboratory tests through their inclusion in the payment bundle violates
the statutory requirement that the Secretary ensure that the estimated
amount of total payments under title XVIII for renal dialysis services
in 2011 equal 98 percent of the amount of payments that would have been
made, but for the PPS. Some commenters stated that section
1833(a)(2)(D)(ii) of the Act specifies that for clinical laboratory
tests paid under Medicare Part B on the basis of negotiated rates, the
payment amount must equal 100 percent of the negotiated rate
(incidentally, we note that a few commenters cited to section
1883(a)(2)(D)(ii) of the Act, but we presume those commenters intended
to instead reference section 1833(a)(2)(D)(ii) of the Act).
Accordingly, the commenters requested that we revise the payment amount
for laboratory tests included in the bundle to reflect 100 percent of
the allowable amount.
Response: Cost sharing with respect to laboratory services is
addressed in section 1833(a)(2)(D) of the Act. We note that nothing
changes in terms of the cost-sharing structure for non-ESRD-related
laboratory tests. Under the definition of renal dialysis services under
section 1881(b)(14)(B)(iv) of the Act, ESRD-related laboratory tests
[[Page 49054]]
would be considered to be renal dialysis services under the new ESRD
PPS, subject to the usual coinsurance applied to such Part B services.
A few commenters appeared to be under the impression that only 80
percent of payments for laboratory tests were included in the
calculation of the base rate. This is incorrect. We included 100
percent of payments for laboratory services in the ESRD PPS base rate.
As with all other renal dialysis services included in the payment
bundle, these laboratory services will be part of the ESRD PPS payment
rate and would be subject to the customary 20 percent Part B
coinsurance amount.
Comment: Many commenters took issue with our proposal to include
laboratory tests ordered by MCP physicians for treating ESRD
beneficiaries, and that are billed separately by independent
laboratories, and our proposal to include all these tests billed by
independent laboratories for ESRD patients in the payment bundle.
Numerous commenters pointed out that in many instances the MCP
physician is the primary care physician for the ESRD patient and often
has laboratory tests performed for conditions unrelated to ESRD. The
commenters asserted that requiring ESRD facilities to pay for such
tests would result in a potentially vast number of tests unrelated to
the treatment of ESRD being inappropriately included in the ESRD
payment bundle.
Response: Section 1881(b)(14)(B)(iv) of the Act specifies that the
ESRD PPS must include ``diagnostic laboratory tests * * * that are
furnished to individuals for the treatment of end-stage renal
disease.'' We interpreted this language to include laboratory tests
ordered by MCP physicians for treating ESRD beneficiaries and that are
currently billed separately by independent laboratories. We recognize
that there is a small subset of laboratory tests that are typically
performed in connection with a patient's ESRD, and that are
appropriately considered renal dialysis services because they are
furnished for the treatment of ESRD, but that can also be done for non-
ESRD reasons. For example, a complete blood count (CBC) could be
ordered for an ESRD patient in connection with routine testing for
hemoglobin or hematocrit to ensure appropriate management of anemia, an
ESRD-related purposes. However, a CBC could also be ordered for an ESRD
beneficiary to measure the amount of blood loss in response to a
suspected lower gastrointestinal bleed, or to measure infection (for
example, white blood cell count for a suspected pneumonia), non-ESRD
purposes.
The 2007 ESRD facility claims do not distinguish between ESRD-
related and non-ESRD-related laboratory services. We included payments
for all tests billed by independent laboratories for ESRD patients in
calculating the final base rate in order to appropriately account for
such tests as renal dialysis services. We presumed that MCP physicians,
for the most part, order laboratory tests for ESRD beneficiaries for
ESRD-related purposes. However, as we recognize that certain non-ESRD
laboratory tests may be ordered in conjunction with ESRD-related
laboratory tests, we have developed billing modifiers to provide for
separate payment where the testing is not ESRD-related (section II.K.2.
of this final rule).
Comment: Several commenters recommended that we include in the ESRD
PPS payment bundle, only those laboratory tests that are generally
furnished for the treatment of ESRD, and included lists of
approximately 50 tests which they believe account for about 95 percent
of the laboratory tests ordered by ESRD facilities for ESRD patients.
The commenters pointed out that such specificity would leave no doubt
as to whether a particular laboratory test would be included or
excluded from the payment bundle, would not create billing rules other
than the list of 50 to 60 current procedural technology (CPT) codes
that would not be separately billable, and would not result in the
attachment of testing frequencies to the included tests. The commenters
also stated that there is precedent for their recommendation, pointing
out that CMS excluded ESRD-related clinical laboratory tests from the
skilled nursing facility consolidated payment, and published a list of
those ESRD-related tests, which closely resemble the tests which the
commenters submitted for consideration as ESRD-related for inclusion in
the ESRD PPS. Other commenters submitted their recommended list of
ESRD-related laboratory tests.
Response: We agree with the commenters that limiting the laboratory
tests for payment under the ESRD PPS payment bundle to specific tests
that are customarily performed in connection with the treatment of ESRD
comports with section 1881(b)(14)(B)(iv) of the Act and would be a
straight forward method of capturing only ESRD-related laboratory
testing. In addition, we needed to develop a list of ESRD-related
laboratory tests for consolidating billing edits to ensure that payment
is not made to independent laboratories for ESRD-related laboratory
tests. However, based on a review of the lists of ESRD-related
laboratory tests in the Medicare Claims Processing Manual and received
in public comments, it appears there is currently not consensus among
the various stakeholders about the laboratory testing commonly
furnished to ESRD patients.
Therefore, in order to develop a list of ESRD-related laboratory
tests, we identified those laboratory tests that were most frequently
identified on the lists we reviewed. Then, we received input from
physicians working with UM-KECC. Lastly, CMS physicians and other
clinical staff finalized the list which is contained in Table F of the
Appendix. As discussed in more detail in section II.K.2. of this final
rule, we will be implementing consolidated billing edits to prevent
payment to independent laboratories for tests on the list of ESRD-
related laboratory tests unless a modifier is reported indicating the
test is not ESRD-related.
ESRD facilities should report on their claims all laboratory tests
ordered by the MCP physician. We will establish a modifier so that ESRD
facilities may continue to be paid separately for non-ESRD-related
laboratory tests. We plan to review the ESRD-related laboratory tests
reported by ESRD facilities to ensure that the laboratory list
continues to reflect common ESRD-related laboratory testing.
Comment: Commenters noted that we proposed to include in the ESRD
PPS blood and blood products to the extent these items were furnished
by ESRD facilities and reported on the type ESRD claims. One commenter
pointed out that patients are transfused infrequently in ESRD
facilities, and that most transfusions occur in hospital outpatient
settings. The commenter stated that if ESRD facilities are to be held
responsible for blood transfusions administered to dialysis patients,
then the costs from other outpatient settings need to be captured and
added to the payments developed from dialysis facility claims to
compute the ESRD PPS base rate.
Another commenter opposed the inclusion of blood and blood products
in the payment bundle. This commenter stated that blood transfusions
for outpatient dialysis patients do not represent the current first
line standard-of-care intervention for the treatment of ESRD, having
largely been replaced by anemia management drugs. Because their
administration in dialysis facilities is relatively infrequent, the
commenter requested that to the extent dialysis facilities furnish
blood or blood products ordered by an MCP physician, these costs should
be excluded from the
[[Page 49055]]
ESRD PPS payment bundle and remain separately billable.
Response: We agree with the commenter that the furnishing of blood
and blood products by ESRD facilities to ESRD beneficiaries is a
relatively infrequent and unusual occurrence, and we believe that it
does not represent standard clinical practice for the management of
anemia in connection with the treatment of ESRD. ESRD facilities may
also furnish blood and blood products for non-ESRD reasons ordered by
an MCP physician for the convenience of the patient undergoing
dialysis. We also agree that the administration of blood and blood
products is usually performed in a hospital outpatient setting,
generally for non-ESRD reasons.
For these reasons, we do not consider the furnishing of blood and
blood products to be renal dialysis services under the statute and,
therefore, these services would be excluded from the ESRD PPS payment
bundle. The furnishing of blood, blood products, and blood supplies in
connection with transfusions will remain separately billable when they
are administered in an ESRD facility. The total payments for blood and
blood products to ESRD facilities as reported on available ESRD claims
in CY 2007 was $1,504,831. We have excluded this amount from the
computation of the final ESRD PPS base rate, consistent with our
determination that blood and blood products are not renal dialysis
services.
We note that the incentives under the ESRD PPS may lead to under
treatment of anemia, a critical clinical indicator for ESRD patients,
necessitating blood transfusions for patients whose hemoglobin levels
drop too low. We plan to monitor the extent to which dialysis patients
receive transfusions after implementation of the ESRD PPS. If practice
patterns change such that the administration of transfusions and
furnishing of blood and blood products substantially increase, we may
subsequently reexamine whether these services should be considered
renal dialysis services used for the treatment of ESRD and included in
the ESRD PPS payment bundle.
With respect to the laboratory tests included in developing the
ESRD PPS base rate, we are finalizing our proposal to include payments
for outpatient laboratory tests billed on ESRD facility claims, as well
as payments for laboratory tests ordered by physicians receiving MCP
amounts and billed on carrier claims. We used the list of CY 2007 MCP
physicians for this purpose. The ESRD related laboratory tests that
will be subject to the ESRD PPS are identified in Appendix Table F of
this final rule.
5. Physicians' Services
Section 1881(b)(14)(A)(i), as added by MIPPA, states as follows in
pertinent part:
* * * the Secretary shall implement a payment system under which
a single payment is made under this title to a provider of services
or a renal dialysis facility for renal dialysis services (as defined
in subparagraph (B)) in lieu of any other payment * * * and for such
services and items furnished pursuant to [section 1881(b)(4)].
As we indicated in the proposed rule, we believe this provision
generally governs payment to ESRD facilities (74 FR 49931). With regard
to physicians' services related to renal dialysis, such services are
addressed separately in section 1881(b)(3) of the Act. In the ESRD PPS
proposed rule, we indicated that we did not intend to significantly
modify payment for physicians' services, and stated that any changes
with regard to the payment for physicians' services related to renal
dialysis would be addressed in future rulemaking (74 FR 49931).
Comment: Numerous commenters supported our decision in the proposed
rule to exclude physician services from the ESRD PPS payment bundle. We
received no comments endorsing the inclusion of these services in the
bundle.
Response: We appreciate the views of the commenters. As we
indicated in the proposed rule, we are limiting the scope of this
rulemaking to payment for home dialysis and renal dialysis services
furnished by ESRD facilities. Therefore, we do not, at this time,
intend to modify payment for physicians' services. Any changes in
payment for physicians' services related to renal dialysis would be
addressed in future rulemaking.
6. Other Services
The comments and our responses are set forth below.
Comment: One commenter requested that we clarify that services that
may be furnished to beneficiaries at the time of a dialysis session,
but not furnished specifically for the treatment of ESRD, would be
excluded from the proposed ESRD bundled payment system. The commenter
cited apheresis treatment as an example. Because apheresis, like
dialysis, filters a patient's blood, the commenter was concerned that
this treatment regimen may be incorrectly viewed as a treatment for
ESRD. The commenter further explained that although both dialysis and
apheresis filter the patient's blood, the procedures accomplish
different objectives. The commenter stated that in dialysis the purpose
is to clear wastes from the blood, restore electrolyte balance, and
eliminate excess bodily fluid, whereas the purpose of apheresis is to
remove from the blood certain blood components such as abnormal
proteins implicated in a disease.
The commenter recommended that Medicare policy take no steps that
would financially incentivize fracturing dialysis and apheresis into
separate patient visits, but encouraged service alignments.
Response: As described in greater detail in section II.A. of this
final rule, items and services included within the ESRD PPS are home
dialysis and those items and services that meet the definition of
``renal dialysis services'' and are furnished to individuals for the
treatment of ESRD. Moreover, such services are considered essential for
the delivery of outpatient maintenance dialysis. Therefore, the fact
that an unrelated, non-ESRD item or service is furnished at the time of
a maintenance dialysis treatment would not mean that the particular
item or service would be bundled into the ESRD PPS.
Because at this time, we do not consider apheresis to be a renal
dialyisis service that is furnished to individuals for the treatment of
ESRD, or to be essential for the delivery of maintenance dialysis, we
have not included apheresis services in the ESRD PPS. As a result, we
would expect that the delivery of apheresis in the ESRD facility
setting would occur infrequently. However, we note that to the extent
that the coverage provisions for apheresis are met, as set forth in the
National Coverage Determination (NCD) Manual, apheresis services may be
payable outside the scope of ESRD facility payment, and in accordance
with hospital or nonhospital setting payment policies (for example,
hospital inpatient prospective payment system (IPPS), outpatient
prospective payment system (OPPS), or the physicians' fee schedule).
Medicare coverage provisions for apheresis procedures for certain
indications are set forth in the CMS Internet Only Manual (Pub. L. 100-
03; Chapter 1, Part 2, section 110.14), available online at: http://www.cms.hhs.gov/Manuals/IOM/list.asp?listpage=1. Please note that
indications not specifically addressed in section 110.14 of the NCD
Manual are left to local contractor discretion.
Comment: One commenter pointed out that occasionally a hospital or
ambulatory surgical center (ASC) may furnish services to an ESRD
patient. The commenter expressed concern that the
[[Page 49056]]
``other items and services'' language in section 1881(b)(14)(B)(iv) of
the Act could be interpreted as including such services in the ESRD PPS
payment bundle. The commenter requested that CMS clarify that the
definition of ``renal dialysis services'' excludes inpatient services,
emergency hospital services (including dialysis furnished to ESRD
patients), and hospital or ASC services relating to the creation or
maintenance of a patient's vascular access.
Response: None of the services which the commenter described were
included in developing the ESRD PPS base rate, and none of them are
considered renal dialysis services for inclusion in the PPS payment
bundle. Moreover, these services are reimbursed under other Medicare
payment systems. Hospital inpatient services, emergency services
(including emergency dialysis) furnished to ESRD patients, and certain
outpatient procedures necessary to maintain vascular access (that is,
those which cannot be addressed by the ESRD facilities using procedures
that are considered part of routine vascular access), are excluded from
the definition of renal dialysis services and are not included in the
ESRD PPS payment bundle. We note that currently ESRD facilities utilize
medications to maintain vascular access. We would consider the
administration of medications that are currently performed by ESRD
facilities to fall within the definition of renal dialysis services and
paid for under the ESRD PPS.
Comment: Several commenters requested confirmation that nutritional
supplements such as intradialytic parenteral nutrition (IDPN) and
intraperitoneal parenteral nutrition (IPN) are not included in the ESRD
PPS payment bundle.
Response: We do not consider nutritional therapies, even though (as
in the case of IDPN) they are often administered during a patient's
dialysis treatment, to be related to the treatment of ESRD. Nutritional
supplements have never been considered part of the ESRD benefit,
because they have not been considered integral to the furnishing of
outpatient maintenance dialysis, and are not included in the ESRD PPS
as Part B renal dialysis services.
Comment: One commenter stated that when adding up the numbers in
Table 8 of the proposed rule (74 FR 49940), the total expenditures for
composite rate and separately billable services included in payment
bundle was $9,876,466,063, more than $636 million higher than the total
shown of $9,239,987,362. The commenter inquired as to the reason for
the discrepancy.
Response: There is no discrepancy. The totals shown in Table 8 of
the proposed rule for vitamin D ($402,447,416) and injectable iron
($234,031,283) are each subdivided to show the payment amounts for each
of the drugs which comprise these categories. The commenter has
inadvertently added the component amounts for each of these payment
categories along with the totals for the two categories, resulting in
an overstatement of ESRD expenditures of $636,478,699.
7. Home Dialysis Patients (Method I and II) and Self Dialysis Training
Section 1881(b)(4) of the Act authorizes the Secretary to make
payment to providers of services and renal dialysis facilities, and to
suppliers of home dialysis supplies and equipment, for the cost of home
dialysis supplies and equipment and self-care home dialysis support
services furnished to patients for self-care home dialysis under the
supervision of such provider or facility. Currently, hemodialysis,
continuous cycling peritoneal dialysis (CCPD), intermittent peritoneal
dialysis (IPD) and continuous ambulatory peritoneal dialysis (CAPD)
treatment modalities may be performed at home by appropriately trained
patients. Medicare beneficiaries dialyzing at home must complete a
Medicare Beneficiary Form (CMS-382) selecting between two methods of
payment (Method I or Method II) as described in detail in the ESRD PPS
proposed rule (74 FR 49929).
a. Payment for Home Dialysis (Method I and Method II)
As a result of the enactment of section 153(b) of MIPPA, we
proposed that payment for home dialysis services (excluding physician
services) furnished to both Method I and Method II home dialysis
patients under the current basic case-mix adjusted composite payment
system would be included in the bundled payment to the ESRD facility
under the ESRD PPS (74 FR 49929 through 49930). We also proposed that
the costs of home dialysis training be included in the composite rate
portion of the two-equation regression model for determining payment
adjustments under the ESRD PPS (74 FR 49930 through 49931).
Below we address the general comments we received on home dialysis,
but in subsequent subsections we address more specific comments on the
proposals on Method I and Method II and self-dialysis training.
Comment: A commenter noted that section 1881(b)(14)(D)(iv) of the
Act gives the Secretary the discretionary authority to include payment
adjustments to the ESRD PPS as the Secretary determines appropriate.
The commenter requested that CMS provide a separate adjustment that
would account for the unique cost associated with providing home
dialysis that would include: (1) Training for home dialysis; (2)
support services; and (3) emergency home dialysis supplies, so that
dialysis facilities do not neglect their responsibility to the care of
ESRD home dialysis patients for financial reasons. The commenter stated
that in the proposed rule, the training reimbursement for home dialysis
services was fashioned to apply to all patients regardless of whether
training services were actually provided to them. The commenter stated
that the current system fosters a financial disincentive for home
dialysis by encouraging providers to minimize the number of home
dialysis patients they accept. To eliminate this financial
disincentive, the commenter recommended that CMS remove home dialysis
costs from the bundled rate and include this reimbursement in a
separate adjustment.
Response: Section 1881(b)(14)(A)(i) of the Act requires the
Secretary to implement a payment system under which a single payment is
made under this title to an ESRD facility for renal dialysis services
for such services and items furnished pursuant to section 1881(b)(4) of
the Act. Therefore, we are required to include payment for home
dialysis training, equipment and supplies, and support services in
computing the single bundled payment base rate.
As we explained in the ESRD PPS proposed rule (74 FR 59930), when
ESRD facilities furnish home dialysis training, Medicare pays the ESRD
facility its case-mix adjusted composite rate plus a training add-on of
$12 for peritoneal dialysis and $20 for hemodialysis and CCPD to
account for the staff time, supplies, and equipment associated with
training treatments. We believe the ESRD PPS base rate adequately
accounts for the costs associated with equipment and supplies. However,
we agree with the commenter, that the base rate does not capture the
unique staffing costs associated with home dialysis training. Section
494.100(a) of the ESRD Conditions for Coverage requires that training
be conducted by a registered nurse. Thus, as training involves one-on-
one training sessions with a nurse, we believe a separate adjustment to
reflect those costs are warranted.
We discuss the training payment adjustment we are finalizing in
[[Page 49057]]
subsection (b) of this section of the final rule.
Comment: A commenter suggested that CMS evaluate the cost of care
for nursing home hemodialysis patients and create an adjustment for
these patients under the ESRD PPS. The commenter stated that nursing
home hemodialysis patients incur unique costs that pertain to one-
machine per patient, administrative burdens, co-morbidities, higher
turn-over rates, and require nursing caregiver assistance for dialysis
administration. The commenter asserted that despite certain co-
morbidities not being included in the ESRD PPS for case-mix
adjustments, a nursing caregiver staff assistant is still required for
dialysis administration. The commenter further stated that CMS failed
to explain how the inclusion of home dialysis costs in the ESRD PPS
bundled payment system creates an incentive to provide home dialysis in
cases where the costs to treat patients is greater than the
reimbursement CMS proposed. The commenter suggested that a special
adjustment be afforded to cover these unique costs.
Response: Nursing home patients are regarded as home dialysis
patients because they are considered residents of the nursing home and
receive dialysis treatments at the nursing homes and not at dialysis
facilities. We disagree with this commenter's assertions because the
unique costs they described are no different from any other home
dialysis patient where there is one-machine per patient, co-
morbidities, and patient turn-over occurs due to kidney
transplantation. We, therefore, do not believe that a separate
adjustment for nursing home ESRD patients is warranted.
The other unique costs identified by this commenter pertained to
nursing-related caregiver services. The commenter stated that all
nursing home dialysis patients must have a trained caregiver in order
to dialyze at a nursing home and that these caregiver services are not
covered under the ESRD benefit. The commenter is correct that caregiver
services are not covered under the ESRD benefit, including caregiver
services furnished to nursing home dialysis patients. Thus, caregiver
services are not considered to be renal dialysis services and are not
reflected in the ESRD PPS base rate nor in the payment adjustments.
Comment: Some commenters suggested that CMS allow for self-
administration of injectable ESRD-related drugs at home by home
dialysis patients. The commenters indicated that home dialysis patients
would prefer to self-administer all injectable ESRD-related drugs at
home to include EPO, rather than traveling to the dialysis facility to
receive the injectable drugs. The commenters reasoned that since
injectable drugs such as EPO, Vitamin D, and IV iron are included in
the ESRD PPS bundle, patients should have the option to self-administer
these drugs at home.
Response: Under section 1861(s)(2)(O) of the Act, self-
administration of erythropoietin (EPO) is permitted for dialysis
patients who are competent to use such drug without medical or other
supervision with regard to the administration of such drug. If a
dialysis patient meets this requirement, then he or she can self-
administer erythropoietin at home. Payment for erythropoietin and
supplies needed to self-administer the drug would be included in the
ESRD PPS payment.
The ESRD PPS does not fundamentally alter how other injectable
drugs are administered under Part B. Thus, under the ESRD PPS, home
dialysis patients would continue to go to the dialysis facility for the
administration of other injectable drugs.
Comment: Some commenters expressed concern that CMS did not fully
account for supplies in estimating the cost of home dialysis programs.
They indicated that there is a one-time cost associated with certain
supplies and equipment (scales, thermometer, blood pressure equipment,
etc.) and continuing costs for daily treatment including disposable
supplies for peritoneal dialysis (dialysate, syringes, needles, masks,
latex gloves, etc.).
The commenters were also concerned that since supplies are
delivered monthly, the facility pays up front for those supplies.
Commenters claimed that should a patient discontinue treatment, change
modalities, or for other reasons stop using the delivered supplies, the
dialysis facility cannot move supplies from one patient to another
because of infection control issues. Commenters stated that the cost of
these supplies is borne by the facility. The commenter stated that
these cost are not recognized in the proposed ESRD PPS, and facilities
will no longer be able to bill separately for supplies without a
treatment.
Response: In accordance with Sec. 410.52 and Sec. 414.330,
Medicare Part B pays for all medically necessary home equipment and
supplies for the effective performance of a patient's dialysis in the
ESRD patients home. Medicare currently pays for home dialysis equipment
and supplies under the basic case-mix adjusted composite rate (Method
I) and for claims submitted by the DME supplier of home dialysis
equipment and supplies (Method II). We proposed that the costs of home
dialysis services furnished under Method I and Method II, regardless of
home treatment modality, would be included in the proposed ESRD PPS (74
FR 49929).
As explained in great detail in the data section of the proposed
rule (74 FR 49934 through 49935), we obtained cost information from
4,573 CY 2006 cost reports, for both hospital-based and independent
ESRD facilities. Cost data obtained from these cost reports included
all costs necessary to furnish home dialysis treatments including
staff, equipment and supplies. Even though a dialysis facility could
incur some up-front costs for supplies for home dialysis patients,
these costs are reported as supply costs on the provider's cost report
and were included in the composite rate part of the model. Therefore,
by including home dialysis costs in the composite rate portion of the
two-equation ESRD PPS model (described in section II.D. of this final
rule), we believe we have appropriately accounted for the cost of home
dialysis services and supplies.
Comment: A number of commenters indicated that CMS should actively
monitor home dialysis utilization after the ESRD PPS is implemented via
a formal plan consistent with the GAO's recommendation, which CMS has
publically supported.
Another commenter recommended that CMS monitor the effect of the
new payment system on use of training services and home dialysis. Also,
commenters suggested that more specific coding would facilitate such an
effort by enabling CMS and researchers to better analyze trends in the
use of these services. For example, commenters indicated that specific
codes on facility claims could identify particular types of training
services, home dialysis services, and in-facility dialysis services.
Commenters also believe that a strengthened monitoring plan should help
CMS assess the use of dialysis services, identify lapses in care, give
providers an incentive to furnish all clinically necessary care, and
lead to quality improvement.
Response: We agree with the commenters that increased monitoring
will be needed to monitor the effects of the new ESRD PPS. We concurred
with the GAO's recommendation in its May 2009 report and we intend to
assess the effect of the expanded bundled payment on home dialysis
utilization rates. We also agreed with GAO on the need to establish a
monitoring plan under the new bundled ESRD PPS that includes an
examination of home dialysis utilization. We expect to establish such
[[Page 49058]]
a plan after we promulgate this final ESRD PPS. With regard to
establishing more specific code for home dialysis equipment, supplies,
and services, we will take these comments into consideration as we make
changes to the cost report to reflect the ESRD PPS. Changes in coding
will be established through administrative issuances.
i. Method I--The Composite Rate
In accordance with Sec. 414.330(a), under the basic case-mix
adjusted composite payment system, the ESRD facility receives the same
Medicare payment rate for a home dialysis treatment as it would receive
for an in-facility treatment. Under Method I, the ESRD facility bills
the fiscal intermediary Medicare administration contractor (FI/MAC) for
needed supplies, equipment, and drugs, and the beneficiary is
responsible for paying the Medicare Part B deductible and the 20
percent coinsurance on the total Medicare payment made to the facility.
Although we proposed that the costs for home dialysis services
furnished under Method I would be included in the single payment rate
under the proposed ESRD PPS, we did not propose any changes to Method I
as this approach could continue to be used under the ESRD PPS (74 FR
49930).
The comments we received on this proposal and our responses are set
forth below.
Comment: Several commenters expressed support for continuing to
provide the same payment for home dialysis and in-facility treatments,
which commenters believe will support CMS's goal of increasing the
number of patients that elect the various home dialysis therapies. The
commenters applauded CMS's move to a bundled payment system and our
interest in encouraging patient access to home dialysis services.
Response: We appreciate the commenters' support of our move to a
bundled payment system that we believe will encourage patient access to
home dialysis and recognize the importance of various home dialysis
therapies.
Comment: Commenters from individual home dialysis patients thanked
CMS for including all home dialysis options in the ESRD PPS and
recognizing the importance of home dialysis. Many of the patients
stated that they have access to more frequent dialysis that decrease
hospitalizations and medications and increase their quality of life,
which allows them to work or go to school and contribute to society.
Another commenter generally pointed out that there are no
transportation costs incurred for home hemodialysis patients.
Commenters stated that decreased hospitalizations are typical of home
dialysis patients, which further reduced the costs within the system.
Additionally, commenters pointed out that early discharge from acute
and sub-acute care facilities to either the patient's home or a nursing
home has allowed patients to receive care in less expensive and more
appropriate settings.
Response: We appreciate the comments from individual home dialysis
patients who support our recognition of the importance of home dialysis
which we believe results in a better quality of life for the patient.
We did not receive any public comments objecting to our proposal
for payment under the ESRD PPS of home dialysis services furnished
under Method I payment. As we described above, numerous commenters
supported payment under the bundle for Method I home dialysis patients
stating it would increase beneficiary access to home dialysis services,
which would increase their quality of life. Therefore, consistent with
section 1881(b)(14)(A)(i) of the Act, we are finalizing our proposal to
bundle home dialysis furnished under Method I and pay the bundled ESRD
PPS rate for such home dialysis services, as set forth in Sec.
413.210, Sec. 413.217, and Sec. 414.330, respectively.
ii. Method II--Dealing Directly With Suppliers
Currently, in accordance with regulations at Sec. 414.330(a)(2), a
Medicare ESRD beneficiary can elect to obtain home dialysis equipment
and supplies from a supplier, that is not a Medicare approved dialysis
facility (Method II). If a beneficiary elects Method II, the
beneficiary deals directly with a single Medicare Durable Medical
Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) supplier to
secure the necessary supplies and equipment to dialyze at home. The
selected DMEPOS supplier must accept assignment and bills the Durable
Medical Equipment Medicare Administrative Contractor (DME MAC). The
beneficiary is financially responsible to the supplier for any unmet
Medicare Part B deductible and for the 20 percent Medicare Part B
coinsurance requirement. Currently, the amount of Medicare payment
under Method II for home dialysis equipment and supplies may not exceed
$1,974.25 per month for CCPD and $1,490.85 per month for all other
modalities of home dialysis (see 57 FR 54186, published on November 17,
1992).
For each beneficiary it serves, the supplier is required to
maintain a written agreement with an approved ESRD facility to provide
backup and support services. An ESRD facility that has a written
agreement to supply backup and support services bills the FI/MAC for
services provided under the agreement. Under Method II, an ESRD
facility may be paid up to $121.15 per month for home dialysis support
services, such as arranging for the provision of all ESRD-related
laboratory tests and billing for the laboratory tests that are included
in the composite payment rate (see 57 FR 54186, published on November
17, 1992). An ESRD facility may not be paid for home dialysis equipment
or supplies under Method II.
As we indicated previously, section 1881(b)(14)(A)(i) of the Act
requires that a single payment for renal dialysis services and items
and services under section 1881(b)(4) be made to an ESRD facility. As a
result, we proposed: (1) That payment for all home dialysis services
excluding physicians' services would be included in the bundled payment
to the ESRD facility; (2) that all payments made for home dialysis
services furnished under Method I and Method II, regardless of home
treatment modality, would be included in computing the proposed ESRD
PPS base rate; and (3) that the Method II home dialysis approach in its
present form would no longer exist when the ESRD PPS is implemented
January 1, 2011. We proposed to revise Sec. 414.330 to reflect that
the ESRD PPS payment as established in section 1881(b)(14) of the Act
will be the basis of payment for home dialysis supplies, equipment, and
home support services and that payment limits applicable for such
services would no longer apply (74 FR 49930). We noted that effective
January 1, 2011, a supplier could only furnish, home dialysis equipment
and supplies to a Medicare home dialysis beneficiary under an
arrangement with the ESRD facility, and that the supplier would need to
look to the ESRD facility for payment.
We received several comments from various ESRD organizations and
individuals who rely on the Method II home dialysis payment approach
who oppose our proposed elimination of Method II. These and other
comments we received on our proposals, including our responses, are set
forth below.
Comment: One commenter stated that working with Method II supply
companies is vital to their home dialysis program because the supply
companies
[[Page 49059]]
take on the costs and responsibility of furnishing home dialysis
supplies and equipment.
Response: Under the ESRD PPS, the supplier could still furnish,
under arrangement with the dialysis facility, home dialysis equipment
and supplies to a Medicare home dialysis beneficiary. However,
effective January 1, 2011, the supplier would be required to look to
the ESRD facility for payment since the ESRD PPS payment would be made
to the facility. As such, under the ESRD PPS, DME MACs would no longer
make payment to suppliers of home dialysis equipment and supplies. All
payments previously paid to DME MACs for home dialysis supplies and
equipment has been built into the ESRD PPS base rate so that ESRD
facilities can pay for the supply and equipment costs for their home
dialysis patients.
Comment: A commenter stated that the elimination of Method II is a
complete contradiction of the CMS goals for promoting better outcomes
and increased utilization of more cost effective home dialysis
treatment modalities.
Response: We do not agree that the elimination of Method II will
undermine our goals for increased use of home modalities and better
outcomes. We will continue to support home dialysis as indicated in our
decision to pay the same under the ESRD PPS for home and in-center
treatments even though home dialysis is less costly for ESRD facilities
and our decisions regarding payment for home dialysis training
discussed later in this section.
Comment: Some commenters stated that the loss of the Method II
payment system will result in higher administrative costs and
logistical burdens that will greatly increase the cost of providing
treatment to home dialysis patients and create a disincentive for ESRD
facilities to provide home modalities.
Response: We do not believe that the elimination of Method II will
result in significant increased burdens to ESRD facilities such that it
would create disincentives for ESRD facilities to provide home
treatment modalities. Most ESRD facilities currently have arrangements
with DME suppliers to furnish dialysis equipment and supplies for their
in-facility dialysis patients and home dialysis patients. Under the
ESRD PPS, in order to minimize the impact on patients of the
requirement that DME suppliers now must look to the ESRD facility for
payment, home patients could continue with these same arrangements. We
believe that ESRD facilities will have a financial incentive to provide
home treatment modalities since we will pay the same base rate for less
expensive home modalities than we pay for in-facility treatments.
Comment: Commenters from pediatric facilities that use Method II
suppliers expressed concern that the specialty products they use are
not available through the major manufacturers of dialysis products and
that pediatric products are more expensive to purchase due to the
limited demand and negotiating power of pediatric facilities.
Response: We do not believe that the elimination of Method II
option under the ESRD PPS will have a negative effect on pediatric
dialysis facilities. The pediatric facilities have indicated that their
home dialysis patients are mostly peritoneal dialysis (PD) patients. As
discussed in the proposed rule, we described a comparison of composite
rate costs by modality for CYs 2004 through 2006 which showed that PD
is a substantially less costly mode of dialysis compared to in-facility
hemodialysis (74 FR 49967 through 49968). Data from the Medicare cost
report and Medicare claims data showed a significant difference in
resource utilization, with PD patients incurring significantly lower
composite rate and separately billable expenses. Since payment under
the ESRD PPS for home dialysis patients will be based on Method I, we
believe that paying the same amount for all types of dialysis
modalities will not disadvantage pediatric facilities. We believe that
pediatric facilities will still be able to make arrangements with their
current DME suppliers to furnish the special supplies and equipment
that are needed for small children and infants. The only difference is
that the DME supplier must look to the pediatric ESRD facility for
payment. Also, we note that pediatric facilities could form a group
purchasing arrangement to enhance their negotiating power when
purchasing supplies and equipment for their home patients.
Comment: Commenters claim that the elimination of Method II under
the ESRD PPS would require children's hospitals to become a ``flow-
through'' for supplies and equipment that previously would have been
obtained by patients directly from Method II suppliers.
Response: We agree with this ``flow-through'' description made by
the commenter because under the ESRD PPS, the payments for the
equipment and for supplies will be made to the ESRD facility which then
buys the equipment and supplies from a DME supplier.
Comment: Commenters from pediatric facilities requested that CMS
perform further analysis to determine whether the elimination of Method
II billing under the ESRD PPS will have a negative effect on pediatric
dialysis facilities.
Response: Since publication of the proposed rule, we have continued
to examine the ESRD data in order to refine the model. The cumulative
effect of the changes we have made to the ESRD PPS is projected to
beneficially impact pediatric facilities. See section IV. of this final
rule for specific impacts.
Comment: Some commenters had concerns with the elimination of
Method II and the resulting change in incentives for dialysis
facilities. The commenters suggested that CMS needs to understand the
adverse effects that eliminating Method II would have on the dialysis
facilities' ability to furnish home treatment modalities.
Response: Effective January 1, 2011, Medicare will pay the ESRD PPS
base rate to ESRD facilities for home dialysis services furnished to
home dialysis patients under Method I . Under Method I, the incentives
will be different because we will only pay the ESRD facility the ESRD
PPS base rate which includes the costs of all dialysis services such as
staff time, equipment, and supplies. Despite the elimination of Method
II under the ESRD PPS on January 1, 2011, the Method I payment includes
the following provisions were supported by many other commenters.
First, Medicare will continue to pay on a per treatment unit of
payment. Second, Medicare will pay the same base rate for both in-
facility and home dialysis. Third, the same base rate will also be paid
for all dialysis treatment modalities furnished by a dialysis facility
(hemodialysis and the various forms of peritoneal dialysis). Since home
dialysis treatment modalities cost less than in-facility dialysis
(especially home PD, which is the primary home dialysis treatment
modality for pediatric home patients) ESRD facilities that have home
dialysis programs should continue to benefit by providing home dialysis
under ESRD PPS Method I payments.
We believe there are also some administrative benefits for dialysis
facilities with the elimination of the Method II home dialysis.
Dialysis facilities and home patients will have less burden because
they will no longer need to complete or file the CMS Form-382 which is
the form currently used to determine whether the dialysis patient has
selected Method I or Method II home dialysis. Under the ESRD PPS,
dialysis facilities will no longer be required to submit separate bills
for home support services and suppliers no longer need to bill Medicare
for home
[[Page 49060]]
dialysis equipment and supplies furnished to Method II home dialysis
patients. The costs of home dialysis services for all home dialysis
treatment modalities have been included in the composite rate part of
the bundled ESRD PPS payment.
Comment: Commenters expressed concerns that the elimination of
Method II payment system will affect the ability of ESRD facilities to
establish and grow their home dialysis program. Commenters stated that
using the Method II approach allows the dialysis facility to remove the
supply and equipment costs associated with a home program from their
total costs, making the utilization of home modalities more
economically feasible and available to their patient population.
Another commenter stated that CMS created financial disincentives for
the provision of home hemodialysis because the cost of treating
hemodialysis patients is generally higher than the cost of treating
facility-based patients.
Response: We disagree with this commenter. We do not believe that
financial disincentives have been created because, based on our cost
report data, the cost for home hemodialysis is less costly than in-
facility. As we noted in the proposed rule, the reliance on separately
billable services as a source of revenue growth for ESRD facilities has
potentially impeded the greater use of less costly PD (which typically
uses fewer separately billable drugs and less provider and facility
overhead expense) (74 FR 49931). We also noted that others have argued
that constraining payment based on number of treatments may reduce the
use of alternative treatment regimens such as increased frequency
nocturnal dialysis, home HD using compact portable dialysis machines,
and shorter but more frequent dialysis sessions (for example, 1.5 to 2
hours, five or six days per week).
We do not agree that a financial disincentive has been created for
the provision of home hemodialysis. Under the ESRD PPS, payment for all
home dialysis services (excluding physician services) would be included
in the bundled payment to the ESRD facility and would not be subject to
the current composite payment limits on what Medicare would pay for
home dialysis supplies, equipment, and home support services as
described in Sec. 413.330(c). We disagree with the commenter that the
elimination of the Method II payment system will affect the ability of
ESRD facilities to establish and grow their home dialysis program,
because the ESRD PPS takes into account the supplies and equipments
costs associated with a home program. The intent is to continue to
preserve the utilization of home modalities under Method I of the ESRD
PPS, and to make home dialysis economically feasible and available to
the ESRD patient population.
Comment: A commenter expressed concern that the elimination of
Method II would deprive beneficiaries of access to specialty products,
recent technologies, and cost effective home modalities.
Response: Although Method II would be eliminated under the ESRD
PPS, we note that the suppliers would still be able to play a role
under the new ESRD PPS. The supplier could still furnish, under
arrangement with the support dialysis facility, home dialysis equipment
and supplies to a Medicare home dialysis beneficiary under the ESRD
PPS. However, the supplier would have to look to the ESRD facility for
payment since the ESRD PPS payment would be made to the ESRD facility
and DME MACs would no longer make payment for ESRD-related supplies to
suppliers. As such, we disagree that because of the ESRD PPS,
beneficiaries would be deprived of enjoying specialty products, recent
technologies and cost effective home modalities. Dialysis facilities
are encouraged to ensure that ESRD patients continue to receive all
necessary supplies and equipment under the ESRD PPS. Additionally,
under the ESRD PPS, lower cost patients offset the higher cost for
patients who utilize specialty products and new technology.
Comment: A commenter stated that the current Method II payment
system allowed a ``level-playing field'' in which small and medium-
sized dialysis organizations have the financial flexibility to offer
their patients home modality options. With the elimination of Method II
under the ESRD PPS, the commenter claimed that he is now at a
disadvantage because the risks are now borne by the facilities.
Response: We believe that the final base rate which is addressed in
section II.E. of this final rule and the revised payment for home
dialysis training add-on adjustment which is addressed later in this
section, are sufficient. The goals of creating a bundled prospective
payment system were to create a single comprehensive payment for all
renal dialysis services. The elimination of Method II under the ESRD
PPS serves to further this goal by eliminating separate payments to
suppliers so that a single payment is made to ESRD facilities for all
renal dialysis services. We disagree that the elimination of Method II
creates a disadvantage as the commenter states as all payments for
renal dialysis services, including those paid to Method II suppliers,
have been included in the ESRD PPS base rate. It is our belief that
such a payment system serves to allow a ``level-playing field'' in
which all dialysis organizations regardless of size, have a single
payment method.
Comment: A few commenters currently using Method II claimed that
the ESRD PPS does not provide for the unique equipment and supply
services costs for providing dialysis to home patients. The commenters
claimed that supply companies install and maintain dialysis equipment
and deliver both equipment and supplies to one patient at a time, and
further noted that reimbursement is based upon a one machine per
patient model. As a result, suppliers cannot achieve the economies of
scale enjoyed by ESRD facilities.
Response: We note that having to install and maintain dialysis
equipment and deliver both equipment and supplies to individual
patients is not unique to Method II home dialysis patients. Currently
all home dialysis patients, whether under Method I or Method II are
impacted by ``economies of scale'' described by the commenter in a one
patient-one machine application. Under the ESRD PPS, while home
dialysis suppliers may not achieve the same economies of scale as
dialysis facilities, suppliers remain able to provide equipment and
supplies to multiple dialysis facilities and can negotiate competitive
prices with the ESRD equipment and supply manufacturers. We note that
all payments related to Method II suppliers and amounts paid by ESRD
facilities to Method I suppliers have been included in the ESRD PPS
base rate which we believe is sufficient to account for the equipment
and supply costs of home dialysis patients.
Comment: Several commenters expressed concern that the ESRD PPS
payment and elimination of Method II will make them less able to offer
nursing caregiver staff-assisted dialysis to patients in nursing homes.
The commenters indicated that Method II enables beneficiaries with
secondary private insurance that includes nursing caregiver dialysis
staff-assistance coverage, the opportunity to dialyze in their homes or
in a nursing home and have the cost of a nurse caregiver dialysis
assistant covered under their secondary insurance. Some of the
commenters suggested that CMS create an adjustment or exception to the
bundled payment rate for home hemodialysis patients receiving nursing
caregiver staff-assisted care in their homes or in a nursing home
setting.
[[Page 49061]]
Other commenters suggested that CMS offer an alternative that meets the
equivalent of the current Method II mechanism that would serve to deny
coverage of nursing home caregiver dialysis assistance or offer an
additional Method I option at a reduced PPS rate. Because Medicare does
not cover payment for nursing caregiver staff-assistance to dialysis
patients, an Explanation of Benefits (EOB) denial is automatically
generated by the FI/MAC. The EOB denial would allow suppliers to
continue to bill for nurse caregiver staff-assistance to home
hemodialysis patients paid by private insurers secondary to Medicare.
Response: Once the ESRD PPS takes effect January 1, 2011, DME
suppliers will no longer be able to bill Medicare for ESRD equipment,
supplies, and nurse caregiver staff-assistance. We will consider the
commenter's suggestion to create a Medicare denial of these services as
we develop billing instructions later this year.
Comment: One commenter urged that we retain Method II and indicated
that the costs to Medicare are lower for nursing staff-assisted
dialysis for home dialysis patients than in-facility dialysis patients.
The commenter believed that Method II supply companies dedicated to
dialysis supplies and services have saved the Medicare Program
significant amounts of money because the DME supplier is paid 80
percent of the amount paid for supplies, which is less than $1,200 each
month. The remainder is paid by the secondary insurance, as a secondary
for the supplies and, in some cases, as a primary for the nursing
services.
Response: Section 1881(b)(14)(A)(i) of the Act specifies that the
Secretary must implement a payment system under which a single payment
is made to a provider of services or a renal dialysis facility for
renal dialysis services in lieu of any other payment, and for such
services and items furnished for home dialysis and self-care home
dialysis support services. The Method II home dialysis option where the
supplier of dialysis equipment and supplies bills the DME MAC is no
longer authorized under the Act after January 1, 2011.
Comment: A few commenters encouraged CMS to clarify that only DME
supplies and equipment related to the provision of renal dialysis
services are included in the ESRD PPS payment. The commenters further
stated that there are many DME supplies and equipment utilized by ESRD
beneficiaries that are unrelated to their dialysis and should not be
included in the ESRD PPS such as wheelchairs, diabetic testing
supplies, oxygen, wound care, ostomy and urological supplies and
equipment.
Response: We agree with the commenters and have clarified in
section II.A.4. of this final rule that renal dialysis services include
only DME supplies and equipment, necessary for the delivery of home
dialysis services under the ESRD PPS. Although we did not provide a
specific listing of the supplies and equipment, they were in fact
considered and included. The Medicare Claims Processing Manual Chapter
8, Section 90.3.2, identifies the home dialysis supplies and equipment
that are (currently) separately billable by DME suppliers.
Comment: Some commenters were concerned that under the ESRD PPS,
the ESRD facility would become responsible for the billing of a variety
of items and services that patients now receive directly from other
suppliers. The commenter stated that the new ESRD PPS may create
confusion for ESRD facilities, Method II suppliers, and patients. For
example, DME suppliers submit their claims to DME MACs for
reimbursement and the DME MACs are guided by their local coverage
determinations and other aspects of DME billing and payment. The
commenter questioned what would apply under the new ESRD PPS during the
transition period.
Response: Under the current Method II home dialysis payment system,
for each beneficiary it serves, the supplier is required to accept
assignment by the beneficiary, and bill the DME MAC. Suppliers are also
required to maintain a written agreement with a support dialysis
facility to provide backup and support services. A dialysis facility,
in turn, is required to maintain a written agreement to supply backup
and support services and bill the FI/MAC for services it provides under
the agreement.
As explained in the proposal (74 FR 49929), section 153(b) of
MIPPA, section 1881 (b)(14)(A)(1) of the Act requires the Secretary to
implement a payment system under which a single payment is made to an
ESRD facility under this title for renal dialysis services and items
furnished pursuant to section 1881 (b)(4) of the Act.
All costs associated with home dialysis services (both Method I and
Method II) are included in the composite portion of the two equation
model. Effective January 1, 2011, all home ESRD patients will be
considered Method I home patients and all Medicare payments for home
dialysis services will be made to the ESRD facility. Medicare payment
for home dialysis services will be made to the ESRD facility whether
the facility elects to participate in the transition period or elects
to be paid under the ESRD PPS. DME suppliers will no longer submit
claims to DME/MACs for home dialysis supplies and equipment effective
January 1, 2011. Since FI/MACs will be processing ESRD facility claims
for Method I home dialysis patients, the reasonable charge DME payment
rules are no longer applicable. After January 1, 2011, a supplier could
only furnish, under an arrangement with the ESRD facility, home
dialysis equipment and supplies to a Medicare home dialysis
beneficiary, and then the supplier would need to look to the ESRD
facility for payment. Payment to the DME supplier from the ESRD
facility will be based upon the payment arrangements agreed to between
the two parties for furnishing home dialysis equipment and supplies to
the home dialysis patient.
Comment: Commenters expressed concern that Method II suppliers
would no longer be permitted to bill Medicare directly for ESRD-related
supplies furnished to ESRD beneficiaries. The commenters believed that
suppliers, ESRD facilities, and patients would be confused about the
changes made under the ESRD PPS and urged CMS to ensure that all
interested parties receive adequate provider education regarding the
changes it implements under the ESRD PPS.
Response: We agree that interested parties should receive adequate
provider education and once the final rule is published, we intend to
provide multiple opportunities for training and education to patients
and ESRD facilities. We also intend to provide information at our
sponsored open-door forums for other groups such as DME suppliers and
laboratory providers.
Comment: Two commenters affiliated with US Military Services
commented that they serve many ESRD patients who are retirees or
dependents of active duty military personnel. In order to maintain war-
time readiness, the commenters stated that they keep their physician
and nursing staff trained by performing dialysis on a small population
of ESRD dialysis patients. The commenter explained that Method II has
been the means of providing seamless home care for their patients while
allowing them to follow these patients and provide their ancillary
care. Absent a Method II reimbursement equivalent, they would not be
able to maintain a nephrology fellowship program which would impact the
training of military physicians. However, another commenter affiliated
with another branch of the military stated that utilization of Method
II reimbursement
[[Page 49062]]
for home PD should have no direct effect on the quality of their
nephrology fellowship training program as these patients are still
required to be evaluated monthly.
Response: While both commenters raise points that relate to the
ESRD PPS, the impacts they describe (military readiness training and
ongoing education needs) are not germane to the intent of the
legislation and not within the scope of this rulemaking.
Comment: One commenter described a study in a recent clinical
journal which claimed that CMS could save more than a billion dollars
in five years if the utilization of PD increased from its current 8
percent to 15 percent. The commenter questioned why Method II was to be
eliminated under the ESRD PPS. He described that this was tantamount to
``eliminating one of the very tools that help dialysis providers
establish and expand home PD programs.''
Response: Although the statute no longer provides discretion to
retain Method II, we believe there remain very good reasons to develop
and expand home PD programs. For example, PD treatment costs
considerably less than comparable in-facility treatments.
Comment: The commenters claimed that as the new ESRD PPS will
require billing changes and create other challenges, CMS should
consider deferring the application of the consolidated billing edits
regarding DME services until the full implementation of the ESRD PPS.
Response: Although we acknowledge that the ESRD PPS will require
some billing changes, we do not have the authority to continue to pay
DME suppliers directly for ESRD-related items furnished to ESRD
patients.
b. Self-Dialysis Training
Currently, Medicare makes a separate payment per treatment for home
hemodialysis training and two forms of PD training programs. Home
dialysis and self-dialysis can only be performed after an ESRD patient
has completed an appropriate course of training. The scope of training
services that a certified facility provides to ESRD patients is
described in Sec. 494.100(a).
We proposed that ESRD facilities would no longer receive an add-on
of $12 for CAPD and $20 for hemodialysis and CCPD to the otherwise
applicable payment amount per treatment for the costs of training. We
also proposed that the ESRD facility training expenses would be
included in the ESRD PPS base rate to which the payment multipliers in
the proposed payment model are applied (74 FR 49930).
Also, we proposed that training costs be included in the regression
analysis to compute the composite rate payment adjusters. We noted that
total composite rate costs included in the per treatment calculation
included costs incurred for training expenses, as well as all home
dialysis costs (74 FR 49947). We proposed to use the ESRD facility's
cost reports to identify provider costs for training and include these
costs in the composite rate portion of the two-equation ESRD PPS model
described in the proposed ESRD PPS (74 FR 49947.) We proposed to
include training and home dialysis costs, as set forth in Sec.
413.217. We specifically invited public comments on our proposal to
include home dialysis training services in the proposed ESRD PPS base
rate.
The comments we received on these proposals and our responses are
set forth below.
Comment: Numerous commenters expressed strong opposition to our
proposal to include payments for the training of patients for home
dialysis in the ESRD PPS base rate. The commenters pointed out that
treatment of training payments as any other overhead expense would have
the effect of giving every dialysis facility a small payment for home
dialysis training regardless of whether it offered a home training
program. These commenters indicated that our proposal fails to target
training payments to facilities actually furnishing training
treatments, and reduces the magnitude of the training payment by
averaging the amount over all hemodialysis equivalent treatments. The
commenters believe that the training proposal would have a devastating
impact on training programs and discourage the growth of home dialysis.
Commenters also disagreed with our statements that most training
treatments were likely to occur within the first four months after the
onset of dialysis and that the proposed 47.3 percent adjustment (new
onset adjustment) to the otherwise applicable case-mix adjusted payment
for treatments occurring within this period would cover the costs of
furnishing home dialysis training programs. These commenters pointed
out that a high proportion of training treatments do not occur within
the first four months after the start of dialysis.
Several commenters pointed out that the ESRD Conditions for
Coverage result in higher training expenses, costs which commenters
believe should be reimbursed through a separate training adjustment.
Other commenters reasoned that failure to provide a separate training
adjustment will result in disparities in care, as facilities would find
it too expensive to train the elderly, patients with language
difficulties, or patients with complex medical conditions.
Most of the commenters recommended that we develop a separate
payment for training treatments outside of the payment bundle. However,
one commenter opposed the implementation of a separate payment for
training services. The commenter maintained that the proposed ESRD PPS
provides an adequate incentive for PD training, while acknowledging the
higher expenses for home HD training.
Response: Although we are continuing to include training payments
in computing the ESRD PPS base rate, we agree with the commenters that
we should treat training as an adjustment under the ESRD PPS. We
believe the ESRD PPS base rate alone does not account for the staffing
costs associated with one-on-one focused home dialysis training
treatments furnished by a registered nurse. Because the patient-focused
training requires greater nursing resources than provided for non-
training treatments, we feel that a separate training add-on adjustment
is warranted.
We explored whether we could develop a regression-based adjustments
as we have conducted for the rest of the ESRD PPS payment adjustments.
However, in analyzing training information in ESRD facility cost
reports and comparing those costs to training claims submitted by ESRD
facilities, we found that some training costs were under-reported by
some facilities and over-reported by others. Therefore, we were unable
to develop a regression-based adjustment due to a lack of cost report
data for many ESRD facilities.
For purposes of developing a training adjustment under the ESRD
PPS, we have decided to use a dollar add-on adjustment similar to the
existing training add-on payments under the current basic case-mix
adjustment payment system. We also explored various options for
updating the training current add-on payment amounts under the current
basic case-mix adjusted composite payment system because the training
add-on amounts have not been updated since they were established in the
1970s and do not believe such amounts reflect the cost of the training
nurse. We believe the training add-on amounts when first implemented,
represented staff time, supplies and equipment. Thus, under the ESRD
PPS, we considered various options to update the training add-on
adjustment to reflect 1-hour of nursing time because home and self-
dialysis training must be
[[Page 49063]]
conducted by a registered nurse in accordance with the ESRD Conditions
for Coverage requirements at Sec. 494.100(a).
The updated training add-on adjustment will be computed by using
the national average hourly wage for nurses from Bureau of Labor
Statistics data updated to 2011. The amount for the training add-on
adjustment we are finalizing under the ESRD PPS will be $33.44 per
treatment. This amount would be added to the ESRD PPS payment amount or
ESRD PPS portion of the blended payment amount for those ESRD
facilities in the ESRD PPS transition. Specifically, this amount will
be added to the ESRD PPS payment rate or ESRD PPS portion of the
blended payment amount for those ESRD facilities in the ESRD PPS
transition, each time a training treatment is provided by the Medicare
certified training ESRD facility.
As the training add-on adjustment is directly related to nursing
salaries and nursing salaries differ greatly based on geographic
location, we will adjust the $33.44 training add-on by the geographic
area wage index applicable to the ESRD facility so that the training
add-on adjustment reflects local nursing wages. Using the proposed wage
index values issued in the CY 2011 PFS proposed rule, the training add-
on amounts after application of the wage index would range from $20.03
to $45.84. The wage index is further described in section II.G.3.a. of
this final rule.
The training add-on adjustment will only apply to training
treatments furnished to dialysis patients by Medicare-certified
dialysis training facilities. This amount represents one hour of
nursing time to conduct one-on-one training with a patient for either
hemodialysis or PD for training treatments furnished by a Medicare-
certified training facility. We believe that this approach would
eliminate the differential paid for hemodialysis training that accounts
for supplies and equipment.
Given that payments for equipment and supplies, as required under
the statute, have been captured in the base rate and training
facilities would also receive the ESRD PPS base rate and all applicable
adjustments, we no longer need to pay these costs as part of a training
adjustment. We believe this provides for an adequate increase in the
current training adjustment, and that it is appropriate to eliminate
the differential paid for HD training.
For those ESRD training facilities that opt to go through the ESRD
PPS transition, Medicare will continue to pay $20.00 per training
treatment for hemodialysis and CCPD and $12.00 for PD for the basic
case-mix adjusted composite rate portion of the ESRD PPS blended
payment. These training rates will not be wage adjusted and will
continue to be paid based on the maximum number of training treatments
explained below.
The payment adjustments for the onset of dialysis adjustment, as
well as all other adjusters we are finalizing under the ESRD PPS, are
the result of the regression models for composite rate and separately
billable services. The regression analysis for this final rule which
used cost reports and Medicare claims for 2006-2008, indicated higher
composite rate costs associated with the first four months of dialysis.
As home dialysis training costs represents one-on-one staff time to
train a patient for home dialysis, we believe we have captured staffing
costs for training in the 4-month onset of dialysis adjustment. Since
we have already accounted for training salary costs in the 4-month
onset of dialysis adjustment, we believe that applying the training
add-on adjustment in addition to the 4-month onset of dialysis
adjustment would have the effect of compounding the composite rate
costs and result in an overpayment of nursing staffing costs associated
with training dialysis patients for home dialysis. Therefore, ESRD
facilities will not receive the training add-on adjustment for patients
who are receiving the first 4-month onset of dialysis adjustment
(section II.F.3. of this final rule for more detailed explanation of
the 4-month onset of dialysis adjustment).
The training add-on adjustment is not a multiplicative adjustment
like the other final adjustments under the ESRD PPS. Rather, the
training adjustment is added to the product of the ESRD PPS base rate
or blended base rate and applicable adjustments. For further
explanation, please refer to the Comprehensive Payment Model examples
provided in section II.I. of this final rule.
Comment: Some commenters requested that CMS continue to make
payment for retraining treatments furnished to home dialysis patients.
The commenters pointed out that under some circumstances a home patient
may change from one mode of dialysis to another (for example, from home
hemodialysis to CAPD) or there are changes to the hemodialysis
equipment which requires the home patient to be retained to continue as
a self-dialysis patient.
Response: Under the ESRD PPS, we will continue to pay for self-
dialysis training after a patient has completed the initial training
course. The conditions under which we make payment for retraining
treatments follow the same coverage rules for training under the ESRD
PPS. Criteria for retraining are unchanged and explained in greater
detail in the Medicare Claims Processing Manual, Chapter 8, Section
50.8 Training and Retraining. In addition, the patient must continue to
be an appropriate patient for self-dialysis.
Comment: Commenters varied in their suggestions for how the
training payments should be applied. For example, one commenter
recommended a ``hold back'' in which a portion of the training payments
would be withheld from the ESRD facility pending demonstration of the
patient's successful transition to home dialysis. Other commenters
recommended that we establish a monitoring system to determine the
degree to which any separate adjustment for the provision of home
training treatments results in more patients successfully transitioning
to home dialysis.
Response: We will continue to require that ESRD facilities are a
Medicare certified training facility in order to receive the training
add-on adjustment each time a training treatment is provided. In an
effort to promote more training for home dialysis, we are not limiting
payment for training through a hold-back mechanism. We fully intend to
monitor how the updated training add-on adjustment relates to changes
in the proportion of ESRD patients on home dialysis modalities and may
propose limits in the future.
Comment: We received numerous comments requesting that CMS retain
the existing policy that limits coverage of the total number of
training treatments at the current level of 15 for peritoneal dialysis
(CAPD and CCPD) and 25 for hemodialysis.
Response: We agree with the commenters. Under the ESRD PPS, we will
continue the current cap on training treatments at 15 for peritoneal
dialysis (CAPD and CCPD) and 25 for hemodialysis training because most
commenters indicated that they can complete training within these
training treatment parameters.
In summary, we are finalizing a training add-on adjustment under
the ESRD PPS in the amount of $33.38 per training treatment, adjusted
based on the geographic wage index for nursing salaries to account for
the hourly nursing time for dialysis training treatments. This
adjustment would apply to HD and PD modalities. This training add-on
adjustment is applied
[[Page 49064]]
after all other adjustments under the ESRD PPS have been made. We have
added paragraph (c) to Sec. 413.235 and revised the description of the
per treatment payment amount in Sec. 413.230 to reflect the training
add-on adjustment.
B. Unit of Payment
Under section 1881(b)(14)(C) of the Act, as added by section 153(b)
of MIPPA, the ESRD PPS may provide for payment on the basis of renal
dialysis services furnished during a week, or month, or such other
appropriate unit of payment as the Secretary specifies. We proposed to
establish an ESRD PPS which relies on a per treatment unit of payment
(74 FR 49931). We proposed to continue the present per treatment basis
of payment in which ESRD facilities would be paid for up to three
treatments per week, unless there is medical justification for more
than three weekly treatments (74 FR 49931). ESRD facilities treating
patients on PD or home HD would also receive payments for up to three
treatments for each week of dialysis, unless there is medical
justification for the furnishing of additional treatments. In the
proposed rule, we discussed in detail the factors and data we
considered in developing our proposal (74 FR 49931 through 49934). The
comments we received with regard to our proposals for the unit of
payment and our responses are discussed below:
Comment: Numerous commenters supported our selection of a per
treatment unit of payment for the bundled payment system. The
commenters noted that a per treatment unit of payment preserved access
for patients who travel, and would minimize operational difficulties
and administrative complexity for the approximately 19 percent of
patients who incur an interruption of service or receive treatment at
more than one dialysis facility. Generally, commenters noted that a
larger unit of payment, such as a monthly payment, would complicate the
phase-in of the payment system. MedPAC noted that a larger unit of
payment would be consistent with several aspects of dialysis care,
pointing out that a weekly unit of payment corresponds to the typical
weekly interval for PD. MedPAC also noted that Medicare pays
nephrologists a monthly capitated payment for caring for dialysis
beneficiaries. MedPAC recommended that we reconsider the unit of
payment, once a strengthened dialysis quality monitoring system is
implemented, to assure that quality of care does not decline.
Response: We agree with the commenters that maintaining a per
treatment unit of payment is the best method to achieve the effect of
the bundled payment system without adversely impacting beneficiary
access to home dialysis services. As we explained in the proposed rule
(74 FR 49931), we considered other units of payment such as a monthly
ESRD PPS, which would provide ESRD facilities more flexibility in
alternative treatment requirements, such as increased frequency
nocturnal dialysis, home HD using compact portable dialysis machines
and shorter but more frequent dialysis services. However, given the
difficulties of implementing a monthly ESRD PPS during the transition
period in which a per treatment methodology applies, we proposed to
continue the current per treatment payment methodology in connection
with the proposed ESRD PPS as set forth in Sec. 413.215.
In this final rule, we are adopting the per treatment unit of
payment for the ESRD PPS for the reasons set forth above. As we
indicated in the proposed rule, we may reconsider this decision after
the transition period has ended (74 FR 49934). At that time, we may
evaluate whether the ESRD PPS has resulted in improved clinical
outcomes, the degree to which home dialysis has increased, and whether
interested stakeholders would favor an alternative to the per treatment
approach we are finalizing in this final rule.
Comment: Several commenters recommended that we change the
definition for reporting the volume of treatments to eliminate the use
of hemodialysis equivalents. The commenters stated that the use of HD
equivalents for the home dialysis modalities distorts the real costs
associated with that modality, pointing out that home HD patients may
be receiving 5-7 treatments per week, with some commercial payers
paying for more than three treatments per week.
Response: The practice of converting PD treatments to HD equivalent
treatments arose in the context of developing an appropriate unit of
analysis for the PD modalities in which multiple exchanges of dialysate
occur during the course of a day. These exchanges are not discrete
treatments in the same sense that an HD session represents a treatment.
In order to encourage home dialysis, the policy decision not to develop
separate bundled payment rates for the in-facility and home dialysis
modalities required that the base rate also be applied to home
dialysis. Therefore, we believed that conversion of each week of home
dialysis to three equivalent HD treatments was the most feasible
approach. The alternative would have been to develop a separate bundled
payment rate for each week of home dialysis. We rejected this approach
in order to use a per treatment payment for all ESRD treatments,
including home treatments.
To the extent that patients on home HD receive more than three
treatments per week, we point out that use of the additional treatments
to develop the base rate would have decreased that rate. Particularly
for PD, we believe that use of three HD equivalent treatments for each
week of PD represents a reasonable basis for establishing payment rates
per treatment that can be applied to both in center and home dialysis
modalities.
In summary, we are finalizing Sec. 413.215(a) which established
the dialysis treatment as the unit of payment under the ESRD PPS.
C. Data Sources
Section 1881(b)(14)(B) of the Act, as added by section 153(b) of
MIPPA, defines the renal dialysis services that must be included in the
ESRD PPS. In the proposed rule, we identified the components used to
construct the payment bundle (74 FR 49934) based on the following
Medicare cost and payment information:
Composite rate services as measured using composite rate
costs calculated from the Medicare cost reports;
Drugs and biologicals (for example, injectables) that are
separately billed by ESRD facilities on Medicare outpatient
institutional claims;
Drugs and biologicals (for example, oral) used to treat
ESRD patients obtained from claims submitted by Part D stand alone
prescription drug plans;
Laboratory tests that are separately billed by ESRD
facilities on Medicare outpatient institutional claims;
Laboratory tests ordered by a physician who receives MCPs
for treating ESRD patients, which are separately billed by independent
laboratories;
Other items and services separately billed by ESRD
facilities that are used in conjunction with injectable medications or
laboratory tests, such as blood products, syringes, and other dialysis
supplies that are billed on Medicare outpatient institutional claims.
The cost report and claims data sources used to construct the
bundled payment system, as set forth in this final rule, remain the
same as described in the proposed rule, with the exception that CY
2006, 2007, and 2008 records
[[Page 49065]]
have been used for this final rule instead of CY 2004 through 2006 data
that were used in the proposed rule. This is consistent with our
statement in the proposed rule that we planned to use the latest
available cost report and claims information to develop the final rule,
given the lead time necessary to prepare the final rule (see 74 FR
49934 through 49935).
Section 1881(b)(14)(A)(ii) of the Act requires that the estimated
total amount of payments for 2011 be equal to 98 percent of the
estimated total amount of payments for renal dialysis services that
would have been made in 2011 if the ESRD PPS had not been implemented.
That section requires that we use per patient utilization data from
2007, 2008, or 2009, whichever has the lowest per patient utilization.
To comply with this provision, we evaluated payment data from 2007,
2008, and the first 9 months of 2009, the latest available given the
lead time required to prepare this final rule, as described later in
this section.
In the proposed rule, we cited the application of a statistical
methodology referenced in UM-KECC's February 2008 report for removing
composite rate costs with extreme values from the cost report database
used to develop the composite rate portion of the ESRD PPS payment
model (74 FR 49947). That methodology employed a standard outer fence
definition. The outer fence is a threshold for identifying extreme
outliers. The upper outer fence, which is the threshold that was used
to identify outliers with extremely high costs, is defined as the 75th
percentile plus three times the interquartile range (IQR). This is the
75th percentile minus the 25th percentile. The lower outer fence, which
is the threshold that was used to identify outliers with extremely low
costs, is the 25th percentile minus three times the IQR.
The outer fence values for average cost per treatment were
calculated on the log scale, since a log transformation was used to
estimate the models. When retransformed to dollars, the lower outer
fence for composite rate costs was $68.81 per treatment, and the upper
outer fence was $470.70 per treatment. However, a test model that
applied these exclusion criteria yielded especially large prediction
errors for facilities with reported composite rate costs below $100.00
per treatment. Accordingly, we applied a separate methodology to
identify additional outliers that could affect the analysis and reduce
the accuracy of the case-mix adjusters resulting from the model
estimates.
This method was also used to develop the set of composite rate cost
per treatment values analyzed in connection with the proposed rule (74
FR 49947). The method involved an analysis of studentized residuals,
which are residuals divided by an estimate of their standard deviation.
Approximately 95 percent of the facilities with average costs between
$68.81 and $100.00 per treatment had studentized residuals less than -
2, and approximately 32 percent had studentized residuals less than -4.
Based on this analysis of studentized residuals, a slightly more
restrictive lower limit of $100.00 was applied.
Together, these methodologies for identifying outlier values for
composite rate costs resulted in the exclusion of 460 facility year
records (approximately 3 percent) from the analysis of 2006-2008 data
that was used to develop the composite rate portion of the ESRD PPS
payment model described in this final rule.
While cost information for composite rate services is available
from the Medicare cost reports, the cost report does not contain
information on the costs of the separately billable categories of
services noted above. The ESRD PPS described in this final rule
incorporates payment for separately billable services based on
separately billable payment information from Medicare claims.
The descriptive statistics, case-mix model, and other analyses
presented in this final rule were based on CMS claims files for
Medicare ESRD patients, and the Medicare cost reports for hospital-
based ESRD outpatient dialysis providers and independent ESRD
facilities. Resource utilization for separately billable services was
based on patient-level Medicare outpatient claims for CYs 2006 through
2008 (the latest available claims), in order to be able to prepare this
final rule. Since composite rate cost information is available only at
the facility level, resource utilization for composite rate services
was measured using the Medicare cost reports for CYs 2006 through 2008
for each outpatient dialysis provider and facility (that is, hospital-
based and independent facilities). These years represented the latest
and most complete data available for the preparation of this final
rule.
As we did in the proposed rule (74 FR 49935), we also used several
data sources for evaluating the patient and facility characteristics
that were used with the case-mix analyses. Patient demographic
information was obtained from the Renal Management Information System
(REMIS)/Consolidated Renal Operations in a Web-Enabled Network (CROWN),
and the ESRD Standard Information Management System (SIMS). These data
sources include the Medical Evidence Report Form (Form 2728), which is
completed at the onset of renal replacement therapy (RRT), which is
either dialysis or transplantation to sustain life at the onset of
kidney failure. Patient body size measures were developed from the
height and weight values reported on the Form 2728. Beginning April 1,
2005, these values were obtained from the patient claims for outpatient
dialysis. Although we have revised the proposed set of patient co-
morbidities used as case-mix adjusters in the development of this final
rule for reasons explained in section II.F.3. of this final rule, the
cost report and paid claims data used to develop the case-mix adjusters
based on co-morbidities described in the proposed rule (74 FR 49935)
remain the same.
We measured dialysis facility characteristics using a combination
of SIMS (ownership type and geographic location), the Medicare cost
reports (facility size), the Online State Certification and Reporting
System (OSCAR) (hospital affiliation for satellite units), and other
available information (for example, identifying facilities with
composite payment rate exceptions).
1. Patient Claims Data
The outpatient facility paid claims file is the primary source of
information for payments that ESRD facilities receive for the treatment
of ESRD patients. The ``type 72X'' claims (ESRD claims) provided the
detailed data for dialysis payments. As we did in the proposed rule,
the claims files used for the analyses in this final rule were based on
patients with at least one claims record for dialysis. We used carrier
claims and durable medical equipment (DME) claims to track dialysis-
related payments to other providers such as independent laboratories.
The case-mix models were based on claims from CYs 2006, 2007, and
2008. These were the most complete CY records available for use with
the Medicare cost reports from the same periods to develop the payment
methodology, given the time necessary for the preparation of this final
rule. As with the composite rate costs obtained from the Medicare cost
reports and patient claims used to develop the proposed ESRD PPS (74 FR
49936), we similarly used the statistical outer fence methodology
described previously to exclude unusually high separately billed values
(statistical outliers) obtained from the claims used to develop the
system as set forth in this final rule. Based on the statistical outer
fence methodology, claims with total
[[Page 49066]]
separately billed amounts greater than $2,545.65 were excluded from the
analysis of 2006 through 2008 data used to develop the separately
billed portion of the ESRD PPS payment model. Application of this
methodology for the analysis that was used to develop the separately
billed portion of the ESRD PPS payment model for pediatric patients
resulted in no exclusions. The number of Medicare claims, patients,
dialysis sessions, and ESRD facilities represented in the source claims
data are shown in Table 6. We have also provided the same information
for CY 2005 for comparison purposes.
[GRAPHIC] [TIFF OMITTED] TR12AU10.013
We did not receive any public comments objecting to our intention
to use the latest available Medicare cost report and claims data to
develop the final rule. Therefore, we are finalizing Sec.
413.220(a)(1) and (2) as proposed.
2. Medicare Cost Reports
We obtained facility-level cost and treatment data from the CMS
Medicare Hospital Cost Report (Form CMS 2552-96) and the CMS Medicare
Independent Renal Dialysis Facility Cost Report (Form CMS 265-94). The
number of available cost reports for CYs 2006 through 2008, which
contained necessary cost and treatment data for purposes of the
composite rate cost analyses, are shown in Table 7. For most ESRD
facilities, a single cost report encompassed the entire calendar year.
For FY cost reports that spanned two CYs, we used a weighted average
based on the proportion falling in each CY.
[GRAPHIC] [TIFF OMITTED] TR12AU10.014
3. Patient Claim and Cost Report Summary Data 2006-2008
The case-mix models were based on data sets that linked claims and
cost report records for each year from CY 2006 through CY 2008. The
claims data for patients treated in hospital satellite facilities were
matched to the parent hospital using OSCAR, since cost reports are only
submitted by the parent facility. Table 8 shows the resulting analysis
files that included both claims and cost report data for measuring
separately billable and composite rate resource utilization.
[[Page 49067]]
[GRAPHIC] [TIFF OMITTED] TR12AU10.015
In the proposed rule, we explained that we trimmed claims data to
exclude statistically aberrant or clinically implausible values (74 FR
49947 through 49948). We received the following comments regarding
excluded claims data.
Comment: Several commenters expressed concern that we
inappropriately excluded claims from the computation of the 2007 base
rate using arbitrary exclusion criteria. For example, one commenter
noted that the use of 30,000 units of epoetin alfa (EPO) per treatment
as a clinically implausible threshold did not comport with CMS's own
EPO Claims Monitoring Policy in which 400,000 units per month is the
established threshold. Another commenter stated that the capping of
patient months in which more than 20 treatments were furnished at 20
treatments was an inappropriate exclusion. The commenter stated that
their attempted replication of the 2007 base rate computation resulted
in 1.3 and 1.45 percent more paid treatments than were included in the
MAP calculation. Other commenters stated that nowhere in the proposed
rule did CMS state exactly how many facilities and payments were
excluded from its calculations. These commenters stated that all paid
Medicare claims should be included in the computation of the MAP so as
not to yield an understatement of the base rate.
Response: In response to the concerns raised by the commenters, we
have reevaluated our basis for excluding certain claims from the
calculation of the CY 2007 base year amount. All payments made on
behalf of Medicare ESRD beneficiaries as reported on type 72X claims
have now been included, but with the following modifications and
exclusions:
Payments for EPO in excess of 500,000 units per month in
2007, and 400,000 units per month in 2008 and 2009 (that is, the
medically unbelievable thresholds), were capped at 500,000 units and
400,000 units, respectively, consistent with CMS's ESA monitoring
policy. A similar cap was applied to claims for ARANESP[supreg], in
which the caps based on the medically unbelievable thresholds were 1500
mcg. per month in 2007, and 1200 mcg. per month in 2008 and 2009. We
believe that the portion of the base rate that reflects ESA utilization
should comport with the ESA dosing guidelines under CMS's ESA Claims
Monitoring Policy in effect at the time.
Claims in which the number of dialysis treatments exceeded
the number of days in the month were capped so that the number of
dialysis treatments equaled the number of days in the month. No
adjustments were made to the paid amounts associated with these claims.
Payments to dialysis facilities in connection with claims with no
dialysis treatments reported were excluded. On these claims, the
payments to facilities were for services other than dialysis.
Accordingly, they would not be considered renal dialysis services.
Payments for blood and blood products. ESRD facilities
rarely furnish blood as part of a patient's ESRD-related anemia
management. As we discuss in section II.a.4. of this final rule, we
have determined that blood and blood products do not meet the
definition of renal dialysis services. Therefore, payments for blood
and blood products were excluded. Blood and blood products are not
included in the ESRD PPS payment bundle.
Payments for vaccines and vaccine administration were
excluded. Section 1881(b)(14)(B) of the Act specifically excludes
vaccines from the ESRD PPS payment bundle.
Immunosuppressive drug payments were excluded because
immunosuppressive drugs are paid under a separate Medicare benefit.
Payments for unclassified drugs (HCPCS J3490) and unknown
drugs
[[Page 49068]]
were excluded because we do not know whether these drugs are ESRD-
related. As their status is unknown, we did not consider them renal
dialysis services.
Payments for non-ESRD-related drugs, as identified in
Table C in the Appendix were excluded because such drugs would not
constitute renal dialysis services.
Payments for pharmacy supplies, procedures not considered
ESRD-related, and other non-ESRD miscellaneous services were also
excluded.
We believe that these revised exclusion criteria permit the
inclusion of statistically aberrant but plausible payments in the
calculation of the base year amounts, while ensuring that amounts paid
incorrectly are excluded.
BILLING CODE P
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[[Page 49069]]
[GRAPHIC] [TIFF OMITTED] TR12AU10.017
BILLING CODE C
Table 9 shows the total MAP amounts for CY 2007, 2008, and the
first 9 months of 2009. The MAP amount for the first nine months of
2009 is shown because of the requirement in section 1881(b)(14)(A)(ii)
of the Act that the budget neutrality per patient utilization
comparison include data from 2009.
Table 9 shows the MAP amounts for each period on a per treatment
basis, after adjustment for price inflation to 2009, in accordance with
the inflation factors described below.
Table 9 reveals that the MAP for CY 2007, the year with the lowest
per patient utilization of renal dialysis services as described in
section II.C.5. of this final rule, was $243.65 per treatment.
Comment: One commenter noted that we eliminated claims from our
analysis
[[Page 49070]]
with a missing date of birth which is necessary in order to assign
patients accurately to the correct age group category for purposes of
determining the impact of age on composite rate costs and separately
billable payments under the two-equation model. The commenter stated
that in the Standard Analytical Files (SAF), an age range is assigned
to patients, and the SAF denominator file similarly assigns an age to
patients. The commenter said that because their data includes an age
designation for all patients, no patients were eliminated from the
commenter's calculations of treatments or payments.
Response: Our elimination of patients with no valid date of birth
is only relevant in connection with the development of the payment
adjusters for the age variable in the two-equation model and not for
purposes of the computation of the base rate. This was done in order to
prevent any distortion in the age adjusters. We point out that the
number of claims eliminated was extremely small. No claims were
eliminated due to the lack of a valid date of birth in the calculation
of the base rate because age is not a classification variable in
computing that rate. We are unaware of the assignment of an age range
in the SAF claims files. Rather than relying on a methodology which
assigns an age to patients, which may be incorrect, we believe that the
exclusion of claims where a correct determination of age is necessary
for the development of payment adjusters is appropriate.
4. Data for the Case-Mix Analyses, 2006-2008
The case-mix analyses required data for several patient and
facility characteristics, such as age, co-morbidities, facility size,
etc. After the exclusion of statistical outliers or otherwise unusable
records (such as patients with no valid date of birth), the data shown
in Table 8 was refined to yield the data set used in the primary
analyses for both composite rate and separately billable services.
Table 10 summarizes these records.
[GRAPHIC] [TIFF OMITTED] TR12AU10.018
The primary case-mix analyses relied on pooled data from CY 2006
through CY 2008, which included a total of 8,620,926 Medicare ESRD
patient months. The case-mix analyses included 97.4 percent of patients
with Medicare outpatient dialysis claims during CYs 2006 through 2008.
Over the 3-year period, the case-mix analyses included data for 475,491
Medicare ESRD patients treated in ESRD facilities.
5. Prescription Drug Event Data, CY 2007, CY 2008, Jan-Sept 2009
We obtained the total payments for Medicare Part D drugs from Part
D claims submitted by prescription drug plans (drugs formerly covered
under Part D prior to the ESRD PPS). The claims were restricted to Part
D claims for oral drugs with an injectable form used to treat ESRD
submitted on behalf of Medicare ESRD beneficiaries with valid ESRD
claims in CY 2007, CY 2008, and for the first 9 months of 2009 (the
latest available in time for the preparation of this final rule). As
discussed in section II.A.3. of this final rule, payment of oral-only
drugs under the ESRD PPS is being delayed until 2014. Therefore,
payments for such drugs were excluded from the calculations. As a
result, we are finalizing Sec. 413.220, but revising paragraph (b) to
reflect the exclusion of oral-only drugs from the computation of the
final base rate.
The drugs included in the ESRD bundle are the three vitamin D
analogues (calcitriol, doxercalciferol, and paricalcitol), and
levocarnitine. The National Drug Coes (NDCs) used to identify these
drugs in the Part D claims are shown in Table D of the Appendix.
Table 11 below shows the number of Medicare ESRD beneficiaries for
which valid ESRD claims were filed in CY 2007, CY 2008, and the first
nine months of 2009; number of ESRD beneficiaries with Part D drug
coverage from the stand alone Part D plans; and number of beneficiaries
with Part D claims for the above oral drugs.
[[Page 49071]]
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D. Analytical Approach
In the proposed rule, we presented a case-mix model that UM-KECC
developed, using standard techniques of multivariate regression. In the
proposed rule, we described in detail two approaches for developing the
case-mix models using multivariate regression (74 FR 49938). The case
mix model we proposed in the development of the proposed ESRD PPS rule
was the two-equation model.
We noted that, for those interested, a more extensive and detailed
mathematical explanation of the two-equation model used to develop the
case-mix adjusters is contained in UM-KECC's February 2008 report, End
Stage Renal Disease Payment System: Results of Research on Case-Mix
Adjustment for an Expanded Bundle (see pp. 38-44 and Technical
Appendix).
We did not receive any public comments in connection with our use
of the two-equation model to develop the case-mix adjusters.
E. Development of ESRD PPS Base Rate
The patient-specific case-mix adjustments developed from the two-
equation model for composite rate and separately billable services are
applied to a base payment rate per treatment (``base rate''). We
proposed that the ESRD base rate would be adjusted to reflect ESRD
facility differences in area wage levels using a proposed wage index
(74 FR 49947).
In this section, we describe the calculation of the ESRD base rate,
as set forth in Sec. 413.220, and the computation of the reduction
factors used to adjust the ESRD 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. We define the
ESRD base rate at Sec. 413.171. The proposed ESRD base rate, which
represents the average Medicare allowable payment (MAP) for composite
rate and separately billable services, was developed from CY 2007
claims data.
We used claims data from CY 2007 in connection with the preparation
of the proposed rule because such data were the latest available. In
the proposed rule, we stated that we expected to have claims data for
CY 2008 and partial claims information for CY 2009 in connection with
our preparation of the final rule (74 FR 49939). We also stated that in
order to comply with the statute's requirement to use per patient
utilization data from 2007, 2008, or 2009 (whichever year had the
lowest per patient utilization), we planned to use available claims for
Medicare ESRD beneficiaries from those years, to determine which year
resulted in the lowest average payment amount per treatment (74 FR
49934).
We received several comments in connection with our proposed
methodology for determining the year with the lowest per patient
utilization of renal dialysis services, as required under section
1881(b)(14)(A)(ii) of the
[[Page 49072]]
Act. The comments received, and our responses to them, are set forth
below.
Comment: Several commenters pointed out that section
1881(b)(14)(A)(ii) of the Act directs the Secretary to use ``per
patient utilization data from 2007, 2008, or 2009'' in estimating the
total amount of payments that would have been made under title XVIII in
2011 for renal dialysis services. The year selected in making that
estimation must be the year which has the lowest per patient
utilization. The commenters explained that CMS's proposed methodology
for determining the unadjusted base rate per treatment, in which the
total expenditures for the specified renal dialysis services included
in the payment bundle is divided by the total annual number of
hemodialysis (HD)-equivalent treatments (74 FR 49940 through 49942),
represents an inaccurate approach for complying with the law. The
commenters maintained that the effect on the Part D drugs component of
the payment bundle was to inflate the denominator (that is, total HD-
equivalent treatments) to include all eligible Medicare ESRD
beneficiaries, regardless of Part D participation, while the numerator
with respect to Part D drugs only included ESRD drug payments for
Medicare Part D enrollees. The commenters stated that this resulted in
a gross understatement of the Part D drugs component of the payment
bundle. The commenters asserted that in order to calculate per patient
utilization accurately, the pool of patients in the numerator and
denominator of the base rate per treatment computation must be
congruent.
Response: We believe that the commenters are correct in concluding
that our proposed methodology for calculating the base rate yielded an
inappropriately low payment amount for the Part D component of the ESRD
PPS payment bundle. This occurred because the total payments for the
Part D drugs we proposed to include in the bundle reflected payments
for those drugs for those Medicare ESRD beneficiaries enrolled in Part
D, while the denominator reflected the total number of HD-equivalent
treatments for all Medicare ESRD beneficiaries, regardless of their
enrollment in Part D. For this final rule, we have revised the
denominator in the calculation described above to reflect the total
number of treatments for those ESRD beneficiaries enrolled in Part D.
In addition, given the commenters' concerns regarding our proposal
for determining the lowest per patient utilization year and the
calculation of the per treatment base year amount, we reevaluated our
proposed methodology and adopted a revised approach. We believe our
revised methodology more closely comports with the language set forth
in section 1881(b)(14)(A)(ii) of the Act, requiring the determination
of the year with the lowest per patient utilization of renal dialysis
services by Medicare ESRD beneficiaries. The methodology is similar to
the calculation used for the composite rate drug add-on, in that the
effects of price and enrollment are removed from total expenditures to
obtain per patient utilization. The method used is described in detail
below. We have also revised our computation of the base rate with
respect to the Part D drug component to yield an amount which we
believe is no longer understated.
Section 1881(b)(14)(A)(ii) of the Act requires that we compare data
from 2007, 2008, and 2009 to select the year with the lowest per
patient utilization of renal dialysis services. Although we have
complete data for 2007 and 2008, we only have partial year data for
2009. To control for the effects of potential seasonal variation in the
utilization of dialysis services, we first compared renal dialysis
expenditures for the first nine months of each year. We felt this
approach was preferable to completing the 2009 data, in order for it to
represent a full year's value, as this could introduce bias in the
estimation.
We eliminated the effects of price inflation by adjusting
expenditures for 2007 and 2008 to reflect 2009 price levels using the
actual annual rates of inflation for the various components of the
bundle. Payments for composite rate services were inflated to the 2009
base rate of $133.81 per treatment and drug add-on percentage of 15.2
percent. The inflators for Part B drugs and biologicals were based on
actual ASP+6 percent prices, because that is what they were paid (see
Table 12 below for the full year prices).
Payments for laboratory tests were inflated 4.5 percent from 2007
to 2009 and from 2008 to 2009. The inflators for laboratory services
are based on updates to the laboratory fee schedule. The laboratory fee
schedule is required to be updated using the CPI-U and any statutory
adjustments to the CPI-U update factor. As the price update for
laboratory services from 2007 to 2008 was statutorily set to be 0
percent, no inflator was applied for that year.
Because DME supplies and equipment, and self dialysis support
services for Method II patients are subject to a monthly capitation
payment that has not increased, we did not use an inflation adjustment.
In addition, because supplies and other services are primarily composed
of the $0.50 administration fee for separately billable Part B drugs,
and this has not increased, we did not inflate this category.
Part D drugs were inflated 6.0 percent from 2007 to 2009, and 3.4
percent from 2008 to 2009, using the growth rates for overall
prescription drug prices that were used in the National Health
Expenditure Projections.
Table 13 shows payments per Medicare ESRD beneficiary for the first
nine months of each year, for the renal dialysis services which
comprise the payment bundle, excluding former Part D oral drugs, with
prices inflated to 2009 levels. Table 14 shows payments for Medicare
ESRD beneficiaries enrolled in Part D, for the oral drugs with an
injectable equivalent based on Medicare Part D claims, similarly
adjusted for price inflation to 2009.
By looking at these components separately, we are able to calculate
the per capita spending based on the number of beneficiaries that are
eligible for the service. By calculating the spending on a per capita
basis, we are eliminating the effects of enrollment. The sum of the two
values yielded the average expenditures per Medicare ESRD beneficiary
for the renal dialysis services included in the payment bundle. These
values are shown in Table 15. The indicated per capita spending amounts
represent the per patient price and utilization of renal dialysis
services. Because we are controlling for the effects of price inflation
for the comparable 9 month periods in 2007, 2008, and 2009, the
variability in per capita amounts is due to utilization. We believe
that this methodology is responsive to the commenters' concerns in that
the Part D spending amount is divided by the number of beneficiaries
enrolled in Part D, and there is no understatement of this component.
Table 15 reveals that for the 9-month periods, 2007 was the year
with the lowest per patient utilization, with per capita expenditures
of $21,568. We performed the same computations using the full year of
data for 2007 and 2008, as a check for the results obtained. (Tables
16, 17, and 18). We did not use the 2009 data in this comparison, as it
is incomplete. The results revealed that per capita spending for
Medicare ESRD beneficiaries was again lower in 2007, with total
expenditures per beneficiary of $27,232.
Accordingly, we have determined that 2007 is the year representing
the lowest per patient utilization of the renal dialysis services which
comprise the ESRD payment bundle, and have used
[[Page 49073]]
that year to develop the base rate set forth in this final rule. For
the reasons described above, we are finalizing 413.220(b)(1). However,
we have revised the title to reflect per patient utilization in CY
2007, 2008 or 2009 and revised the content to clarify that we remove
the effects of enrollment and price growth from total expenditures for
2007, 2008 or 2009 to determine the year with the lowest per patient
utilization. In addition, we have revised Sec. 413.220(a)(3) to
clarify that 2007 is the year with the lowest per patient utilization.
[GRAPHIC] [TIFF OMITTED] TR12AU10.020
[[Page 49074]]
[GRAPHIC] [TIFF OMITTED] TR12AU10.021
1. Calculation of the CY 2007 Unadjusted Rate Per Treatment
Sections 1881(b)(14)(A)(i) and 1881(b)(14)(B) of the Act, as added
by MIPPA, specify the renal dialysis services, and other items and
services, which must be included in the payment bundle of the ESRD PPS.
We proposed to include payments for the various components (see Table 8
at 74 FR 49940), which comprise the renal dialysis services in the
development of the proposed base rate. A detailed description of each
of the components of the ESRD PPS payment bundle included in the CY
2007 unadjusted rate per treatment was discussed in the ESRD PPS
proposed rule (74 FR 49941). We also described the adjustments used to
calculate the ESRD PPS base rate from the CY 2007 unadjusted rate per
treatment (74 FR 49942). Table 19 shows the various components of the
ESRD PPS payment bundle based on CY 2007 claims, after adjustment for
price inflation to 2009.
BILLING CODE P
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[[Page 49076]]
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BILLING CODE C
As we explained above, we determined that CY 2007 was the year with
the lowest per patient utilization of renal dialysis services. The
categories which comprise the ESRD PPS payment bundle remain the same
as set forth in the proposed rule (Table 8 at 74 FR 49940). The payment
amounts associated with each component are presented in Table 19, and
reflect the modifications and exclusions previously described (for
example, the Part D drug component excludes oral-only drugs and
biologiclas, payments for blood and blood products are excluded,
payments for separately billed drugs which should be considered
composite rate drugs were excluded, etc.).
a. Composite Rate Services
The first MAP component of the ESRD PPS payment bundle shown in
Table 19 is ``Composite rate services''. This line item refers to total
CY 2007 payments for composite rate services as obtained from ESRD
facility claims (bill type 72X claims), inflated to 2009. This total
includes all composite rate payments to ESRD facilities, including
exception payments made in accordance with Sec. 413.182 through Sec.
413.186.
b. Part B Drugs and Biologicals
The next 11 line items in Table 19 reflect the categories of
injectable drugs. In the proposed rule, we noted that the top 11 Part B
drugs and biologicals accounted for 99.7 percent of total separately
billable Part B drug payments (74 FR 49943). For this final rule, we
found that total payments in 2007 for the top 11 Part B drugs and
biologicals reported on ESRD claims, and used to calculate the base
rate, accounted for 99.8 percent of total spending for Part B drugs.
Monthly payments for EPO and ARANESP[supreg] were capped in accordance
with the applicable medically unbelievable edits, described previously
in this section. For all other injectable Part B drugs, we have
provided a separate line item. In section II.A.3. of this final rule,
we discuss Part B drugs and biologicals in detail.
c. Laboratory Tests
Another component of the ESRD PPS bundle shown in Table 19 is
laboratory tests. Payments for laboratory tests represent the total
amount paid to dialysis facilities for outpatient laboratory tests
billed on ESRD claims, as well as payments for laboratory tests ordered
by physicians receiving MCP amounts and billed on carrier claims. We
identified laboratory tests ordered by physicians receiving MCP using
the list of physicians for CY 2007, which was the latest list available
in connection with the publication of the final rule. We discuss
laboratory tests under the ESRD PPS in detail in section II.K.2. of
this final rule.
d. Durable Medical Equipment (DME) and Supplies
DME and supplies is another component of the ESRD PPS payment
bundle. Payments for these items and services were obtained from the
form CMS 1500 claims for Method II home patients.
e. Dialysis Support Services
We computed a total amount for the next component of the ESRD PPS
payment bundle shown in Table 19, ``Dialysis support services.'' This
total represents total payments for support services furnished to
Method II home dialysis patients, and reported under subcategory 5 of
revenue codes 082X through 085X on ESRD claims.
f. Supplies and Other Services Billed by Dialysis Facilities
This category of the ESRD PPS payment bundle primarily includes
payments for syringes used in the administration of intravenous drugs
during the provision of outpatient dialysis. These supplies and
services were billed by the dialysis facilities on ESRD claims.
g. Former Part D Drugs
This amount represents total payments made on behalf of the ESRD
beneficiaries with Part D coverage in CY 2007 (inflated to 2009), for
the oral equivalents of injectable drugs and biologicals which were
furnished for the treatment of ESRD. These drugs and biologicals (three
vitamin D analogues and levocarnitine) were obtained from Part D claims
submitted on behalf of the Medicare ESRD beneficiaries with valid type
72X claims in CY 2007 with Part D coverage. We received several
comments concerning payment for Part D drugs.
Comment: One commenter suggested that the payment amount for oral
drugs included in the base rate use the Part D data for beneficiaries
with the low income subsidy. The commenter stated that this amount
would then be applied to all Medicare ESRD beneficiaries, regardless of
their particular insurance arrangement (Part D coverage, retiree
coverage, or out-of-pocket). The commenter believed that such an
approach would likely produce a more robust estimate of the costs of
the drugs for inclusion in the payment bundle.
Response: In calculating the component of the base rate which
reflects payments for former Part D drugs (excluding oral-only drugs),
we used Part D claims for 2007 for all Medicare ESRD beneficiaries who
were enrolled in Part D. This included payments not only made by the
Part D drug plan, but also payments made by or on behalf of the
beneficiary, for which the Part D beneficiary was responsible. Total
Part D drug expenditures for the oral equivalents of ESRD injectables
were divided by the number of treatments for Medicare ESRD Part D
enrollees. This amount per treatment was added to the per treatment
amount reflecting total 2007 ESRD expenditures for all Medicare ESRD
beneficiaries, divided by the number of treatments for those
beneficiaries. Because total payments for Part D drugs were divided by
the number of HD-equivalent treatments furnished to Part D enrollees,
we believe that this methodology does not result in an understatement
of the oral drug component of the payment bundle. Comparison of the
price adjusted amounts for 2007, 2008, and available data for 2009
revealed that 2007 was the year with the lowest per patient utilization
of renal dialysis services (see paragraph E. above). The NDC codes
[[Page 49077]]
used to identify these drugs are shown in Table D of the Appendix.
Comment: Several commenters asserted that even if CMS has the
statutory authority to include oral-only Part D drugs in the
calculation of the base rate, the proposed computed amount of $12.48
per treatment is inordinately low. The commenters believed the amount
was too low because it reflected the amount of payments made for two-
thirds of all beneficiaries divided by the number of Medicare HD-
equivalent treatments provided to the entire universe of Medicare ESRD
beneficiaries, including those not enrolled in Part D. One commenter
stated that this represents the imposition of an unfunded mandate.
After consideration of inflation, prescription rates, and patient
compliance, the commenter presented an analysis suggesting that the
proper per treatment amount in 2011 for oral Part D drugs should be
about $45.00.
Response: We have revised the base rate component of the bundled
ESRD PPS for Part D drugs so that it excludes oral-only ESRD drugs (see
section II.A.2. of this final rule for a discussion of our decision to
delay payment of oral-only ESRD drugs under the ESRD PPS until January
1, 2014). We have also revised the methodology for computing the
portion of the base rate attributable to Part D drugs so that it
represents the average Part D payment per treatment for each Part D
enrollee. This revision responds to the commenter's concern that the
payment amount included in the proposed rule was understated because it
represented Part D payments for only two-thirds of all Medicare ESRD
beneficiaries, divided by the number of HD-equivalent treatments for
all Medicare ESRD beneficiaries. With respect to the suggestion that
the Part D payment amount included in the base rate should also be
adjusted to reflect increased inflation, prescription rates, and
patient compliance, we decline to include these factors for the
following reasons.
The commenter asserted that the actual rate of price inflation in
Part D drugs would be about 16 percent annually from 2007 through 2011
based on historical data, but calculated a projection using a more
conservative figure of 12.2 percent. We reject the magnitude of this
projection as it differs significantly from forecasted rates of drug
price inflation using the producer price index. Moreover, we believe
that using projected increases in patient prescription rates and
anticipated increases in patient compliance as a basis for calculating
the Part D drug component of the base rate is highly speculative.
We believe the data we used for the Part D drugs that we are
including in the base rate at this time are appropriate and reflect an
adequate payment amount for this component of the base rate.
Accordingly, we decline to incorporate the commenter's suggested
variables. We note that we will address data issues pertaining to oral-
only drugs and the base rate payment amount for such drugs in the
future when we bundle oral-only drugs beginning January 1, 2014.
With respect to the commenter's concern that the per treatment
amount for the Part D drugs component of the bundle is inordinately low
because the number of treatments used reflected all Medicare ESRD
beneficiaries, not just those enrolled in Part D, we point out in a
response to a previous comment that we have addressed this concern by
revising the computation of the base rate, so that the Part D drugs
component reflects Part D payments divided by HD-equivalent treatments
for Part D enrollees. With respect to the adequacy of Part D drug
payments, we have delayed the inclusion of oral-only drugs until
January 1, 2014. We will address data issues pertaining to oral-only
drugs, and the per treatment payment amount for these drugs, in the
future when these drugs are included in the payment bundle. For the
Part D drugs which we are including in the ESRD PPS beginning January
1, 2011, the source data are the actual payments from the 2007 Part D
claims for the oral drugs with an injectable version. We believe that
these data are appropriate and adequate.
Comment: Several commenters pointed out that our proposed
methodology for calculating the base rate resulted in an understatement
of the Part D drug component of the payment bundle (74 FR 49940). This
occurred because, while total payments for renal dialysis services
(excluding Part D drugs) were properly divided by the total number of
HD-equivalent treatments for Medicare ESRD beneficiaries, the total
payments for Part D drugs for Medicare ESRD beneficiaries enrolled in
Part D, was similarly divided by the same number of HD-equivalent
treatments. This yielded an understatement in the amount of the
payments per treatment for Part D drugs included in the payment bundle,
because the number of treatments for Part D enrollees was overstated,
reflecting total treatments for all ESRD beneficiaries instead of
treatments for Part D enrollees only.
Response: The commenters are correct. In this final rule, for all
components of the base rate excluding the portion for Part D drugs, we
used the total number of CY 2007 Medicare HD-equivalent dialysis
sessions (36,747,662) to calculate the portion of the base rate
attributable to all composite rate and separately billable services.
For the portion of the MAP attributable to oral Part D drugs with an
injectable version, the number of CY 2007 HD-equivalent treatments used
to compute the Part D drugs component was 24,737,326. This represents
the number of treatments for Medicare ESRD beneficiaries enrolled in
Part D.
Comment: Several commenters stated that based on a plain reading of
the statute, the Congress intended CMS to take into account all of the
costs for Part D drugs, regardless of Medicare beneficiaries' source of
prescription drug coverage. Therefore, some commenters asserted that an
accurate estimate of total Part D drug costs should include a
determination of the cost of oral drugs for Medicare ESRD beneficiaries
who obtain their drug coverage from Medicare Part D or through another
source. One commenter included a specially commissioned study which
purported to quantify the utilization of oral ESRD drugs (using pill
counts) among three payer groups: Medicare Part D, private coverage
(including employer coverage), and other/unclassified coverage. Because
the average pill counts for specific oral ESRD drugs varied among the
payer groups, the commenter suggested that this difference in
utilization would need to be considered to adjust the Part D component
of the base rate. In addition, the commenter recommended that CMS
adjust this component to reflect anticipated changes in oral drug use,
expected improvements in beneficiary adherence to oral drug regimens,
and an appropriate inflation adjustment.
Response: For reasons expressed in the response to the preceding
comment, we decline to adjust the Part D component of the base rate
using expected increases in oral drug use, and increases in patient
compliance. We also believe that we have appropriately inflated the
base rate to 2011 to reflect price changes. Under the methodology for
calculating the per treatment amount for the specified renal dialysis
services included in the base rate, the sum of the composite rate and
separately billable components is divided by the number of treatments
for ESRD beneficiaries. Total payments for the oral equivalents of
injectable drugs were divided by the number of treatments for Medicare
ESRD Part D enrollees. These two
[[Page 49078]]
amounts were summed to obtain the unadjusted MAP per treatment.
Therefore, the Part D component of the unadjusted base rate amount was
calculated only using beneficiaries with Part D coverage.
The commenter's cited study suggests that differences in oral drug
utilization occur depending on the source of the payment. Although the
commenter's study was limited to a sample using 12,706 Medicare ESRD
beneficiaries and did not control for differences in dosage
(utilization was based on pill counts regardless of the dosage amount),
we believe that a finding that the utilization of Part D drugs among
Medicare ESRD beneficiaries differs depending on payer source would
have no impact on our calculation of the base rate. Section
1881(b)(14)(A)(ii) of the Act refers to the total amount of payments
``under this title,'' which we have interpreted as meaning under Title
XVIII of the Social Security Act.
Therefore, even if differences in the utilization of Part D drugs
among Medicare ESRD patients were confirmed based on non-Medicare
sources of payment for these drugs, we believe this information could
not be used to develop weighting factors to adjust the Part D component
of the base rate based on differences in utilization across payer
groups. Non-Medicare sources of payment for these drugs, such as
employer groups, unions, private insurance, etc., could not be
considered because we interpret section 1881(b)(14)(A) of the Act as
requiring that the ESRD PPS reflect payments under Title XVIII for
renal dialysis services.
h. Total Medicare Hemodialysis (HD)-Equivalent Sessions
In order to calculate the proposed ESRD PPS base rate per
treatment, it was necessary to divide the total payments for each MAP
amount described above by the number of corresponding Medicare HD-
equivalent sessions. The number of Medicare HD-equivalent sessions
represents the total Medicare treatments for outpatient dialysis as
reported on ESRD claims submitted by dialysis facilities. For PD
patients, patient weeks were converted to HD-equivalent sessions. For
this purpose, one week of PD was considered equivalent to three HD
treatments. Accordingly, a patient on PD for 21 days would have (21/7)
x 3 or 9 HD-equivalent sessions. In determining the total number of
Medicare treatments, the number of HD-equivalent sessions was capped so
as not to exceed the number of days in the month in which treatments
were furnished.
i. Average MAP per Treatment
We summed the total payments for the composite rate and separately
billable portions of the bundle. The total of $8,936,542,191 (which
excludes all Part D drugs) was divided by the number of HD-equivalent
treatments (36,747,662), to yield an average MAP per treatment of
$243.19. The MAP per treatment for Part D drugs (excluding oral-only
drugs) was similarly computed by dividing the total payment for those
drugs ($11,340,484) by the number of HD-equivalent treatments for
Medicare ESRD Part D enrollees (24,737,326), to obtain a MAP per
treatment of $0.46. The sum of the MAP amount for all renal dialysis
services excluding Part D drugs ($243.19), plus the MAP amount for the
Part D drugs component, which excludes oral-only drugs, ($0.46),
yielded the total average MAP per treatment for the renal dialysis
services included in the ESRD PPS payment bundle. This amount, $243.65,
is the unadjusted base rate amount and reflects price inflation to
2009. The renal dialysis services which comprise the base rate, both in
terms of total payments for each component and the average payment per
treatment, inflated to 2009, are shown in Table 19.
2. Determining the Update Factors for the Budget-Neutrality Calculation
In order to estimate payments under the current payment system for
each facility in CY 2011, the first year of the ESRD PPS, the
components of the CY 2007 unadjusted per treatment rate were updated to
reflect estimated 2011 prices, using the methodology as described in
the proposed ESRD PPS rule (74 FR 49942). It is necessary to estimate
2011 payments under the current ESRD payment system (including all
separately billable items) for each facility in order to meet the
statutory budget-neutrality requirement for the ESRD PPS.
Section 1881(b)(14)(A)(ii) of the Act requires that the ESRD PPS
payment system be 98 percent budget neutral in 2011. In other words,
the estimated total amount of payments under the ESRD PPS in 2011,
including any payment adjustments, must equal 98 percent of the
estimated total amount of payments for renal dialysis services that
would have been made with respect to services in 2011 if the ESRD PPS
system had not been implemented. In the proposed ESRD PPS, we described
the update factors used to estimate CY 2011 payments for each component
(74 FR 49939).
a. Composite Rate Services
In order to update the basic case-mix adjusted composite payments
to 2011, we began with the CY 2009 base composite rate ($133.81) and
the CY 2009 drug add-on percentage of 15.2 percent. At the time of the
proposed rule (74 FR 49942), in accordance with section 1881(b)(12)(G)
of the Act, as amended by section 153(a)(1) of MIPPA and in accordance
with section 1881(b)(14) of the Act, we updated the composite rate by
1.0 percent for CY 2010 and by the estimated ESRD bundled market basket
percentage increase minus 1 percentage point (1.5 percent) for CY 2011,
respectively, resulting in a proposed 2011 composite rate of $137.18.
We proposed (74 FR 49942 through 49943) to use this base composite
rate for CY 2011, which included the ESRD bundled market basket update
minus 1 percentage point to update the CY 2010 composite rate, for
purposes of establishing the ESRD PPS base rate, given that we
interpreted section 1881(b)(14)(F)(ii) of the Act to require us to
update the composite rate portion of the blend by the market basket
update minus 1.0 percentage point in all years of the transition (which
included CY 2011). We stated that using the market basket in this way
would be a consistent approach (74 FR 49943). At the time of the
proposed rule, we proposed an ESRD bundled market basket update of 2.5
percent for CY 2011. Therefore, we proposed (74 FR 49942 through 49943)
a 1.5 percent update to the composite rate for CY 2011, resulting in a
proposed CY 2011 composite rate of $137.18 ($135.15 * 1.015).
We noted that the drug add-on percentage was reduced from 15.2
percent to 14.8 percent as a result of the increases to the composite
rate in CYs 2010 and 2011. Since the drug add-on is calculated as a
percentage of the base composite rate, the drug add-on percentage
decreases with increases in the composite rate. The CY 2009 PFS final
rule (73 FR 69755) explains why increases to the base composite rate
require decreases to the drug add-on percentage to ensure that the
total drug add-on dollar amount remains the same. We stated our intent
to update the drug add-on, if necessary, for the ESRD PPS final rule
(73 FR 69755).
In the proposed rule, we used the applicable facility-level and
patient-level basic case-mix adjustments from the CY 2007 claims to re-
compute payment using the applicable basic case-mix adjustments applied
to a 100 percent CBSA wage-adjusted composite rate using the most
recently available
[[Page 49079]]
ESRD wage index, which is the CY 2009 final rule ESRD wage index with a
0.60 floor. We stated that we did this to use the most recent wage
indexes available in estimating 2011 payments (74 FR 49943). We also
noted that the other components of the bundle discussed in the proposed
rule do not have payments which are computed with wage indexes (74 FR
49943). In addition, we noted in the proposed rule that payment rates
to facilities that have chosen to retain their exceptions under the
basic case-mix composite payment system are not updated because, once
approved, the exception amounts were fixed payment amounts, and hence
the 2007 amounts represent the 2011 amounts (74 FR 49943).
We did not receive any public comments regarding our proposal with
regard to composite rate services. However, following the release of
the ESRD PPS proposed rule, section 3401(h) of the Affordable Care Act
of 2010 amended section 1881(b)(14)(F) of the Act, by revising the
ESRDB market basket update for CY 2011 from a market basket update
minus one percent to a full market basket update. Thus, a 2.5 percent
update to the composite rate for CY 2011, results in a final CY 2011
composite rate of $138.53 ($135.15 * 1.025). We note that $135.15 is
the final CY 2010 composite rate, which was derived from the CY 2009
composite rate of $133.81 increased by one percent as required by
section 153(a)(1) of MIPPA ($133.81 * 1.01). We also note that, as
discussed in the CY 2011 PFS proposed rule issued on June 25, 2010, we
have used the proposed CY 2011 drug add-on percentage of 14.7 percent,
and the CY 2011 proposed ESRD wage index values with a 0.60 floor for
computing the ESRD PPS budget neutral base rate. In this way, we are
using the most current data available for computing the final CY 2011
ESRD PPS base rate. The final CY 2011 ESRD PPS base rate will not be
adjusted to reflect final decisions regarding the drug add-on
percentage and the wage index floor for CY 2011. However we note that
we will use the final drug add-on and wage index floor values in
computing the composite rate portion of the blended payments during the
transition.
b. Self-Dialysis support services for Method II patients
Currently, the allowance per month under Method II for home
dialysis support services may not exceed $121.15 per month for all
forms of dialysis. Since home dialysis support services for Method II
patients are subject to a monthly capitation payment that is not
increased, we proposed (74 FR 49943)that the CY 2007 amounts represent
the CY 2011 amounts.
We did not receive any public comments regarding our proposal.
Since the monthly capitation payment has not increased, we are
finalizing the approach that the CY 2007 amounts represent the CY 2011
amounts.
c. Part B Drugs and Biologicals
Under the current system, payments for ESRD drugs and biologicals
under Part B are paid on average sales price plus 6 percent (ASP+6
percent) methodology. For the proposed rule, we reviewed ASP prices for
four quarters of 2006, 2007, 2008, and two quarters of 2009 for the top
eleven separately billable drugs. We proposed to use the 2009 prices as
a proxy for 2011 values (74 FR 49943). We indicated that we would
revaluate our decision with updated quarterly ASP pricing data.
For other ESRD-related Part B drugs, we used a proposed weighted
average of the top eleven Part B drugs to update those drug prices to
2011. As the top eleven drugs represented 99.7 percent of total
separately billable Part B drug payments at the time of the proposed
rule, we indicated that the overall weighted average was representative
of the remaining 0.3 percent of drugs. (See Table 10 in the ESRD PPS
proposed rule (74 FR 49943) for the price updates used.) We have
refined our data and the top eleven drugs that now represent 99.8
percent of total separately billable Part B drug payments.
The comments we received on this proposal and our responses are set
forth below.
Comment: Commenters expressed concern about the lack of an update
for ASP-priced drugs and biologicals and suggested that we use the
Producer Price Index for Drugs (PPI) to inflate Part B drug prices.
Response: We agree with the commenters about the need for an update
in ASP prices for Part B drugs and to use the PPI for the update. For
that reason, we took the latest available ASP pricing data, which
represented the second quarter of 2010, and updated these prices using
the PPI for drugs. This update resulted in a 3.9 percent increase to
the top eleven separately billable Part B Drugs from 2010 to 2011.
Similar to the proposed rule, since the top eleven drugs account for
over 99 percent of total spending, for the final rule we used a
weighted average growth of the top eleven drugs (4.6 percent) for the
remaining Part B drugs. Table 20 below shows the price increases, from
2007 to 2011, of the separately billable Part B drugs.
[[Page 49080]]
[GRAPHIC] [TIFF OMITTED] TR12AU10.024
d. Laboratory Tests
We proposed to update payments for laboratory tests paid through
the laboratory fee schedule to 2011 using projected CPI-U increases and
any legislative adjustments that would be applied to this fee schedule
(74 FR 49943). Using this approach, we proposed (74 FR 49943) a growth
update of 5.1 percent from 2007 to 2011.
We did not receive any public comments regarding our proposal.
Since the CPI-U increase, with any legislative adjustments, is the
statutory updated required for laboratory testing, we are finalizing
this approach. However, we have updated the growth percentage using
more recent forecasts of the CPI-U data. For this final rule, the
growth from 2007 to 2011 is 3.9 percent.
e. DME Supplies and Equipment
Since payments for supplies and equipments for Method II patients
are subject to a monthly capitation payment that has not increased, we
proposed that the CY 2007 amount represents the 2011 amounts (74 FR
49943).
We did not receive any public comments regarding our proposal.
Therefore, for the reasons above, we are finalizing the proposed
approach for updating the amount for DME supplies and equipment.
f. Supplies and Other Services
This category primarily includes the $0.50 administration fee for
separately billable Part B drugs. Since this fee has not increased, as
there is no update for such fees, we proposed no price update (74 FR
49943).
We did not receive any public comments regarding our proposal.
Given that the administration fee has not increased, we are finalizing
the proposed approach for supplies and other services.
g. Former Part D Drugs
We proposed that former Part D drugs would be updated by the growth
rates for overall prescription drug prices that were used in the
National Health Expenditure Projections and referred to the following
link for further information on the National Health Expenditure
Projections: http://www.cms.hhs.gov/NationalHealthExpendData/03_NationalHealthAccountsProjected.asp#TopOfPage. Using the National
Health Expenditure Projections, we proposed a growth of 12.2 percent
from 2007 to 2011 (74 FR 49943). We proposed this approach because we
did not have enough data to establish a trend for Part D prices and we
use this price growth in the overall Part D projections. Therefore, we
believed it was an adequate proxy for updating prices for former Part D
drugs.
The comments we received on this proposal and our responses are set
forth below.
Comments: A few commenters suggested the use of the PPI to update
the Part D drugs.
Response: We continue to feel that the growth rates for overall
prescription drug prices that are used in the National Health
Expenditure Projections are the best proxy, as they are consistent with
the price growth proxy used in Part D spending projections. However,
due to new National Health Expenditure Projections, the final growth
for Part D drugs is 12.9 percent. This growth factor would be applied
to those Part D drugs that are to be included in the ESRD PPS bundle as
of January 1, 2011. We note that oral-only Part D drugs will not be
included until after the transition, as discussed in section II.A.3. of
this final rule.
Once we determined updated CY 2011 payments for each component of
the items and services discussed above, we proposed to add the
components together to determine each ESRD facility's total payments
under the current payment system in CY 2011. These estimated total 2011
MAPs divided by the total 2007 Medicare HD-equivalent sessions yielded
the proposed unadjusted per treatment base rate for renal dialysis
services in CY 2011 of $261.58 (74 FR 49944).
The comments we received on this proposal and our responses are set
forth below.
Comments: We received comments that we should account for increases
in enrollment and utilization in determining the base rate.
Response: We do not typically make utilization increase assumptions
in setting budget neutrality for PPS payment systems. In addition, the
statute requires us to use the utilization for the lowest of 2007, 2008
and 2009. Enrollment growth assumptions would not affect a per
treatment rate calculation, as it would increase total spending and
total treatments.
However, due to changes in the components of the final ESRD PPS
bundle described in section II.A. of this final rule, the final updated
unadjusted per treatment base rate for renal dialysis services in CY
2011 is $251.60. We note that the reduction is primarily due to the
delay in implementing oral-only Part D drugs under the ESRD PPS, as we
have removed these MAPs from the unadjusted base rate computation.
Other changes related to the composition of
[[Page 49081]]
the final ESRD bundle and hence the reduction in the unadjusted per
treatment base rate are discussed in section II.A. of this final rule.
We are finalizing $251.60 as the starting point for further
adjustments in determining the final ESRD PPS per treatment base rate.
The 2011 unadjusted average payment per treatment of $251.60 was then
used in the payment model to estimate final total payments under the
ESRD PPS in CY 2011. These final CY 2011 ESRD PPS estimated payments
are based on treatment data from the CY 2007 claims file.
3. Standardization Adjustment
CY 2011 payments under the proposed ESRD PPS were initially
estimated without a budget-neutrality adjustment, using the unadjusted
CY 2011 average payment per treatment amount of $261.58 (74 FR 49944).
We calculated the proposed PPS payments using treatment counts from the
2007 claims file. The wage index and all applicable proposed patient-
level and facility-level adjustments were applied to the unadjusted CY
2011 average payment per treatment to determine the estimated payment
amount under the proposed ESRD PPS for each treatment and ESRD
facility. We noted that to simulate payments, we used the latest
available final CY 2009 ESRD wage indexes, with no floor (74 FR 49944)
because it was the latest available wage index data at the time, and we
had proposed to apply no floor to the PPS payments beginning January 1,
2011. In the proposed rule, we discussed how we standardized payments
(74 FR 49942) and calculated the standardization factor (74 FR 49944)
for the ESRD PPS.
Payments were standardized to account for the overall effects of
the proposed ESRD PPS case-mix patient and facility adjustment factors
and wage indexes. We must standardize payments in order to ensure that
total projected PPS payments are equal to the payments under the
current basic case-mix adjusted composite payment system. The proposed
standardization factor was calculated to be 21.73 percent. As a result,
the proposed CY 2011 unadjusted per treatment base rate of $261.58 was
reduced by 21.73 percent to $204.74 (74 FR 49944).
The comments we received on this proposal and our responses are set
forth below.
Comment: We received numerous comments disagreeing with the
significant reduction in the per treatment base rate caused by
standardization. The commenters indicated that the per treatment base
rate is too low to account for their high staffing and medical costs.
The commenters suggested fewer adjustments yielding a smaller
standardization adjustment and a high per treatment base rate.
Response: In an effort to respond to the concerns expressed about
the amount of the base rate, as discussed in section II.F.3. of this
final rule, we have removed a number of patient adjustments and co-
morbidity categories. Following the methodology from the proposed rule,
we have recomputed the standardization adjustment using the final ESRD
PPS adjustments. The final standardization factor was calculated by
dividing total estimated payments in 2011 under the current payments
system by estimated payments under the final ESRD PPS in 2011. We have
used the same method as in the proposed rule and since we received no
comments on the standardization calculation, we are finalizing this
approach and Sec. 413.220(b)(3) as proposed. The final standardization
adjustment is .9407 or a reduction of 5.93 percent from the unadjusted
per treatment base rate. As a result, the CY 2011 standardized per
treatment base rate is $236.68.
Based upon our review of the public comments and for the reasons
described above, we are finalizing Sec. 413.220(b)(3). However, we
have corrected the cross reference to reflect the patient-level and
facility-level adjustment sections (Sec. 413.231 through Sec.
413.235).
4. Calculation of the Budget-Neutrality Adjustments
a. Outlier Adjustment
Section 1881(b)(14)(D)(ii) of the Act provides that the ESRD PPS
shall include a payment adjustment for high cost outliers due to
unusual variations in the type or amount of medically necessary care,
including variations in the amount of ESAs necessary for anemia
management. We proposed that outlier payments be applied in a budget
neutral manner, as doing so would ensure that estimated total payments
under the proposed ESRD PPS equals 98 percent of the estimated total
amount of payments for renal dialysis services that would have been
made with respect to services in 2011 if the ESRD PPS system had not
been implemented (74 FR 49944).
To ensure that the proposed outlier policy (74 FR 49944) under the
ESRD PPS is budget neutral, we proposed to reduce the base rate by the
proposed outlier percentage, or 1.0 percent. Specifically, we proposed
to reduce the base rate from $204.74 to $202.69. We did this to account
for the 1.0 percent of aggregate ESRD PPS payments estimated to be made
as outlier payments. We then re-estimated the prospective payment
amounts with the new reduced base rate of $202.69, allowing 1.0 percent
of payments to be outliers. The outlier amount was computed for all
treatments and the total outlier payment amount across all treatments
was added to the prospective payment amount for all treatments.
We did not receive any public comments regarding our proposal to
reduce the base rate to account for the outlier percentage and,
therefore, we are finalizing 413.220(b)(4) as proposed. Specific
comments about the outlier policy are discussed in section II.H. of
this final rule. However, using the final standardized base rate of
$236.68, we reduced this amount by 1.0 percent to account for outlier
payments. This reduction resulted in a revised base rate of $234.31.
b. 98 Percent Budget-Neutrality Adjustment
Section 1881(b)(14)(A)(ii) of the Act requires that the ESRD PPS
payment system be 98 percent budget neutral. In other words, the
estimated total amount of payments under the ESRD PPS in 2011,
including any payment adjustments, must equal 98 percent of the
estimated total amount of payments for renal dialysis services that
would have been made with respect to services in 2011 if the ESRD PPS
had not been implemented. Therefore, we proposed to reduce the 2011
standardized base rate, which was already adjusted for 1.0 percent
outlier payments, by an additional 2.0 percent, from $202.69, to yield
a proposed base rate of $198.64 (74 FR 49944).
The comments we received on this proposal and our responses are set
forth below.
Comment: We received numerous comments indicating that the proposed
per treatment base rate of $198.64 is too low to account for the costs
of dialysis.
Response: As we indicated in the previous section, due to changes
made to the final ESRD PPS payment model (specifically, the patient-
level and facility-level adjustment factors described in sections
II.F.3. and II.F.4, respectively, of this final rule), the final
standardization adjustment is considerably lower that the proposed
adjustment. For this reason, the final standardized base rate used as
the starting point for the budget-neutrality adjustments is over $31
higher than the proposed amount.
Comment: Several commenters requested that the outlier percentage
be
[[Page 49082]]
withheld after the 98 percent budget-neutrality adjustment.
Response: The budget-neutrality adjustments are multiplicative, and
as a result, the order of the reductions has no effect on the final
adjusted base rate. The adjustments for the outlier payments and the 98
percent budget-neutrality requirement are needed to ensure that total
payments under the PPS are equal to 98 percent of payments under the
current basic case-mix adjusted composite payment system.
In consideration of the comments received and for the reasons
discussed above, we are finalizing Sec. 413.220(b)(5). However, we
have deleted the cross-references to the ESRD PPS regulatory citations.
Instead, we have revised the language to clarify that CMS adjusts the
per treatment base rate so that the aggregate payments in 2011 are
estimated to be 98 percent of the amount that would have been made
under Title XVIII of the Act if the ESRD PPS described in section
1881(b)(14) of the Act were not implemented. We made this change
because we believe the revised language is more straightforward and
clear.
To summarize, the final base rate per treatment with an outlier
adjustment and budget-neutrality is calculated to be $229.63. This
amount includes a 5.93-percent reduction from $251.60 to account for
standardization to the projected CY 2011 current system payment per
treatment, a 1.0 percent reduction to account for outlier payments, and
a 2.0 percent reduction for the required 98 percent budget-neutrality.
We note that if the reader were to multiply the outlier adjusted base
rate of $234.31 by .98 for the budget-neutrality requirement, they
would calculate $229.62. However we did not round the figures in the
calculation of each step and arrived at $229.63.
5. Calculation of the Transition Budget-Neutrality Adjustment
Section 1881 (b)(14)(E)(i) of the Act requires the Secretary to
provide ``a four-year phase-in'' of the payments under the ESRD PPS for
renal dialysis services furnished on or after January 1, 2011, with
payments under the ESRD PPS ``fully implemented for renal dialysis
services furnished on or after January 1, 2014.'' Although the statute
uses the term ``phase-in'', we are using the term ``transition'' to be
consistent with other Medicare payment systems.
Section 1881(b)(14)(E)(ii) of the Act permits ESRD facilities to
make a one-time election to be excluded from the transition. An ESRD
facility that elects to be excluded from the transition receives
payments for renal dialysis services provided on or after January 1,
2011 based on 100 percent of the payment rate under the ESRD PPS,
rather than a blended payment based in part on the payment rate with
regard to the current basic case-mix adjusted composite payment system
and in part on the payment rate under the ESRD PPS. The proposed
implementation of the transition is discussed in detail in the proposed
rule (74 FR 50003). Section 1881(b)(14)(E)(iii) of the Act also
requires that we make an adjustment to payments for renal dialysis
services provided by ESRD facilities during the transition so that the
estimated total amount of payments under the ESRD PPS, including
payments under the transition, equals the estimated total amount of
payments that would otherwise occur under the ESRD PPS without such a
transition.
In the proposed rule (74 FR 49944 through 49947), we discussed that
the transition budget-neutrality adjustment would be comprised of two
parts. First, we proposed to make a payment adjustment under the basic
case-mix adjusted composite payment system portion of the blended rate
during the transition to account for the per treatment costs of drugs
that are currently paid under Part D. Second, we proposed to compute a
factor that would make the estimated total amount of payments under the
ESRD PPS, including payments under the transition equal the estimated
total amount of payments that would otherwise occur without such a
transition (3.0 percent reduction).
In the proposed rule, we described in detail our rationale for the
transition budget-neutrality adjustment and alternatives considered (74
FR 49944). We invited comments on the calculation and application of
the proposed two-part transition budget-neutrality adjustment factor.
The comments we received on this proposal and our responses are set
forth below.
Comment: We received numerous comments about the proposed
transition budget-neutrality adjustment. Many commenters focused on the
transition budget-neutrality adjustment related to payment for Part D
oral drugs. The commenters indicated that the proposed $14 adjustment
is too low and does not reflect all of the ESRD patients covered under
the ESRD PPS.
Response: As discussed in section II.A.3. of this final rule,
although oral-only Part D drugs meet the definition of renal dialysis
services and are included in the ESRD PPS bundle, we are not
implementing these drugs under the PPS until after the transition. That
section also addresses our rationale for the Part D component of the
base rate and the data used for that analysis. As a result, we removed
the amounts for those drugs from the base rate. However, oral drugs or
other forms of ESRD-related Part B injectable drugs are in the ESRD PPS
bundle and will be implemented January 1, 2011.
In addition, as discussed in section II.E. of this final rule,
based on the comments, we reviewed our methodology to determine if
there were ways to compute the Part D per treatment amount that would
more accurately reflect payments for Part D ESRD-related drugs by ESRD
beneficiaries. As a result of this review, for this final rule we
revised the method of computing the Part D per treatment amount to
divide by the number of Part D enrolled ESRD beneficiaries rather than
total ESRD beneficiaries. As a result of these changes, the final
transition budget-neutrality adjustment related to Part D drugs has
been recomputed to be $.49. If we had not changed our methodology to
divide by the number of Part D enrolled ESRD beneficiaries and had
instead divided by the number of Part B enrolled ESRD beneficiaries, we
would have calculated the Part D per treatment amount to be $.33. While
we recognize the $.49 does not cover all the ESRD patients under the
PPS, the statue limits us to payments made under Title XVIII of the
Act.
Comment: Numerous commenters questioned CMS's legal authority to
impose a transition budget-neutrality adjustment. They expressed
concern about the proposed 3.0 percent reduction going beyond the 98
percent budget neutrality requirement in 2011. Commenters also
expressed concern about the size of the transition budget-neutrality
adjustment related to the cost of the transition. The commenters
indicated that the adjustment was too high and may not reflect ESRD
facility decisions regarding the transition, and expressed concern
about our proposed method of determining which facilities would choose
to opt out of the transition. Several commenters believed that the 3.0
percent reduction during the years 2012 and 2013 will go beyond the 98
percent budget-neutrality requirement. Commenters expressed concern
that we should consider 2012 and 2013 payments in calculating this part
of the transition budget-neutrality adjustment.
Response: We believe section 1881(b)(14)E)(iii) of the Act requires
us to implement the transition budget-neutrality adjustment. We do not
believe the proposed 3.0 reduction goes
[[Page 49083]]
beyond the 98 percent budget neutrality requirement; as it is necessary
to ensure that total payments under the PPS do not exceed the 98
percent requirement. Since we assume that facilities will act in their
best financial interest and opt to transition if it is beneficial, it
is likely that total payments would exceed what is allowed. As we
discussed in the proposed rule (74 FR 49946), we proposed to apply this
adjustment to both the ESRD PPS and the blended payment so as not to
affect provider decisions in opting out of the transition.
We recognize that the transition budget-neutrality adjustment may
not reflect actual choices made by ESRD facilities regarding opting out
of the ESRD PPS transition. We are requiring that ESRD facilities
notify their FI/MACs by November 1, 2010 of their decision to opt out
of the ESRD PPS transition. We are unable to wait until then to
establish the transition budget-neutrality adjustment which is
necessary to meet statutory budget-neutrality requirement.
As a result, we based the final transition budget-neutrality
adjustment on our best projections of how ESRD facilities will fare
under the ESRD PPS compared to the basic case-mix adjusted composite
payment system. With regard to conducting the analysis using 2012 and
2013 projections, we note that the transition budget-neutrality
adjustment will be updated each year of the transition to reflect the
appropriate blend of PPS and composite rate payments. We agree that it
is not possible for us to predict accurately which facilities will opt
out of the ESRD PPS transition. Given that the transition budget
neutrality adjustment applies in each year of the transition, we are
considering whether to prospectively correct for over or understatement
of the number of facilities that choose to opt out of the transition
when we update the adjustment for 2012. We would address this issue in
rulemaking for the CY 2012 ESRD PPS.
We conducted a preliminary analysis for the final rule, to simulate
payments for 2012 and 2013 in order to assess whether considering these
years in the calculation of the transition budget-neutrality adjustment
is warranted due to the change in the blend of payments for those
years. We determined that it makes very little difference in the
adjustment calculation.
In consideration of the public comments and for the reasons
described above, we are finalizing Sec. 413.220(b)(6).
In Sec. 413.239(d), we proposed to apply the transition budget
neutrality adjustment during the first three years of the transition.
As this characterization of the period during which the transition
budget neutrality adjustment applies, we are revising proposed Sec.
413.239(d) to clarify that there is a 4-year transition period.
In summary, for the final rule, due to revised estimates of
simulated payments under the current basic case-mix adjusted payment
system and under the ESRD PPS payment system by facility, we estimate
that 43 percent of ESRD facilities will choose to be excluded from the
transition and that 57 percent of ESRD facilities will choose to be
paid the blended rate during the transition. Consequently, we estimate
that during the first year of the transition, total payments to all
ESRD facilities would exceed the estimated payments under the ESRD PPS
in the absence of the transition.
Thus, in order to maintain the 98 percent budget-neutrality
required by section 1881(b(14)(E)(iii) of the Act during the initial
year of the transition period, we are finalizing the reduction of all
payments to ESRD facilities in CY 2011 by a factor that is equal to 1
minus the ratio of the estimated payments under the ESRD PPS were there
no transition (that is, 98 percent of total estimated payments that
would have been made under the current basic case-mix adjusted payment
system) to the total estimated payments under the transition, or 3.1
percent.
For 2011, application of this factor would result in a 3.1 percent
reduction in all payments to ESRD facilities, that is, we intend to
apply this adjustment to both the blended payments made under the
transition and payments made under the 100 percent ESRD PPS. We are
finalizing this approach because, as we stated in the proposed rule (74
FR 49946), we believe that it would evenly distribute the effect of the
transition budget-neutrality adjustment and it would not affect ESRD
facilities' incentives with respect to whether to opt out of the
transition.
F. Regression Model Used To Develop Final Payment Adjustment Factors
1. Regression Analysis
In the proposed rule, we described the two-equation methodology
used to develop the proposed adjustment factors that would be applied
to the base rate to calculate each patient's case-mix adjusted payment
per treatment (74 FR 49947 through 49949). The two-equation approach
used to develop the proposed ESRD PPS included a facility-based
regression model for composite rate service, and a patient-level
regression model for separately billable services. The composite rate
and separately billable components of the model described in the
proposed rule, used CY 2004-2006 Medicare cost report and claims data
to develop the specific adjusters associated with the variables
included in the payment model (74 FR 49947).
For purposes of developing the payment adjusters included in this
final rule, we have updated the proposed two-equation methodology using
CY 2006-2008 Medicare cost report and claims data. These are the latest
available cost reports and claims given the time necessary for the
preparation of this final rule. We have also reduced the number of co-
morbidities and revised the definitions of co-morbidities for which
payment adjusters apply; modified the separately billable regression
model so that it reflects information for a patient-month rather than
patient-year; added facility training status as a control variable; and
eliminated sex and race as payment variables.
The addition of facility training status as a control variable and
modification to the separately billable regression so that it reflects
information for a patient-month rather than patient-year are described
below. The basis for the reduction in the number of co-morbidities used
to develop the case-mix adjusters and elimination of sex and race as
payment variables are discussed in section II.F.3. of this final rule.
For this final rule, the measures of resource use, specified as the
dependent variables for developing the payment model in each of the two
equations, are also explained below.
a. Dependent Variables
i. Average Cost per Treatment for Composite Rate Services
As described in the proposed rule (74 FR 49947) and for purposes of
this final rule, we measured resource use for the maintenance dialysis
services included in the current bundle of composite rate services,
using ESRD facility data obtained from the Medicare cost reports for
hospital-based ESRD providers and independent ESRD facilities. The
average composite rate cost per treatment for each ESRD facility was
calculated by dividing the total reported allowable costs for composite
rate services for CYs 2006, 2007, and 2008 (Worksheet B, column 11,
rows 7-16 on CMS 265-94; Worksheet I-2, column 11, rows 2-11 on CMS
2552-96) by the total number of dialysis treatments and Worksheet C,
column 1, rows 1-10 on CMS 265-94; Worksheet I-4, column 1, rows 1-10
on CMS 2552-96). CAPD and CCPD patient weeks were multiplied by
[[Page 49084]]
3 to obtain the number of HD-equivalent treatments. We point out that
our computation of the total composite rate costs included in this per
treatment calculation includes costs incurred for training expenses, as
well as all costs incurred by ESRD facilities for home dialysis
patients.
The resulting composite rate cost per treatment was adjusted to
eliminate the effects of varying wage levels among the areas in which
ESRD facilities are located using the proposed ESRD PPS CY 2011 wage
index published July 13, 2010, in connection with the proposed CY 2011
physician fee schedule (PFS)(75 FR 40673), and the estimated labor-
related share of costs from the composite rate market basket. This was
done so that the relationship of the studied variables on dialysis
facility costs would not be confounded by differences in wage levels.
The description of that labor-related share was contained in the
Secretary's 2008 Report to Congress, A Design for a Bundled End Stage
Renal Disease Prospective Payment System.
The proportion of composite rate costs determined to be labor-
related (53.711 percent of each ESRD facility's composite rate cost per
treatment) was divided by the ESRD wage index to control for area wage
differences. No floor or ceiling was imposed on the wage index values
used to deflate the composite rate costs per treatment in order to give
the full effect to the removal of actual differences in area wage
levels from the data. We applied a natural log transformation to the
wage-deflated composite rate costs per treatment to better satisfy the
statistical assumptions of the regression model, and to be consistent
with existing methods of adjusting for case-mix, in which a
multiplicative payment adjuster is applied for each case-mix variable.
As with other health care cost data, there was skewness in the cost
distribution for composite rate services in which a relatively small
fraction of observations account for a disproportionate fraction of
costs. Cost per treatment values which were determined to be unusually
high or low in accordance with predetermined statistical criteria, were
excluded from further analysis. (For an explanation of the statistical
outer fence methodology used to identify unusually high and low
composite rate costs per treatment, see pages 45 through 48 of UM-
KECC's February 2008 report.)
ii. Average Medicare Allowable Payment (MAP) for Separately Billable
Services
For purposes of the final rule, resource use for separately
billable ESRD-related services was measured at the patient level using
the payment data on the Medicare claims for CYs 2006-2008. This time
period corresponded to the most recent three years of Medicare cost
report data that were available to measure resource use for composite
rate services. Measures of resource use included the following
separately billable services: injectable drugs billed by ESRD
facilities, including ESAs; laboratory services provided to ESRD
patients, billed by freestanding laboratory suppliers and ordered by
physicians who receive monthly capitation payments for treating ESRD
patients, or billed by ESRD facilities; other services billed by ESRD
facilities, including support services for Method II home patients;
medical equipment and supplies for Method II home patients billed by
durable medical equipment suppliers.
In the proposed rule, we stated that complete data for CYs 2006-
2008 for Part D claims were not available in sufficient time for the
development of the proposed case-mix adjusters (74 FR 49947). Our
decision not to implement oral-only drugs in the ESRD PPS until after
the transition period ends January 1, 2014, as explained in section
II.A.3. in this final rule, means that only oral drugs with an
injectable version (that is, drugs other than oral-only drugs) would be
relevant for inclusion in the separately billable regression model.
Total payments for these drugs in 2007 and 2008 averaged about $12.8
million each year, an amount which on a per treatment basis would have
a minimal impact on the magnitude of the case-mix adjustments.
In addition, there is a technical issue of how payments for
prescription drugs taken at home over a period of time should be linked
to specific patient HD-equivalent treatments, so that the regression
results for patient utilization of separately billable services would
not be distorted. Because of the time necessary to prepare for this
final rule, we deferred resolution of this issue. Given that oral drugs
and biologicals included in the payment bundle represent a very small
proportion of the total annual total expenditures for the renal
dialysis services included in the ESRD PPS ($8.8 billion in 2007), we
believe that not including these drugs in the regression model used to
develop the case-mix adjusters at this time is of little consequence.
We will need to revisit this issue prior to the expansion of the
ESRD PPS to include all oral ESRD-related drugs and biologicals
beginning in January 2014, because expenditures for oral-only ESRD-
related drugs are significantly higher ($445 million in 2007), compared
to those for the oral and other forms of injectable drugs. Including
drug expenditures of this magnitude in the regressions used to develop
the case-mix adjusters could impact the size of the adjustment factors
in the ESRD PPS and will need to be evaluated. Accordingly, the
regression model set forth in this final rule does not reflect the
inclusion of oral or other forms of injectable ESRD-related drugs.
Although these drugs have been excluded from the regression model, we
point out that payments for these drugs have been included in the
calculation of the ESRD base rate to which the case-mix adjusters will
be applied.
We obtained Medicare claims data for separately billable services
for CYs 2006-2008 for patient-months in which outpatient dialysis was
provided and Medicare was the primary payer. Measures of resource use
were based on MAPs, which were calculated using the payment data on the
claims.
Medicare payments were inflated by a factor of 1.25 for services
that have a 20 percent patient co-insurance (for example, ESRD-related
injectable drugs), to yield the MAP. For laboratory tests that have no
patient co-insurance obligation, the Medicare payment is identical to
the MAP. The MAP amounts do not include the annual Part B payment
deductible which may apply to separately billable services because we
were unable to determine whether the deductible amount was incurred in
connection with another Part B service. We point out that the Part B
payment deductible can apply in connection with any Part B service, not
just outpatient dialysis. As required under section 1881(b)(14)(B) of
the Act, vaccines are excluded from the ESRD PPS and, therefore, were
excluded from the computation of separately billable drugs.
Comment: One commenter questioned why CMS repriced injectable
drugs, but not other payments included in the analysis. The commenter
noted that the repricing was done to the first quarter of 2008 and
pointed out that the ASP value for EPO for this period was the lowest
value for the drug in four years. The commenter stated that the effect
of selecting this quarter was to reprice several injectable drugs
downward, dampen variations in payments, and lower the value of the
case-mix adjustments.
[[Page 49085]]
Response: In the proposed rule, we repriced the payments for
injectable drugs for CYs 2004-2006 to the first quarter of 2008. This
was accomplished by using a ratio which was obtained by dividing the
Medicare payment rate in the first quarter of 2008 by the Medicare rate
in 2004, 2005, and 2006. The ratios used to adjust the MAPs for the 11
specified injectable drugs were shown in Table 11 in the proposed rule
(74 FR 49948). The basis for the repricing of the top 11 injectable
drugs in the proposed rule was due to the shift in the drug pricing
methodology in 2006, from Average Wholesale Price to ASP+6 percent. The
first quarter of 2008 was selected as the end quarter for the repricing
because it represented the latest available quarter for which we had
pricing information, consistent with the lead time necessary for the
preparation of the proposed rule.
There was no attempt to select a quarter which would lead to
reduced prices and reduced case-mix adjustments. For this final rule,
we believe there is no need to reprice injectable drugs due to a change
in the pricing methodology, because CY 2006, 2007, and 2008 drug prices
consistently reflect the ASP+6 percent method.
The adjusted MAP values were standardized to reflect the number of
Medicare outpatient dialysis treatments reported on the claims. This
approach is consistent with the unit of payment under the current
composite payment system. For patients who received PD during the
month, the number of PD days reported on the claims was multiplied by
\3/7\ to obtain the number of HD-equivalent treatments. For example, 7
PD days were converted to 3 treatments since hemodialysis is typically
performed 3 times per week. Monthly treatments reported on the claims
were capped so as not to exceed the number of days in the month
treatments were furnished, as treatments in excess of this number were
considered clinically implausible.
Comment: Several commenters pointed out that our exclusion of
claims in which the average utilization of EPO per treatment exceeded
30,000 units based on clinical implausibility was inconsistent with
CMS's ESA Claims Monitoring Policy.
Response: We agree with the commenters and have revised the
thresholds to conform with the medically unbelievable edit thresholds
(MUE) for EPO and ARANESP[reg] applicable to each year. Payments for
EPO and ARANESP[reg] in excess of the MUE thresholds of 500,000 units
for EPO in 2006 and 2007, and 400,000 units in 2008 were excluded from
the claims. Similarly, payments for ARANESP[supreg] in excess of the
MUE thresholds of 1500 mcg in 2006 and 2007, and 1200 mcg in 2008 were
also excluded from the claims. The ratio of the adjusted MAP values for
separately billable services divided by the total number of treatments
was used to calculate the average adjusted MAP per treatment.
As with the analysis of composite rate services described in
section II.D. of this final rule, we similarly used the statistical
outer fence methodology to exclude unusually high separately billed
values. Claims with total separately billed amounts greater than
$2,545.65 were excluded from the analysis of 2006 through 2008 data,
used to develop the separately billed portion of the ESRD PPS payment
model for patients age 18 and older. For the analysis used to develop
the separately billed portion of the ESRD PPS payment model for
pediatric patients for purposes of the pediatric payment adjustment,
the application of this methodology resulted in no exclusions.
b. Independent Variables
In the proposed rule, we explained that two major types of
independent or predictor variables were included in the composite rate
and separately billable regression equations--case-mix payment
variables and control variables (74 FR 49948 through 49949). Case-mix
payment variables were included as factors that may be used to adjust
payments in either the composite rate or in the separately billable
equation. Control variables, which generally represent characteristics
of ESRD facilities such as size, type of ownership, facility type
(whether hospital-based or independent), etc., were specifically
included to obtain more accurate estimates of the payment impact of the
potential payment variables in each equation. Control variables were
excluded from consideration as actual payment adjusters because they
represent facility characteristics rather than patient characteristics.
In the absence of using control variables in each regression equation,
the relationship between the payment variables and measures of resource
use may be biased.
i. Control Variables
In the proposed rule, we described seven control variables that
were included in the regression analysis (74 FR 49948). They were: (1)
Renal dialysis facility type (hospital-based versus independent
facility); (2) facility size (<3,000 for less than three years, 3,000-
5,000, 5,000-10,000, and > 10,000 dialysis treatments); (3) type of
ownership (independent, large dialysis organization, regional chain,
unknown); (4) whether the ESRD facility received a composite rate
payment exception between November 1993 and July 2001; (5) adequacy of
dialysis, based on the percentage of patients having a urea reduction
ratio (URR) < 65 percent; (6) rural versus urban location; and (7)
calendar year. For the proposed rule, calendar years 2004, 2005, and
2006 were included as a control variable in analyses that pooled three
years of data. In order to avoid excluding dialysis facilities that
treated PD patients from the analysis with control variables, for these
facilities, if no URR was available for any patients in the facility,
we used the average percentage of patients with a URR greater than 65
percent.
For this final rule, we have added an eighth control variable,
training treatments, in which the proportion of training treatments
furnished by each dialysis facility is specified. This was done in
order to remove any confounding cost effects of training on other
independent variables included in the payment model, particularly the
onset of dialysis within 4-months variable. In addition, for the
calendar year control variable, we have used CYs 2006, 2007, and 2008
in analyses that pooled 3 years of data.
ii. Case-Mix Adjustment Variables
Section 1881(b)(14)(D)(i) of the Act requires that the ESRD PPS
include a payment adjustment based on case-mix, but gives the Secretary
broad discretion with regard to the selection of patient-specific
measures which would comprise the case-mix adjusters. In the proposed
rule, we stated that as part of our case-mix analysis, we identified
the same patient demographic variables used in connection with the
basic case-mix adjusters under the current composite payment system:
age (five groups, excluding patients less than age 18), BSA, and low
BMI (values less than 18.5 kg/m\2\) (74 FR 49949)). BSA was calculated
as a function of height (H, in centimeters) and weight (W, in
kilograms) using the following formula:
BSA = 0.007184 x H(0.725) x W(0.425)
BMI values below 18.5 kg/m\2\ were used to identify patients who
were underweight. BSA and low BMI are currently used as part of the
basic case-mix adjustment for the composite payment system.
The same set of independent variables was included in both the
composite rate and separately billable regression equations. To define
the independent
[[Page 49086]]
variables for each equation, however, it was necessary to link patient
and facility-level data. For example, measures for patient
characteristics (for example, female gender) were included as potential
payment variables in the facility-level composite rate equation, while
measures for facility characteristics (for example, hospital-based or
independent facility) were included as control variables in the patient
level separately billable equation. For the composite rate equation, we
defined case-mix measures using data for all Medicare dialysis patients
treated in each facility. Specifically, we determined the percentage of
a facility's patients having each patient characteristic. For example,
patient sex was measured as the percentage of patients that were
female. For the equation of the separately billable MAPs, we defined
measures for facility characteristics using data for all facilities
that treated each Medicare dialysis patient.
These patient and facility control variables were weighted to give
greater emphasis to patient and facility observations that accounted
for more of the care that was delivered, based on the number of
dialysis treatments. For example, in defining facility-level case-mix
measures, the characteristics of patients who were treated at the
dialysis facility for twelve full months (for example, with 13
treatments each month), were given twelve times as much weight as the
characteristics of patients who were treated at the facility for only 1
month (that is, with 13 treatments). Similarly, to define patient-level
measures for the control variables, the characteristics of the facility
that treated the patient for nine full months were given three times as
much weight as the characteristics of the facility that treated the
patient for the remaining three full months.
The resulting case-mix variables were examined as potential payment
variables in the composite rate equation (for example, percent female
and average BSA among patients in each facility). This was the same
approach used to define the basic case-mix measures under the composite
payment system. The resulting facility variables were included as
control variables in the separately billable equation (for example,
percent of a patient's treatment furnished in a hospital-based
facility).
We have not departed from the use of facility control and patient-
specific variables as described above in developing the case-mix
adjusters set forth in this final rule. In the sections that follow, in
response to public comments and for the reasons outlined below, we
describe how we reevaluated and revised the proposed independent
variables for use as potential case-mix adjusters in the ESRD PPS to
determine their relationship to composite rate costs and separately
billable payments.
Before we explain how the final set of case-mix adjustment
variables was determined, we must first explain the difference between
an annual model and a monthly model in connection with the separately
billable regression equation component of the two equation model used
to develop the case-mix adjustments. There are subtle but important
differences in the interpretation of what variation in costs is being
captured by the case-mix multipliers depending upon whether an annual
model or monthly model is used. This has particular relevance in
connection with the multipliers for co-morbidities.
2. Choosing Between a Separately Billable Model Based on Patient-Year
or Patient-Month Data
The composite rate cost component of the two-equation model is
based on Medicare cost reports that are submitted annually. The
separately billable payment portion of the two-equation model is based
on claims submitted monthly by ESRD facilities. Accordingly, the
composite rate model is based on data that are observed annually, while
the separately billable model is based on data that are observed
monthly. In order to create consistency between the two models, the
various versions of the separately billed models which we have analyzed
have been based on annualized data.
For a chronic condition, the measurement of the co-morbidity at the
annual or monthly level does not vary, because the patient either
always has the condition or never has it. Aside from first time
diagnoses, there is no distinction in how the co-morbidity is coded on
an annual or monthly level, that is, patients will either have a zero
or one for the variable. However, most patients with acute conditions
(as will be shown later), are measured as present in the current month
of treatment or previous 3 months, only have the condition for part of
the year. Therefore, the coding of the co-morbidity variable for an
acute condition will differ substantially on the annual versus monthly
basis. On an annual basis, the value often lies between zero and one,
representing the fraction of treatments in the year which occurred in
months with the co-morbidity present (currently or within the three
prior months). On a monthly basis, the value for the co-morbidity
variable will be either zero or one, depending on whether the diagnosis
is present in that month or the three preceding months.
We believe this distinction is important. The values of the case-
mix adjustments for the acute co-morbidity variables in an annual model
compared to a monthly model, create subtle but significant differences
in the interpretation of what variation in costs the multipliers
capture. Statistically, an omitted variable bias occurs when variables
that predict the outcome (cost) are not included in the model, but are
correlated with some of the variables that are included. As more
variables predictive of costs are dropped from the model, the magnitude
of the bias tends to increase. In this context, the proper
interpretation of the multipliers is that they capture the costs
directly associated with the co-morbidity being measured, plus part of
the costs related to the omitted factors correlated with the condition.
In a payment model, this could be seen as either a positive or a
negative characteristic. On the positive side, the omitted variables
bias allows the model to partially adjust for unmeasured factors that
influence costs, but are not reflected in the payment system. However,
this bias undercuts the face validity of the case-mix multipliers
because part of what they are capturing is unknown. Further, the larger
multipliers would increase the incentive to report relatively minor
cases of the co-morbidity that may not even be associated with whatever
unmeasured conditions the multiplier reflects.
With respect to using an annual versus monthly unit of analysis in
the separately billable model, the case-mix multipliers for acute co-
morbidities in the annual model are likely to be subject to a greater
degree of omitted variables bias because of the longer time span. In
the annual specification, the question being answered is ``Is a patient
with this acute co-morbidity more costly to treat throughout the year?
'' Those higher costs could be directly attributable to the co-
morbidity and occur in those months in which the co-morbidity was
present. However, they could also represent costs directly attributable
to the co-morbidity that occur outside the three month time interval in
which the co-morbidity was coded as present (for example, if there is
some impact on costs beyond three months), or costs attributable to any
other correlated omitted conditions that occur at any time of the year.
Therefore, for those patients with the acute conditions coded for
only part of the year, the case-mix adjuster in an
[[Page 49087]]
annual model can reflect costs occurring outside the time frame during
which the co-morbidity was actually present. In other words, having the
acute condition present for part of the year might be a marker for
having other costly conditions at any time of the year.
In a monthly model, the case-mix multiplier can still reflect costs
associated with correlated, omitted variables, but only if those costs
occur in the same months the co-morbidity is coded as present. Any
costs occurring outside the months in which the co-morbidity is coded
as present, regardless of whether those costs are directly related to
the co-morbidity, or arise from correlated, omitted conditions, will
not be reflected in the multiplier because the co-morbidity is coded as
zero in those months.
We want to focus on specific conditions that are associated with
more costly resource intensive dialysis, not other unspecified
conditions that may be an indicator for more costly care at any time of
the year. We also want to minimize omitted variables bias as much as
possible, but particularly for omitted conditions that can occur at any
time of the year. Accordingly, in connection with this final rule, we
have adopted the patient-month separately billable model. The case-mix
adjusters reflected in the proposed rule were based on the annual unit
of analysis for separately billable services (Table 14 at 74 FR 49954).
As shown in Table A of the Appendix in this final rule, the case-
mix adjusters for acute conditions are substantially smaller in the
patient-month model in comparison to the annual model. This indicates
that the multipliers in the annual model are capturing costs that occur
outside the time window during which the condition was coded as
present. As will be explained later in section II.F.3. of this final
rule, on co-morbidities, we have dropped certain co-morbidities after
considering comments received and for the reasons highlighted below,
with more of an emphasis on acute as opposed to chronic conditions, and
modified the definitions of others. As conditions are dropped from the
model, the tendency is for omitted variables bias to become more
pronounced in the patient-year model. In the patient-month model, the
case-mix adjustments are less affected by the elimination of co-
morbidities as independent variables.
In selecting a patient-month separately billable model, we believe
that the case-mix adjustments more closely reflect costs associated
with the specific co-morbidity being measured, and occurring in the
specific months in which the co-morbidity was present. We believe that
this approach will more closely align the costs of furnishing dialysis
with patient-specific conditions requiring more resource intensive care
in a timely manner. Because composite rate cost data are only available
on an annual basis through the Medicare cost reports, the option of
switching to a monthly model for the composite rate component of the
two equation regression model used to develop the case-mix adjusters is
not possible. Therefore, the case-mix adjustments set forth in this
final rule were developed using an annual model for the composite rate
portion of the regression model and a patient-month model for the
separately billable portion.
3. Patient-Level Adjustments
We proposed to include patient age, patient sex, body surface area
(BSA), body mass index (BMI), onset of dialysis and certain co-
morbidities as patient-level adjusters (74 FR 49949). Over one hundred
commenters representing patients, health care professions and their
professional organizations, ESRD facilities and ESRD organizations,
renal organizations, and pharmaceutical companies commented on the
patient-level adjusters.
The comments we received relating to the specific adjusters and our
responses to those specific comments are discussed in their respective
sections below.
Comment: Some commenters indicated that weight, size and age have
little impact on overall costs of providing dialysis. One commenter did
not believe that our analysis of the proposed adjustments reflected
actual payments that facilities would receive. Another commenter
suggested that the proposed adjustments would increase patients' co-
payment obligations. Several commenters were concerned that the
patient-level adjustments would lead to facilities ``cherry picking''
patients with better defined case-mix adjustments and turn away others
whose reimbursement would not cover costs.
Response: As discussed in the proposed rule, multiple regression
analysis was used to develop the proposed payment adjustment factors.
The results of the proposed two-equation model (composite rate and
separately billable items) using the latest data that was available at
that time, demonstrated that age, sex, BSA, BMI, co-morbidities and
onset of dialysis were indicators of higher cost patients (74 FR
49947). The discussion on the current analysis and findings is in
section II.F.3. of this final rule. We appreciate the concerns raised
about ESRD facilities ``cherry picking'' patients. We plan to monitor
the effects of the payment system, which are discussed in section II.K.
of this final rule and will be discussed in the future, and could make
adjustments to the ESRD PPS in the future. We expect that ESRD
facilities will not ``cherry pick'' patients under the ESRD PPS.
We believe that the same incentives and concerns could exist under
the current composite rate payment system, as well. In other words, if
ESRD facilities will select more lucrative patients under the ESRD PPS,
they could also do so currently under the basic case-mix adjusted
composite payment system. We also believe that in the absence of such
adjustments, high cost patients could be turned away, thereby ``cherry
picking'' only the least costly patients. Providing patient-level
adjustments to the ESRD PPS base rate should result in adequate payment
for the higher resource utilization and therefore higher cost patients.
Comment: Some commenters suggested that we decrease the number of
case-mix adjustments to include only those affecting cost. Others
stated that multiple adjustments will decrease the overall base payment
rate taking funding away from the cost of providing care to the
majority of patients. Some commenters suggested that money from the
case-mix adjustments should be added to the base rate to provide the
same reimbursement for all patients.
Response: As discussed in the proposed rule (74 FR 49938), our
analysis demonstrated that the proposed patient-level adjustments did
affect cost and those that did not were rejected. However, we did
consider the concerns and comments about the adjustments and have
eliminated some of them. These adjustments are discussed in the
respective sections below. We discuss the methodology for computing the
ESRD base rate in section II.E. of this final rule.
Comment: One commenter suggested that we provide all facilities
with an electronic calculator to ensure consistency among providers.
Several commenters believed that CROWNWeb would be used for
documentation to be eligible for the patient-level adjustments. One
commenter disputed our belief that nephrologists complete the Medical
Evidence Form 2728 (Form 2728) indicating that the form is more likely
completed by someone not medically trained. Therefore, this commenter
believed the data on the form could be inaccurate, missing or
incompletely filled out.
[[Page 49088]]
This observation was reiterated by another commenter who suggested
that a study be conducted prior to the ESRD PPS 2011 implementation to
determine who should complete the Form 2728. The commenter suggested
that the study also include the experience and training of personnel
completing the Form 2728 as well as a random selection of Form 2728.
The commenter further suggested that the Form 2728 be compared with
patient/family interviews, physician interviews, and medical record
review. One commenter suggested that we continue to study and research
additional variables that demonstrate a good correlation between
resource consumption and patient characteristics.
Response: We appreciate the commenter's concerns regarding
consistency among providers and agree that it is important. However, we
do not believe that providing a tool such as an electronic calculator
will ensure consistency as ESRD providers will be required to identify
the appropriate patient-level adjustments for their individual
patients. In addition, it is the responsibility of each ESRD facility
to ensure that all information on patient claims submitted is accurate
under any Medicare payment system. Contrary to the commenter's belief,
CROWN is not the source for documenting eligibility for the patient-
level adjustments. For the purposes of payment, the requisite
information would be obtained from the claim or from sources that are
discussed in the specific patient-level adjustments below.
We are concerned about the assertion made by the commenters about
the completion of the Form 2728. We maintain that it is the ESRD
facilities' responsibility to ensure that the information provided to
Medicare is accurate. While there is no requirement that the
nephrologist complete the form, instructions on the Form 2728 specify
that the form ``[b]e signed by the physician supervising the patient's
kidney treatment [sic].'' The instructions also specify that stamp
signatures are not acceptable. In other words, the nephrologist may not
complete the entire form but his or her signature serves to attest that
the information is accurate. Therefore, we do not believe that
performing a study to determine the qualifications of the person
completing the form is warranted. However, we do believe that ESRD
facilities are responsible for ensuring that appropriate staff who
provide care, include documentation as appropriate. We agree with the
commenter that we should continue to study and research the correlation
between resource consumption and patient characteristics and we plan to
do so.
After considering these comments and other comments below, we are
finalizing age, BSA, BMI, certain co-morbidities and onset of dialysis
as the patient-level case-mix adjustments in this final rule. Our
rationale for including these factors, as well as the reasons for
excluding patient factors for patient sex and race or ethnicity, are
discussed below. We are revising Sec. 413.235 to reflect the patient-
level, case-mix adjustments to be implemented effective January 1,
2011.
a. Patient Age
Section 1881(b)(14)(D)(i) of the Act requires that the ESRD PPS
include a payment adjustment based on case-mix that may take into
account a patient's age. In the proposed rule we pointed out that the
basic case-mix adjusted composite payment system currently in effect
includes payment adjustments for age based on five age groups (74 FR
49949), based on analyses that showed a strong relationship between
composite rate costs and patient age. Table 12 from the proposed rule
(74 FR 49950) contained the payment multipliers for each of these
groups, along with a special multiplier that applies to pediatric
dialysis patients. The proposed ESRD PPS adjustment factors for age
reflected the U-shaped relationship of age with the CY 2007 MAP per
treatment, a relationship similar to that observed in developing the
current basic case-mix adjusted composite payment system.
The regression analyses performed in connection with the
development of the ESRD PPS payment adjustments for this final rule
indicate that age continues to be a strong predictor of variation in
composite rate costs and separately billed payments, although the
magnitude of the adjusters for the two oldest age categories has been
attenuated as a result of other changes in the payment model (for
example, elimination of sex and race/ethnicity as payment variables,
revisions in the co-morbidities used for payment, modification of the
low-volume threshold, etc.). Therefore, we are implementing payment
adjustment factors for the same five age groups as proposed, calculated
in accordance with the two equation regression methodology described
elsewhere in this final rule. The final payment adjustment factors for
age are shown in Table 21.
[GRAPHIC] [TIFF OMITTED] TR12AU10.025
We received several comments on our proposed use of age as a
payment variable in the proposed ESRD PPS.
Comment: Several commenters stated that age is an objective and
easily collected variable, demonstrably related to cost, and that
continuing to collect age data would not be burdensome or require
systems changes.
[[Page 49089]]
Response: We agree with the commenters. The use of a payment
variable that is objective, easily collected, and related to patient-
specific differences in the cost of dialysis strongly support its use
as a case-mix adjuster in the ESRD PPS.
Comment: Several commenters suggested that we combine age with
gender and ethnicity. Another commenter recommended that we match age
with an adjuster for home dialysis training.
Response: The reason that age is included in the ESRD PPS is
because analyses demonstrate that age is a significant independent
predictor of variation in composite rate costs and separately billable
payments. For reasons explained elsewhere later in this section, we
have not adopted patient sex and race/ethnicity as payment adjusters in
connection with the ESRD PPS set forth in this final. For information
on our development of a special add-on to the otherwise applicable
prospective payment rate for the costs of home dialysis training, see
section II.A.7. of this final rule.
Comment: Several commenters suggested that we use an age adjuster
for patients of ``advanced age and/or frailty''. One commenter
recommended age specification of pediatric patients, claiming that both
groups require specialized care resulting in higher costs for ESRD
facilities.
Response: Both the proposed rule (74 FR 4995) and this final rule
incorporate an age group for patients age 80+. Further disaggregation
of the proposed age groups did not result in more statistically
homogeneous age groups for the application of case-mix adjustments
based on age. Therefore, we have not modified the proposed age
classification categories. Nor have we identified a separate variable
for patient frailty, as this would be very difficult to quantify
objectively and measure with currently available sources of claims
data. With respect to age classification groups for pediatric patients,
we point out that we have adopted pediatric payment adjustments for two
age groups (<13, and 13-17), and explain the basis for the selection of
these two age categories in section II.G. of this final rule.
Comment: Two commenters representing ESRD facilities opposed the
use of age as a basis for case-mix adjustment, claiming that they did
not see any merit in its use.
Response: We strongly disagree with the commenters. The analyses in
support of the payment adjustments for age used in connection with the
basic case-mix adjusted composite payment system, the proposed ESRD PPS
(74 FR 49949 through 49950), and the ESRD PPS described in this final
rule, show that age is an important predictor of facility differences
in ESRD composite rate costs, and patient-specific differences in
separately billed payments. Therefore, we are incorporating age as a
case-mix payment variable in the final ESRD PPS, and have specified the
use of age as a patient-level adjustment in Sec. 413.235(a).
b. Patient Sex
Section 1881(b)(14)(D)(i) of the Act requires that the ESRD PPS
include a payment adjustment based on case-mix that may take into
account a number of variables and may include ``other appropriate
factors.'' Consequently, for the proposed rule (74 FR 49950), we
analyzed patient sex as part of the regression analysis and found that
patient sex was a strong predictor of variation in payments for ESRD
patients. In addition, we indicated that we believed patient sex is an
objective measure and that data on patient sex are readily available.
Based on our analysis, we found that females were 13.2 percent more
costly on a per treatment basis than males, primarily due to
differences in use of ESAs. Therefore, we proposed an adjustment of
13.2 percent for female patients (74 FR 49951). We solicited public
comments on this proposed adjustment, in addition to raising the
possibility of unintended consequences of providing a payment
adjustment for female patients that may lead to admission practices
favoring female patients.
The comments we received on this proposal and our responses are set
forth below.
Comment: Most commenters supported adding patient sex as a case-mix
adjustment. One commenter recommended that CMS monitor ESRD facility
admission practices with regard to female patients. Two commenters
indicated that they did not believe patient sex affects the cost of
dialysis.
Response: As discussed in the proposed rule, the regression
analysis showed that patient sex (female) was a strong predictor of
variation in ESRD payments and the cost of dialysis. However, we are
not convinced that a patient sex adjustment is necessary to ensure
beneficiary access to ESRD services. That is, we believe that there may
be sex-neutral factors that have not been identified in the ESRD PPS
modeling that would explain the increased cost associated with
providing renal dialysis services to members of a certain sex.
We intend to work to identify underlying patient-specific
conditions that may result in increased treatment costs and also how a
patient sex adjustment might be applied. To the extent that these
factors are identified, they could be incorporated into the ESRD PPS
model as patient-level adjustments. We will also continue to monitor
and evaluate the impact of patient sex on cost to determine consistency
in findings and identify other variables that may be responsible for
producing cost variations.
Comment: Many commenters were opposed to or expressed concerns
about the inclusion of patient sex as a case-mix adjuster. Some
commenters opposed patient sex as a variable outright, while others
indicated that the addition of patient sex adjustment could result in
limited access to care for male patients, if providers engaged in
``cherry-picking'' behavior. Other commenters felt the impact would be
debatable in view of a study that had been done 5 years ago indicating
that men rather than women were the most costly beneficiaries in the
dialysis setting and, therefore, would we see another shift in costs
during the next 5 years.
Response: Beneficiary access to ESRD services and medications was
an important factor we considered with regard to using a patient sex
adjustment. At this point, we are not convinced that a patient sex or
gender adjustment is necessary to ensure beneficiary access to
appropriate ESRD services and medications. As we discussed above, the
issue of patient sex influencing the cost of ESRD drugs and services
will continue to be monitored with the possibility of including an
adjustment for patient sex at some future date.
Therefore, in this final rule, we are not finalizing our proposal
to include patient sex as a patient-level case-mix adjustment. We have
revised Sec. 413.235(a) to reflect the exclusion of patient sex
(female) as a patient-level adjustment.
c. Body Surface Area and Body Mass Index
Section 1881(b)(14)(D)(i) of the Act requires that the bundled ESRD
PPS must include a payment adjustment based on case-mix that may take
into account patient weight, BMI, and other appropriate factors.
Consequently, we evaluated height and weight because the combination of
these two characteristics allows us to analyze two measures of body
size: BSA and BMI. In the proposed rule, we analyzed both BSA and low
BMI (< 18.5 kg/m\2\) as independent variables in the regression
[[Page 49090]]
analysis and found that both body size measures are strong predictors
of variation in payments for ESRD patients. In addition, both BSA and
BMI are objective measures and the necessary data, that is, height and
weight, to compute them are readily available from patient claims. In
the proposed rule, we discussed our rationale for developing the
adjustment factors for BSA and BMI in detail (74 FR 49951).
The comments we received on this proposal and our responses are set
forth below.
Comment: Some commenters agreed that CMS should continue to use
only the existing case-mix adjustments which include age, BSA and BMI,
because these adjustments are familiar to facilities and eligible
patients can be identified using information that is currently
available to ESRD facilities.
Response: We disagree with the commenters that we should only use
the existing case-mix adjustments. As we discussed in the proposed rule
(74 FR 49947), the results of our analysis demonstrated that in
addition to the existing case-mix adjustments, other variables such as
co-morbidities, were predictive of patient differences in cost. In this
final rule, our analysis continues to show that BMI and BSA are strong
predictors of variation in costs and payments for ESRD patients. Their
use as payment variables ensure that ESRD facilities receive
appropriate compensation for the costs associated with their specific
patient population.
Comment: Two commenters believed that it was untrue that small-
sized patients require less medication and fewer laboratory tests than
larger-sized patients. The commenters believed that the ``one size fits
all'' approach for drugs and laboratory tests based on the size of the
dialysis patient may lead to discrimination against smaller patients
and those patients with fewer applicable case-mix adjustments may find
it difficult to gain admission to a dialysis center or possibly be
undertreated with medications. One commenter suggested that the
proposed rule created the false impression that dialysis is prescribed
in a dosing format like drugs with well known pharmacokinetics that
must be prescribed on patients parameters of BSA and BMI.
Response: As we discussed in the proposed rule, we individually
analyzed both BSA and BMI (as two measures of body size) as part of the
regression analysis, and found that both body size measures were
significant predictors of variation in composite rate costs and
separately billed payments for ESRD patients. Our analysis for this
final rule demonstrates the same relationship. We do not believe that
our analysis and findings imply a ``one size fits all'' approach.
Because we recognized that there are other variables that explain the
variation in costs for ESRD patients, we included other factors such as
age, co-morbidity and onset of dialysis. We explain these variables in
great detail in the proposed rule and later in this section. Because of
these findings, we have included these variables as patient-level
adjustments, as well as BSA and BMI.
Comment: One commenter questioned the methodology used to address
the BMI fluctuation between a post dialysis weight on the last
treatment and the post dialysis weight on the prior treatment. The
commenter wanted to know if there would be an adjusted payment
reflecting the two differing post dialyses weights or would the
physician prescribed dry weight (weight without the excess fluid that
builds up between dialysis treatments) be applied as the qualifier for
the case-mix adjustment, because the post dialysis weight may drift
enough to trigger a cost-adjustment. The commenter expressed concern
that by using the physician prescribed dry weight, the treatment
facilities and physicians would be rewarded for adjusting dry weights
to reflect more profitable case-mix adjustments.
Response: As described in the Medicare Claims Processing Manual,
Chapter 8, Section 50.3, facilities are required to report the weight
of the patient after the last dialysis session of the month. However,
the commenter raises an interesting point. We will need to consider the
use of dry versus wet weight in future rulemaking.
In this final rule, the case-mix patient-level adjustment for BSA
(per 0.1m\2\) is 1.020 and for low BMI (BMI <18.5) is 1.025 effective
for renal dialysis services provided on or after January 1, 2011. We
are also finalizing the inclusion of the factors for BSA and BMI in
Sec. 413.235(a).
d. Onset of Dialysis (New Patient Adjustment)
Section 1881(b)(14)(D)(i) of the Act, as added by MIPPA, requires
that the ESRD PPS include a payment adjustment based on case-mix that
may take into account a patient's length of time on dialysis.
Consequently, we analyzed the length of time beneficiaries have been
receiving dialysis. We noted in the proposed rule (74 FR 49952), that
the regression analysis demonstrated that patients who are in their
first 4 months of dialysis have higher costs. We also looked at the
amount of separately billable payments relative to the number of months
the patients had been on dialysis. After reviewing the separately
billable payment amounts for patients ranging from one month to twelve
months since the onset of dialysis, we found that there was a drop in
the separately billable payment amounts after the first 4 months of
dialysis. Therefore, we proposed to define the onset of dialysis
beginning with the starting date reported on Form 2728 through the
first 4 months a patient is receiving dialysis (74 FR 49952).
We also proposed that the onset of dialysis adjustment be applied
to both in-facility and home dialysis patients. We acknowledged that
there may be patients whose first 4 months of dialysis occur when they
are not yet eligible for the Medicare ESRD benefit. In these
circumstances, we proposed that no onset of dialysis adjustment would
be made. In other words, the onset of dialysis adjustment would be made
only in the first 4 months of dialysis where the individual is also
eligible for the ESRD benefit (74 FR 49952).
We received over 70 comments from nephrologists, ESRD facilities,
nurses, ESRD organizations, health care professionals, patients,
professional organizations, and hospitals. Most commenters supported
the inclusion of an onset of dialysis patient-level adjustment factor.
Some commenters were, however, opposed to the inclusion of home
dialysis training as part of the onset of dialysis adjustment factor
and recommended that the training be removed from the onset of dialysis
adjustment. The commenters suggested that CMS create a separate
training adjustment instead. Home training is discussed in detail in
section II.A.7. of this final rule.
Comment: A few commenters recommended that the onset of dialysis
adjustment not be implemented because the commenters believed it would
be duplicative of other adjusters such as hospitalization and race that
the commenters believed more accurately predicted treatment costs.
Another commenter recommended that CMS eliminate the onset of dialysis
adjustment in favor of other adjustments which focused on the root
causes of higher costs during the first 4 months of dialysis.
Response: We do not agree with the commenters who stated that the
onset of dialysis adjustment is duplicative of other adjustments in
predicting treatment costs. The adjustment for the onset of dialysis
reflects higher costs seen during the first 4 months a patient receives
dialysis and is independent of the effects of other adjustment factors
[[Page 49091]]
(such as hospitalization), included in the regression analysis. There
is however a risk that a hospitalization adjustment would create an
inappropriate financial incentive for ESRD patients to be hospitalized
for the purpose of receiving a payment adjustment. We discuss the issue
of using race as an adjustment factor in section II.F.3. of this final
rule.
We agree with the commenters who noted that patients in the first 4
months of receiving dialysis may be frail and unstable. We believe that
the onset of dialysis case-mix adjustment recognizes the higher costs
associated with newly diagnosed patients and reflects the care required
to stabilize their conditions. As discussed above, in the proposed rule
our analysis showed that patients who are in their first 4 months of
receiving dialysis have higher costs. Subsequent to the proposed rule,
we performed additional analyses.
In our analysis for this final rule, our findings confirmed that
higher costs were attributed to the first 4 months of dialysis in both
the composite rate model and in the separately billable model. We
believe that at the current time, the onset of dialysis adjustment is a
good predictor of higher costs during the first 4 months of receiving
dialysis and, therefore, in this final rule we are retaining the onset
of dialysis payment adjustment.
Comment: Several commenters strongly urged adoption of the onset of
dialysis adjuster because of the effort required to obtain consents,
waivers, and complete forms and all other compliance documents required
under the Conditions for Coverage for new ESRD patients from nursing
homes.
Response: As discussed in the proposed rule, we believe that the
higher costs associated with patients during the first 4 months of
receiving dialysis may be due to: the need to stabilize patients'
conditions; administrative and labor costs associated with patients new
to dialysis; or initial costs to train patients (74 FR 49952). The
analysis conducted for this final rule continues to indicate higher
composite rate costs and separately billable payments associated with
patients new to dialysis. As the commenter indicates, some of the
increased administrative costs associated with providing dialysis in
the first 4 months that a beneficiary begins dialysis treatment may be
attributed to the costs associated with obtaining medical or other
records from other providers and suppliers of services.
Therefore, we are retaining the onset of dialysis adjustment under
the final ESRD PPS. We note that the onset of dialysis adjustment is
applicable only for those patients 18 years or older, during the first
4 months of the onset of dialysis and would not apply to any patient
who might receive renal dialysis services by an ESRD facility for
subsequent treatments.
Comment: One commenter claimed that there are higher costs due to
the need to increase hemoglobin levels; hospitalizations in the first
months of diagnosis for cardiovascular disease and catheter-induced
infections; and staff time needed for patient assessment and care
planning required by the new conditions for coverage. Other commenters
also supported this assertion stating that it was ``well documented
that staff and drug costs with new patients and the conditions of
participation outline the intense responsibilities during this
period.''
Response: We thank the commenters for their support of the onset of
dialysis adjustment. We acknowledge that our analysis in the proposed
rule and this final rule showed higher composite costs and payment for
separately billable items during the first 4 months of dialysis. As we
noted in the proposed rule, the higher costs for new patients in the
first 4 months of receiving dialysis, may be due to stabilization of a
patient's condition; administrative and labor costs associated with the
patient being new to dialysis; or initial costs of training patients
and their caregivers to perform home dialysis (74 FR 49952). Therefore,
the intent of the onset of dialysis adjustment was to account for the
higher costs through the first 4 months a patient is receiving dialysis
in response to the need for separately billable items such as ESAs.
Due to our further analysis of onset of dialysis for this final
rule, our findings confirm an increase in costs for the composite rate
portion of the two-equation model for patients in their first 4 months
of dialysis. The analysis also demonstrates an increase in measured
costs based on the separately billable portion of the model,
particularly for ESA utilization. Because of the absence of patient-
level data on resource use for composite rate services, and the
relatively small number of individuals who historically received home
dialysis training during the first 4 months of dialysis (which limits
the potential of facility-level analysis to examine resource
utilization for home training), we are unable at this time to determine
the extent of overstatement of composite rate costs if we apply both
the onset of dialysis adjustment and the training adjustment discussed
in section II.A.7. of this final rule. In order to avoid potentially
overstating payments to ESRD facilities under the ESRD PPS for costs
related to new dialysis patients and training during the first 4 months
of dialysis, the training add-on adjustment will not apply for patients
receiving the onset of dialysis adjustment. We note that home dialysis
training is not included in the onset of dialysis adjustment and is a
separate payment adjustment which we discuss in section II.A.7. of this
final rule.
Comment: One commenter disagreed with the onset of dialysis
adjuster indicating that there was little data proving that higher
labor costs was associated with the onset of dialysis. The commenter
stated that costs associated with the initial months of dialysis do not
prevent access to dialysis care and, therefore, if the intent of case-
mix adjustments is to erase disincentives to treat costly patients, the
adjustment is not necessary.
Response: Contrary to the commenters' views, our analysis
demonstrates that the first 4 months of receiving dialysis was a
predictor of higher resource utilization. As discussed in previous
responses, our subsequent analysis for this final rule confirmed our
findings as discussed in the proposed rule (74 FR 49952). Our updated
analysis for this final rule shows a drop in the amount of separately
billable payments after 4 months on dialysis, which was the basis for
our establishing a 4-month time period for the onset of dialysis
adjustment.
The intent of a case-mix adjustment is to provide payment that
reflects the resources associated with patients, whose needs are
greater than patients without certain characteristics or conditions.
The onset of dialysis adjustment is intended to provide payment that
reflects the higher composite rate costs and higher separately billable
payments associated with patients during the first 4 months of
dialysis.
Comment: One commenter alleged that dialysis services are provided
at great expense to the taxpayer with ``very little benefit to the
individual'' and questioned if this adjustment was ``good policy.''
Response: We do not agree with this commenter. We believe that the
onset of dialysis adjustment reflects the average higher costs
associated with patients during the first 4 months of dialysis. We
believe that the ESRD PPS will support the care needed by Medicare
beneficiaries receiving dialysis treatment while controlling costs.
Comment: One commenter questioned whether the onset of dialysis
adjuster was underestimated because of the 90-
[[Page 49092]]
day delay in Medicare entitlement for the ESRD benefit under Medicare
and suggested that the period be 180 days. Other commenters suggested
that the eligibility requirement be reduced to allow ESRD facilities to
receive the adjustment for more than one month. One commenter suggested
that the 90-day waiting period be reduced and the payment be increased.
The commenter acknowledged that statutory change would be required to
make these changes.
Response: We do not agree that the onset of dialysis adjustment is
underestimated. We analyzed ESRD facility claims beginning with the
dialysis onset date on the Form 2728 and found an increase in
separately billable payments in the first 4 months. We also found
increased composite rate costs. We believe that our analysis adequately
and accurately reflects the higher costs associated with the first 4
months of dialysis among patients eligible for Medicare.
We believe the commenters are referring to the need for legislative
changes to reduce the 90-day waiting period for entitlement to benefits
under Part A and eligibility to enroll under Part B required by section
226A of the Act and an increase in payment to ESRD facilities. We agree
that a legislative change would be required to change the 90-day
waiting period, however, such changes are beyond the scope of this
final rule.
Comment: One commenter noted that new patients are costly to care
for, but indicated that many of the patient ``problems'' are not ESRD-
related. The same commenter believed that the onset of dialysis
adjustment will give ESRD facilities an incentive to care for new
patients.
Response: Our analysis demonstrated that patients in the first 4
months of dialysis have higher composite rate costs and separately
billable payments. To the extent that ESRD patients may have other non-
ESRD-related issues or conditions, we do not believe that our analysis
would have captured this. Therefore, in this final rule, we do not
believe that we captured non-ESRD-related costs.
We agree with the commenter that the onset of dialysis adjustment
will have a positive effect in access to care for patients during the
first 4 months of receiving dialysis.
Comment: Several commenters indicated that the proposed onset of
dialysis adjustment was too high and that the duration for the
eligibility requirement for ESRD facilities to receive payment was too
long. A few commenters noted that the high onset of dialysis adjustment
would result in beneficiaries assuming responsibility for large co-
payments. Some of these commenters provided recommendations on changing
the time frame for the onset of dialysis, as well as the amount of the
adjustment.
Some commenters suggested the adjustment should be a 90-day initial
adjustment with the difference re-allocated for a home dialysis
adjustment. Another commenter noted that if the onset of dialysis
adjuster is intended to protect small dialysis providers who cannot
easily spread risk, than the weighting should be recalculated to ensure
accuracy as the proposed weight of 1.47 appears quite high. Others
believed the adjustment should be reduced to 15 or 30 percent using the
remaining percentage for a home dialysis adjustment.
Response: The multiplier amounts for the onset of dialysis
adjustment, as well as all other adjustments, are the result of the
regression models for composite rate and separately billable services.
In the proposed rule, we analyzed Medicare claims for 2004-2006, which
indicated greater resource utilization for separately billable items
among patients treated during the first 4 months of dialysis. An
analysis of cost reports for the same period indicated higher costs for
composite rate services associated with the first 4 months of dialysis.
Based on our subsequent analysis for this final rule, (which used cost
reports and Medicare claims for the years 2006-2008), the onset of
dialysis adjustment under the ESRD PPS for ESRD items and services
provided on or after January 1, 2011 is 1.510.
We note that our analyses also suggest there are effects of co-
morbidities on resource utilization for separately billable items that
are independent of the onset of dialysis. We performed further analysis
of the co-morbidity diagnostic categories for this final rule, in
combination with the onset of dialysis. We found that while costs were
higher on average for dialysis patients with co-morbidities during the
first 4 months of dialysis, the effect of compounding a co-morbidity
adjustment along with the onset of dialysis adjustment would, on
average, result in overstatement for separately billable services.
Therefore, ESRD facilities will not receive a co-morbidity adjustment
for dialysis patients during the first 4 months of dialysis.
We plan to continue to study the onset of dialysis adjustment
because we believe that it is important for us to be cognizant of the
impacts of additional adjustments made to ESRD facilities, the ESRD
base rate, as well as effects on patient co-insurance liabilities.
Comment: One commenter strongly opposed the onset of dialysis
adjustment citing a number of reasons such as: (1) Most of the higher
costs occurring in the first 4 months of dialysis are explained by
hospitalization, race, and age; (2) most beneficiaries in the first 120
days do not receive home training; (3) those under 65 are not covered
by Medicare for the first 90 days unless they begin training for home
dialysis.
The commenter asserted that this would then have the effect of
increasing the number of patients who become entitled to Medicare
earlier. The commenter further stated that the characterization of the
onset of dialysis adjustment as independent of the other ESRD patient-
level adjustments will overestimate the onset of dialysis adjustment's
value. The commenter suggested that the onset of dialysis adjustment be
examined in tandem with other parts of the proposed rule to formulate a
fair and accurate facility payment. The commenter further suggested
that if reliable data such as labor costs are elevated (as asserted by
CMS) at the beginning of dialysis, are found to not exist, the onset of
dialysis adjuster should not be included in the ESRD PPS. The commenter
further noted that CMS's reliance on cost reports is misplaced because
the cost reports are not limited to Medicare, thereby skewing the
sample with non-Medicare patients. The commenter asserted that patients
with commercial primary insurance are over-represented among new
dialysis patients. Other commenters believed the onset of dialysis
adjustment would lead to patients under 65 years of age, to begin home
dialysis therapy in the first 90 days in order to trigger early
Medicare entitlement for the purpose of higher payment.
Response: In our analysis we found that there was an association of
higher composite rate costs and separately billable costs even when
controlling for race and age. The onset of dialysis adjustment reflects
higher costs for patients eligible for Medicare during the first 4
months of dialysis.
With regard to concerns about the inclusion of patients not covered
under the Medicare ESRD benefit, patients who were not entitled to the
ESRD benefit under Medicare during this period were not used in our
analysis for determining the onset of dialysis adjustment because they
would not be eligible for the adjustment. As we discussed in a previous
response, the onset of dialysis adjustment we are
[[Page 49093]]
finalizing under the ESRD PPS will not be applied in combination with
either the co-morbidity adjustment or the home training payment add-on
adjustment.
We do not agree with the commenter who expressed concern that the
onset of dialysis adjustment would trigger an earlier Medicare
entitlement. We will be monitoring the onset of dialysis adjustment,
specifically, to determine if there is an increase in the number of
individuals who become entitled to Medicare prior to the 90-day waiting
period as a result of receiving home dialysis training.
We are aware of the prevalence of patients who receive home
dialysis during the first 4 months of dialysis. As many commenters have
noted, few patients receive home or self dialysis training during the
first 4 months of dialysis. We would not expect to see more patients
receiving home or self dialysis training in the first 4 months of
dialysis in order for ESRD facilities to receive the onset of dialysis
payment adjustment. We expect that ESRD facilities, nephrologists and
other health care providers will provide care in accordance with the
established plan of care and would not require home or self dialysis
for the purpose of a payment adjustment.
With regard to the comment concerning our misplaced reliance of
cost reports, cost reports capture ESRD data and provide the only
comprehensive national data source to measure ESRD resource use of
composite rate services, and reflect costs for Medicare patients.
Therefore, we believe cost reports provide the best available data.
Comment: One commenter expressed concern that many facilities will
no longer accept patients for no fees (free) for the first 90 days
since overall payments will be decreased.
Response: We do not understand the association between the onset of
dialysis adjustment and the facility's decision to not accept patients
for free. However, we believe the decision of an ESRD facility to
accept or not accept patients without payment is beyond the scope of
this final rule.
Comment: One large dialysis organization noted that an adjuster
``of this magnitude invites gaming or cherry picking.'' The commenter
expressed concern that ESRD providers could or do routinely provide
dialysis services for the first 4 months of dialysis, and then
transferred the patient to another ESRD facility.
Response: We are concerned about ESRD facilities ``cherry picking''
patients for the purpose of receiving the onset of dialysis adjustment.
We believe that in the absence of any case-mix adjustments which
provide for additional payments for patients with higher resource
utilization and associated higher costs, ESRD facilities may refuse to
provide dialysis services to higher cost patients over less costly
patients.
We are also concerned that ESRD patients may be inappropriately
placed on home dialysis who either do not want home treatments or who
require more frequent monitoring for medical, social and other reasons,
in order to decrease the eligibility period for the purpose of
receiving the onset of dialysis adjustment.
The ESRD patient's plan of care must reflect the patient's needs.
If a patient is unwilling or unable to self-dialyze at home, insisting
that the patient go on home dialysis would be a violation of the
patient plan of care as described in Sec. 494.90. An ESRD patient who
cannot/would not comply with a home dialysis plan of care is likely to
have poor clinical outcomes and may require additional care, both of
which negate any cost benefits for ESRD facilities of home dialysis.
The ESRD Conditions for Coverage can be found at 42 CFR Part 494. We
expect that ESRD facilities will provide an appropriate plan of care
and continued monitoring will identify ESRD facilities that do not.
Comment: Several commenters believed the onset of dialysis adjuster
should apply to all patients and not solely Medicare beneficiaries, as
all dialysis patients receive more care at the beginning of dialysis. A
few commenters complained that patients under 65 only have 30 days of
increased payment as facilities would need to wait for these patients
to be covered by Medicare before they can receive payment.
Response: The onset of dialysis adjustment will only apply to ESRD
patients who are entitled to receive the ESRD benefit under Medicare.
As explained in a previous response, data for patients who were not
eligible for Medicare during this period were not used in the analysis
for determining the onset of dialysis adjustment. ESRD facilities would
only receive the onset of dialysis adjustment for patients that are
covered under the ESRD Medicare benefit. Therefore, the onset of
dialysis adjustment would not apply to individuals receiving dialysis
care paid for by other third party payers during the first 90 days. We
note that ESRD facilities would receive the onset of dialysis
adjustment for the 4-month adjustment period for its new patients who
are already entitled to Medicare at the time of the onset of dialysis.
Comment: A few commenters noted that the onset of dialysis adjuster
had ``limited administrative complexity or burden'' and therefore,
approved the onset of dialysis adjuster.
Response: Information on the Form 2728 and stored in our systems
will be used to determine if a patient is within the first 4 months of
dialysis. Therefore, ESRD facilities will not have any additional
reporting requirements or burden associated with the onset of dialysis
adjustment.
Comment: While one commenter was in favor of including home
training in the onset of dialysis adjuster because the commenter
believed it could help increase the number of patients on home
dialysis, most commenters opposed inclusion of home dialysis training
costs in the onset of dialysis adjustment. Many of the commenters were
opposed to the inclusion of home dialysis training indicated that
training ESRD patients for home dialysis does not occur in the first 4
months of dialysis because individuals are more likely to receive the
initial treatments in a facility. Other commenters believed that
expecting newly diagnosed ESRD patients to assume responsibility for
home dialysis while they are adjusting to an overwhelming diagnosis
would be inappropriate. Commenters also stated that new patients are
often medically unstable, psychologically compromised by anxiety and
depression, and unable to make home dialysis decisions.
Several commenters noted that training or retraining for home
dialysis may be needed for modality changes after the initial 4 months
of dialysis and therefore, the training portion of the onset adjustment
should be removed. These commenters all recommended that training be
adjusted separately regardless of when training begins.
One commenter noted that ESRD facilities that do not provide home
dialysis training would receive the same enhanced reimbursement as the
facilities that do provide the home training. The same commenter
further believed that inclusion of home training in the onset of
dialysis adjustment would penalize facilities with active growing ESRD
programs. One commenter noted that the increased payment from this
adjustment ``defrayed some increased expenses with indigent patients
and as most patients elect home dialysis after 120 days there is little
incentive to initiate training.'' One commenter believed that even a
significant increase in payment will not encourage home treatments.
Response: The data analysis conducted for this final rule supports
the commenters' views that most ESRD
[[Page 49094]]
patients are not trained for home dialysis in their first 4 months of
dialysis. In our analysis, there were too few training patients in
their first 4 months of dialysis to assess the composite rate costs
associated with patients training for home dialysis compared to those
related to the onset of dialysis.
With regard to payment for both training and the onset of dialysis
adjustments, as we discussed in a previous response, we believe that
the costs associated with the onset of dialysis adjustment and the
training add-on adjustment overlap (that is, costs for services could
be accounted for in both adjustments). Therefore, to avoid duplicative
payment, ESRD facilities will not receive the home dialysis training
adjustment while they are receiving the onset of dialysis adjustment
for a patient. We will continue to study the relationship between costs
related to the onset of dialysis and home training for future
refinement of the ESRD PPS.
The payment multipliers are based on the regression analysis that
compared costs and payments among Medicare ESRD patients. It would not
be appropriate for Medicare to make duplicative payments to fund care
for indigent or other patients.
Therefore, after considering the public comments and for the
reasons stated above, we are finalizing the onset of dialysis
adjustment. ESRD facilities will receive the onset of dialysis
adjustment for renal dialysis services provided on or after January 1,
2011. We are finalizing an adjustment of 1.510 for in-facility and home
dialysis patients eligible for the Medicare ESRD benefit for the first
4 months of the initial onset of dialysis. We are finalizing the
definition of the onset of dialysis as the date reported on the Form
2728 that dialysis begins through the first 4 months a patient is
receiving dialysis. The onset of dialysis adjustment will only apply
for the period of time in the first 4 months of dialysis that occurs
while the patient is covered under the ESRD benefit. In other words,
the onset of dialysis adjustment will not apply after the initial 4
months of dialysis. We are finalizing that ESRD facilities that are
eligible for and receive the onset of dialysis adjustment for a patient
may not receive a co-morbidity adjustment, nor will they receive the
home training add-on adjustment for that patient during the first 4
months of dialysis. We are finalizing Sec. 413.225(a) to include onset
of dialysis (new patient) as a patient-level adjustment.
e. Co-morbidities
Section 1881(b)(14)(D)(i) of the Act requires that the bundled ESRD
PPS include a payment adjustment based on case-mix that may take into
account patient co-morbidities. In the proposed rule, we analyzed co-
morbidities as part of the regression analysis and found that certain
co-morbidities are predictors of variation in costs for ESRD patients
(74 FR 49952). We noted that the potential co-morbidity adjustments are
intended to recognize the increased costs by providing additional
payments for certain conditions that occur concurrently with the need
for dialysis. We explained that we used stepwise regression analysis
for the current basic case-mix adjusted composite payment system to
identify case-mix factors that explained statistically significant
variation in ESRD facility costs. We summarized our findings as a
result of our analysis (74 FR 49952).
As discussed in the proposed rule, we retained UM-KECC to assist us
in developing a case-mix adjustment for the ESRD PPS (74 FR 49947). One
of the tasks was the identification of specific diagnoses within co-
morbidity categories. We explained the methodology we used to capture
changes in patient conditions and patient co-morbidities. We explained
that we began with a long list of patient characteristics based on
diagnostic categories developed for the Medicare Advantage Program and
categories developed for the co-morbidities on the Form 2728.
We also explained that we used co-morbidity diagnoses reported in
multiple types of Medicare claims (inpatient dialysis and other
outpatient, skilled nursing facility, physician/supplier, hospice, and
home health). We acknowledged that because some diagnoses reported on
laboratory claims may represent a condition being excluded by the test,
diagnoses reported on laboratory claims were not used. We solicited
recommendations on the type of claims that reflect the co-morbidities
for beneficiaries receiving renal dialysis services that could be used
in future analyses (74 FR 49953).
Comment: We received a few comments questioning our use of claims
rather than relying on Form 2728 to identify co-morbidities of ESRD
patients. Some commenters questioned the use of other sources such as
emergency room claims to determine co-morbid conditions for ESRD
patients.
Response: We believe that the predominant use of hospital and
physician claims, as well as other types of claims (such as skilled
nursing facilities, home health and hospice claims) to identify co-
morbidities, provided for a more comprehensive picture of co-
morbidities that ESRD patients may have during the course of their
dialysis. The Form 2728 accurately provides the co-morbid conditions at
the time the ESRD diagnosis was made and, therefore, does not reflect
any other medical condition(s) that may have come about subsequent to
that time. We note that the level of co-morbidity reporting on the Form
2728 is quite low. The ICD-9-CM diagnostic codes for patients' co-
morbid medical conditions should be reported in compliance with coding
requirements on the ESRD 72x claim, as well as the official ICD-9-CM
Coding guidelines, which can be found at: http://www.cdc.gov/nchs/icd.htm, regardless of whether a payment adjustment could be associated
with the diagnosis. Entering complete and accurate codes enables CMS to
better evaluate our payment systems and provide updates as necessary.
In the proposed rule, we discussed how we would ensure that each
proposed case-mix adjuster would have a statistically significant
relationship to cost in order to ensure that the magnitude of the
relationship is economically meaningful. We also explained that we
evaluated a refined list of case-mix co-morbidities comprised of 1,022
ICD-9-CM diagnosis codes for persistence of effect and cost. The co-
morbidity categories we proposed were: Cardiac arrest; pericarditis;
substance abuse; positive HIV status and AIDS; gastrointestinal tract
bleeding; cancer since 1999 (excludes non-melanoma skin cancer);
septicemia/shock; opportunistic infections (pneumonias); aspiration and
specified bacterial pneumonias; pneumococcal pneumonia, empyema, lung
abscess; monoclonial gammopathy; myelodysplastic syndrome; leukemia;
hereditary hemolytic anemias and sickle cell anemia; lymphoma;
Hepatitis B; and multiple myeloma (74 FR 49953).
We also discussed the use of the stepwise regression model in
analyzing co-morbidity data for case-mix adjustments (74 FR 49953). We
explained that the eleven proposed co-morbidity variables had
statistically significant relationships to cost. However the magnitude
of the co-morbidity effects varied substantially. We found that short-
term acute conditions (for example, infections, gastrointestinal
bleeds, and pericarditis) would result in a temporary ESRD payment
adjustment. We found that long-term chronic conditions would result in
a permanent increase of an ESRD payment adjustment. We believe
[[Page 49095]]
the long-term chronic conditions may tend to have a more persistent
effect on cost (74 FR 49953).
We explained how we applied the composite rate and separately
billable services using the modeling approach (74 FR 49952). We
discussed the rationale for proposing to include cancer, for example,
as a co-morbidity eligible for a patient-level adjustment if the cancer
has a direct effect on the cost of ESRD treatment. We also explained
why HIV/AIDS was included as our proposed co-morbidity case-mix
adjustment although it has since been eliminated from the current basic
case-mix adjusted composite payment system. We acknowledged that
including HIV/AIDS as a co-morbid adjuster would have benefits that
would need to be balanced with stringent confidentiality concerns (74
FR 49954). In our proposed rule, we also solicited public comments on
suggested conditions or diseases that CMS should consider for future
refinements.
We received comments from approximately one hundred commenters on
the proposed inclusion of co-morbidities as a patient-level case-mix
adjustment. In general, most commenters were opposed to the inclusion
of co-morbidities, or specified co-morbidities that they would like to
see included. Many commenters offered suggestions on certain diagnoses
to include as an adjustment, as well as those that should be
eliminated. A few commenters expressed support for the proposed co-
morbidities, stating that these adjusters would provide a more accurate
payment for complex patients. Specific comments and responses are
discussed below.
Comment: A few commenters offered to work with CMS to identify co-
morbidities that: Influence the cost of dialysis care; are based on
verifiable data; and can be implemented and administered in a practical
manner. They also urged CMS to develop methods to enhance access to
information for conditions that predict hospitalization.
Response: We reviewed public comments on co-morbidities and
considered each for this final rule. In general, we believe that the
commenters were suggesting future collaborative efforts to identify co-
morbidities that influence the cost of dialysis care. We thank these
commenters and we anticipate continuing to work with ESRD facilities,
patients, physicians, organizations, and other stakeholders to refine
the ESRD PPS.
Comment: One commenter suggested that we use facility size as a co-
morbidity adjustment.
Response: As we discussed in the proposed rule, a co-morbidity is a
specific patient condition that is secondary to the patient's principal
diagnosis that necessitates dialysis, yet has a direct effect on
dialysis (74 FR 49952). Therefore, contrary to the commenter's
suggestion, a facility's size does not meet the definition of a co-
morbidity.
Comment: Some commenters asserted that CMS excluded the co-
morbidities that affect dialysis treatment, such as: Hyperglycemia;
hypoglycemia; peripheral vascular disease (PVD) manifested as gangrene
requiring wound care or special therapy; amputations and peripheral
artery disease (which they believed were the major cause of morbidity,
hospitalization, antibiotic expense and poor outcomes); recent re-entry
of transplant patients with re-introduction, continuation, and tapering
of transplant medication; hypertension; hypotension; angina with chest
pain; post-operative affecting heparin dose; sepsis with antibiotics;
routine Coumadin with diagnosis unrelated to ESRD; recurrent
transfusions for hematologic problems and site access issues. A few
commenters indicated that patients returning after hospitalizations
incur extra cost and changes in outcome. One commenter alleged that
ESRD facilities need to address nutritional and volume issues after
hospitalizations that require extra time and attention.
Response: We thank the commenters for their many suggestions. The
inclusion or exclusion of a diagnostic category was based on the
regression model. As we explained in the proposed rule, we found that
certain co-morbidities are predictors of variation in costs for ESRD
patients. We also explained that these co-morbidities have a direct
effect on dialysis. We discussed the process used in identifying the
universe of ICD-9-CM codes that were initially used in the analysis and
how we derived the proposed eleven diagnostic categories.
We do not agree with the commenters' conclusion that we had
excluded co-morbidities that affect treatment because, in fact, we did
analyze co-morbidities that affect ESRD patients and contribute to
increased payments. In our proposed rule, we explained that to ensure
that each potential case-mix adjuster had a relationship to cost that
was statistically significant and to ensure that the magnitude of the
relationship was economically meaningful, low magnitude association
with cost, as well as co-morbidities with ambiguous definitions were
excluded. Several patient co-morbidities were analyzed having
statistical significance and low magnitude association with cost in the
preliminary models. Also, co-morbidities with high prevalence such as
diabetes and vascular disease were excluded from the proposed
diagnostic categories (74 FR 49952).
Based on various issues and concerns raised in public comments
regarding the proposed co-morbidity categories recognized for a payment
adjustment, we further evaluated the co-morbidity categories with
regard to: (1) Inability to create accurate clinical definitions; (2)
potential for adverse incentives regarding care; and (3) potential for
ESRD facilities to directly influence the prevalence of the co-
morbidity either by altering dialysis care, diagnostic testing
patterns, or liberalizing the diagnostic criteria. We utilize these
criteria (referred to ``criteria'') in subsequent discussions below.
We reiterate that it is important for ESRD facilities to report all
patient co-morbidities accurately, regardless of whether or not these
codes are or are not eligible for an ESRD PPS adjustment. The ICD-9-CM
diagnosis codes should be reported in compliance with coding
requirements on the ESRD 72x claim as well as the official ICD-9-CM
Coding Guidelines.
Comment: Several commenters cited the higher cost of treating
patients with Hepatitis B because of facility costs associated with
complying with the isolation requirements under the ESRD Conditions for
Coverage. Commenters stated that facility costs include providing
isolation rooms, protective garments such as gowns and gloves, and
special cleaning protocols. Another commenter did not believe the
Hepatitis B adjustment amount covered the actual costs for full
isolation, special gowning, and the limitations on staff while also
caring for additional patients. The same commenter recommended either
eliminating the Hepatitis B adjuster or substantially increasing the
amount.
Response: Our model demonstrated that Hepatitis B is a stable
predictor of separately billable costs. We also recognize that there
are costs associated with the ESRD Conditions for Coverage
requirements. We utilized the criteria as described above in evaluating
the inclusion of Hepatitis B for a payment adjustment. We believe that
while there are accurate definitions of Hepatitis B, in our analysis
for the proposed and the final rule, we did not access whether a
shorter term (acute) or a longer term (chronic) payment adjustment
would be most appropriate. This information may depend on the
conditions reported on the claims in our determination of whether
Hepatitis B is classified as an
[[Page 49096]]
acute or chronic co-morbidity adjustment. Further research could also
be helpful to determine if the cost of providing care to ESRD
beneficiaries with Hepatitis B approximates or exceeds the costs
associated with the coefficient. Because we recognize that we need
additional research on Hepatitis B, we did not proceed with the
remainder of the evaluation. Therefore, in this final rule, we are
eliminating Hepatitis B as a co-morbidity diagnostic category
adjustment to the ESRD PPS base rate.
Comment: Some commenters opposed the inclusion of cardiac arrest as
a patient-level adjustment. One questioned if someone with end-stage
cardiac disease would be less complicated to care for in the absence of
cardiac arrest. Another commenter asked how long a history of cardiac
arrest could be valid in order to receive the cardiac arrest
adjustment. Some commenters objected to the cardiac arrest adjustment,
citing reasons such as: The nephrologist would need to know about the
cardiac arrest and communicate this to staff; HIPPA (patient privacy)
may restrict sharing of such information; cardiac arrest is more costly
to hospitals but not to ESRD facilities; and difficulty in obtaining
cardiac arrest information by the ESRD facility. One commenter
recommended eliminating this adjustment because they believed a cardiac
event did not significantly affect the amount of time required to
provide care for an ESRD patient unless the cardiac arrest was very
recent and the patient was unstable. Another commenter tentatively
supported inclusion of cardiac arrest as a patient-level adjuster,
pending clarification of the testing and documentation required to
substantiate the initial and ongoing diagnosis.
Response: We believe the commenters have expressed valid concerns.
We applied the criteria as discussed above to cardiac arrest. We
believe the first criterium is met because there is a potential for
misclassifying a medical episode as a cardiac arrest (for example,
considering a patient with transient unresponsiveness during dialysis
to have had a cardiac arrest). Other medical episodes and situations
can be mistakenly classified as a cardiac arrest, when in fact they are
not an actual cardiac arrest. As a result, there is the potential for
ESRD facilities to influence the prevalence of cardiac arrest as a co-
morbidity recognized for a payment adjustment (criteria number 3).
Because we believe there is a lack of consistency in what constitutes a
cardiac arrest diagnosis and because commenters generally did not
support the inclusion of cardiac arrest as a co-morbidity adjustment,
we are not finalizing cardiac arrest as a co-morbidity diagnostic
category recognized for a co-morbidity payment adjustment under the
ESRD PPS in this final rule.
Comment: Several commenters were in favor of the payment adjustment
for infections because commenters believed that treating infections
adds cost and intensity of care. A few commenters suggested that an
additional outlier payment should be given for each patient month in
which a patient is treated for either infections or symptoms of
infection to reflect the additional costs of laboratory work, greater
use of antibiotics and higher ESA needs. The commenters believed that
this met the legislative intent for outliers.
Response: We assume the commenters believed that Congress intended
outlier payments to address infections and therefore suggested that an
outlier payment be made for each patient month in which symptoms of
infection existed or an infection was treated. We do not agree with the
commenters because we do not believe that Congress intended for any
particular co-morbidity to be eligible for outlier payments. Rather,
under the outlier policy described in section II.H. of this final rule,
an outlier payment will be made to share the cost of renal dialysis
services beyond a fixed dollar loss amount. To the extent that the use
of outlier services (that is, drugs and laboratory tests) as a result
of an infection exceeds the fixed dollar loss amount, Medicare will
make an outlier payment.
As we discussed in the proposed rule, we used a stepwise regression
analysis model in analyzing co-morbidity data for case-mix adjustments.
The relationship between patient characteristics was related to the
reported facility costs. A patient-level model was used to identify
potential payment adjusters for separately billable services. We
identified co-morbidities that had statistically significant
relationships to cost. Based on our analyses, we proposed adjustments
for eleven co-morbidity categories. In other words, because our
analyses found a correlation between the diagnostic categories
(including infections) and higher costs, we proposed to provide a
payment adjustment to be applied to the proposed ESRD PPS base rate.
For co-morbidities found to be short term, we proposed that the
condition must have existed within the past 3 months and affected
treatment. In the proposed rule, infections were classified as a short-
term co-morbidity eligible for a payment adjustment to the ESRD
proposed base rate (74 FR 49953 and 49954). However, we are not
including all infections as co-morbidities recognized for separate
payment in the final ESRD PPS as we discuss in greater detail below.
Comment: Other commenters opposed the inclusion of infections
citing the facilities' success in decreasing infections. Several
commenters expressed concern that higher payment (such as the infection
adjustment) may be provided for conditions such as bacteremia (related
to dialysis catheter) or pneumonia (related to lower vaccination rate)
that could be attributed to poor care.
MedPAC expressed concern that paying more for septicemia, for
example, could give ESRD facilities an incentive not to provide the
necessary care to minimize infections, and could reverse the
effectiveness of Medicare's quality improvement efforts for promoting
arterio-venous fistulas. (Septicemia was included in the proposed
infections co-morbidity category recognized for a proposed payment
adjustment.) MedPAC further opined that suboptimal care should not be
rewarded.
A few commenters suggested that an adjuster for sepsis/septicemia
should be excluded because the commenters believe that it is not a
consistent factor in the cost of dialysis care and that paying for
infections and hospitalizations serves as a disincentive for reducing
catheter use. One commenter believed that if infections remain as an
adjustment, peritonitis for patients on PD should be added.
One commenter noted that in addition to the vague meaning of
septicemia, the adjustment largely reflects high use of Epoetin[supreg]
from the acute illness and inflammation. The commenter further stated
that variation in Epoetin[supreg] dose accounted for almost all cost
variation among dialysis patients, thereby driving the associations in
the statistical models.
Response: Our analysis for the proposed rule demonstrated that
certain diagnostic categories showed effects on cost either long-term
or short-term (74 FR 49953). Infections showed higher cost effects for
3 months after the date of diagnosis. Our analysis for this final rule
indicated the same findings. We are, however, convinced by the concerns
expressed by commenters who opposed the inclusion of infections as a
co-morbidity diagnostic category recognized for a payment adjustment to
the ESRD PPS base rate.
The intent of a case-mix adjustment is not to award higher payments
to ESRD facilities for medical conditions that could be avoided through
ESRD facility
[[Page 49097]]
practices. To do so, would have the effect of inadvertently rewarding
poor quality care. We acknowledge that there may be a greater risk for
certain types of infections that we proposed for payment adjustment,
including septicemia known to result from vascular access infections.
We evaluated pneumonia, septicemia, and other pneumonia/
opportunistic infections using the three criteria described earlier in
this section. It is our understanding that vascular access infections
are often the result of organisms that cause bacteremia/septicemia
conditions in ESRD patients. Prevention of these infectious conditions
is a fundamental tenet of dialysis care. Septicemia is a clinical
syndrome consisting of a number of non-specific symptoms and signs. In
the context of a suspected or known infection, the diagnosis of sepsis
is considered when some or all of the defining signs and symptoms are
present depending on the severity of those signs and symptoms. The
inherent ambiguity of this definition makes the diagnosis subjective.
Lack of an objective standard in the diagnosis of septicemia creates
the opportunity for providers to increase their payments by changing
the sensitivity of the diagnostic criteria for this condition.
Furthermore, we are concerned the inclusion of septicemia as part
of the infection co-morbidity category could create perverse financial
incentives not to follow this fundamental tenet. This is an area where
further research may inform us that subsequent modification of the
case-mix adjustment is needed. As additional information becomes
available for further analysis, it may be possible to develop an
adjustment for septicemia while not negating facility efforts to
minimize vascular access infections. Therefore, in this final rule, we
are not finalizing septicemia as part of the infection co-morbidity
diagnostic category.
We also are not finalizing other pneumonias/opportunistic
infections as part of the infection co-morbidity category. We believe
that other pneumonias/opportunistic infections meet all of the
criteria. Therefore, their inclusion as a co-morbidity payment
adjustment category could, as commenters have noted, negate the
positive gains made in controlling infections. In the analysis
conducted for this final rule, we analyzed the pneumonias/opportunistic
infections separately from other infections and did not find the same
degree of association with higher costs associated with higher
separately billable items and services, as was seen with bacterial
pneumonia. For this reason, we do not believe these infection diagnoses
warrant a co-morbidity adjustment.
We note that the elimination of ``other pneumonias'' has a limited
effect on the magnitude of the adjustment for patients with bacterial
pneumonia and only slightly reduces the number of pneumonias that would
be used to determine eligibility for the adjustment. Therefore, for
this final rule, we excluded the diagnoses for primary plague
pneumonia, unspecified pneumonia, primary coccidiodomycosis
unspecified, and rare non-bacterial opportunistic infections.
We believe that bacterial pneumonia does not meet the 3 criteria
and, therefore, should be included as a co-morbidity adjustment. Once
the other infections were removed, we reran the regression analysis.
The regression analysis showed that bacterial pneumonia have a strong
validity as a cause of ESA resistance and, therefore, increased ESA
requirement for 4 months. Therefore, we are finalizing bacterial
pneumonia as the infection co-morbidity diagnostic category eligible
for a payment adjustment under the ESRD PPS. The list of bacterial
pneumonia ICD-9-CM codes that will be recognized for a payment
adjustment to the ESRD PPS base rate appears in Table E of the
Appendix. We note that as discussed earlier in this section, an ESRD
facility will not receive co-morbidity adjustments during the 4-month
onset of dialysis time period.
We will require a documented radiographic diagnosis in the
patient's clinical or medical record, in order for an ESRD facility to
be eligible for the co-morbidity payment adjustment for the bacterial
pneumonia infection category. We will discuss the documentation
requirements in future administrative issuances. After the
implementation of the ESRD PPS, we will monitor the reporting of
bacterial pneumonia on ESRD claims and compare the prevalence of
bacterial pneumonia with their prevalence over the past several years.
Comment: A few commenters believed that patients with
gastrointestinal bleeding should be eligible for a fixed outlier
payment due to ESA and transfusion expense, because this meets the
legislative intent of high cost outliers.
Response: We do not agree with the commenters who believed that
there should be an additional outlier payment for patients with
gastrointestinal bleeding due to ESA and transfusion expense because we
believe that the co-morbidity adjustment is more appropriate than
applying the outlier policy. We discuss the outlier policy in detail in
section II.E.4. of this final rule.
The regression analysis for this final rule demonstrated that
certain diagnostic categories showed higher costs over either the long
term or the short term. Gastrointestinal bleeding showed higher cost
effects for three months after the date of diagnosis (that is, the
month of the diagnosis and three months after). As we indicated above,
based on various issues raised in public comments regarding the
proposed co-morbidity payment adjustment categories, we further
evaluated the proposed categories, including the gastrointestinal tract
bleeding diagnostic category, based on three criteria. The
gastrointestinal tract bleeding co-morbidity category met all of the
three criteria, however, as we discussed above, we believe that by
limiting gastrointestinal bleeding to gastrointestinal bleeding with
hemorrhage, we have satisfied the established criteria by creating
accurate clinical definitions and mitigating the potential for adverse
incentives regarding care for ESRD facilities to influence the
prevalence we are finalizing it as a co-morbidity diagnostic category
because our analysis for this final rule also indicated significant
validity of gastrointestinal tract bleeding as a cause for increased
ESA utilization and, therefore, higher separately billable costs.
However, because we are concerned that the gastrointestinal tract
bleeding diagnostic category we proposed is overly broad (as determined
by criteria number 1) and could be ``gamed'' (as noted by the
commenter), we have limited in this final rule the diagnoses to
gastrointestinal tract bleeding with hemorrhage and have limited the
ICD-9-CM codes for luminal ulcers with associated hemorrhage which
would be eligible for the payment adjustment. In addition, in order to
receive a co-morbidity payment adjustment for this co-morbidity
category there must be documentation of an associated hemorrhage with a
gastrointestinal tract bleed. We will monitor ESRD claims after the
implementation of the ESRD PPS is implemented to see if the prevalence
has changed over the past several years.
Comment: Most commenters opposed the inclusion of HIV/AIDS and
alcohol or substance dependence as patient-level adjustments. Many
cited State confidentiality laws protecting patients' privacy against
discrimination, as well as difficulty in obtaining this information for
the purposes of documenting the presence of HIV/AIDS and substance
abuse.
[[Page 49098]]
One commenter questioned how a substance abuse diagnosis would be
made if not disclosed by the patient. The same commenter indicated that
the inclusion of these codes would be inappropriate, as it would
stigmatize patients and require facilities to violate State law in
order to meet the requirements to be eligible for the payment
adjustment. The commenters therefore believed that if they did not
comply with the requirements, they would be inappropriately forced to
forego payment. Several commenters stated that substance abuse is
highly subjective diagnoses and prone to ``gaming'' and, therefore,
should be eliminated as payment adjustments.
A few commenters believed that a diagnosis of HIV should be a
patient level adjuster due to the increased cost of care. However, the
commenter questioned how the information would be obtained in order to
qualify as an adjustment. Other commenters indicated that HIV/AIDS and
substance abuse diagnoses could not be reported without the patient's
permission. Other commenters stated that often the ESRD facilities
would not be aware of the diagnoses. One commenter opined that
providers do not alter their overall treatment practices because of
HIV/AIDS suggesting that HIV/AIDS actually may be a surrogate for other
costly patient characteristics such as being hypo-responsive to ESA,
increased hospitalization, or race. The same commenter suggested that
if HIV/AIDS remains a payment adjustment, it should be as a facility-
level adjuster.
Response: We concur with the commenters that requiring ESRD
facilities to place a diagnosis of HIV/AIDS or a diagnosis of alcohol/
drug dependence on the claim may be contradictory to State and other
privacy requirements. We acknowledged in the proposed rule that we
recognized the difficulties encountered by ESRD facilities that must
comply with State privacy requirements (74 FR 49953 and 49954). As a
result, the diagnostic categories may be misreported. We do not
understand the commenter's suggestion that HIV/AIDS should be a
facility adjustment rather than a patient-level adjustment.
Because of the concerns expressed by commenters about State privacy
requirements, we are not finalizing HIV/AIDS and Alcohol/Drug
Dependence as co-morbidity diagnostic groups and, therefore, HIV/AIDS
and Alcohol/Drug Dependence will not be recognized as co-morbidity
diagnostic groups for purposes of the co-morbidity payment adjustment
under the ESRD PPS.
Comment: Several commenters expressed concerns about patients in
nursing homes or long term care (LTC) facilities. One commenter
believed the adjustment for alcohol and drug dependency was adequate to
compensate for the effort required to determine dependency needs and
that alcohol and drug dependency were frequent problems in nursing
homes. One commenter indicated that many of the new admissions in
nursing homes were for infection. The commenter did not indicate
whether to include or exclude the infection adjustment as a payment
adjustment until further clarification was provided by CMS regarding
testing and documentation requirements. Another commenter claimed that
the cost for treating nursing home dialysis patients is higher than
community-dwelling patients, because nursing home dialysis patients had
higher acuity due to the extent of their co-morbidities; the need for
one-on-one caregiver assistance; and higher staffing costs.
Some commenters complained that many of the co-morbidities seen in
nursing homes, such as hypertension, diabetes, coronary artery disease,
peripheral vascular disease, Alzheimer's, senile dementia, and other
mental impairments and ventilator dependence were not considered as
being eligible for a payment adjustment. One commenter indicated that
the administrative burden for a provider with a disproportionate number
of nursing home dialysis patients, because of the limited time they
were under the care of the ESRD provider, as well as high turnover. The
commenter also suggested that the request for medical records to obtain
nursing home patient information should be added to the co-morbidity
condition information being tracked on the Form 2728 to help determine
patient acuity and cost to treat. Other commenters believed that
functional limitations such as inability to walk should be factors
included in determining payment adjustments.
Response: The purpose of the co-morbidity adjustments is to provide
added payment for those co-morbid diseases that result in higher
dialysis costs. Therefore, to the extent that a patient residing in a
nursing facility has one of the designated co-morbidity diagnostic
categories, the ESRD facility would receive an adjustment to the ESRD
PPS base rate.
The only information on functional limitations available to us is
from Form 2728 (inability to ambulate or transfer). Our analyses used
in developing the proposed rule did explore functional variables, when
they were reported, and found no statistically significant relationship
to cost for such functional variables. We believe, however, that
functional limitations are important measures and will consider these
in the future if more complete data become available and show a
significant relationship to costs.
We disagree with the commenter requesting changes on Form 2728 to
allow it to be used to determine changes in patients' acuity and the
resulting cost to treat them. We do not believe that adjustments on a
form which is used for the purpose of establishing the ESRD diagnosis
should be the basis for determining on-going case-mix adjustments
because the Form 2728 would not reflect changes in patient's
conditions. In other words, the Form 2728 is a snapshot at the time of
the onset of ESRD (capturing, for example, any co-morbidity that exists
at the onset of dialysis) and not an ongoing reflection of that
individual (capturing, for example, any co-morbidity that might occur
during the span of dialysis).
Comment: Some commenters stated that they often do not know about
patient's temporary conditions, such as pneumonia, gastrointestinal
(GI) bleeding, and pericarditis and, therefore, would not be able to
indicate their presence on ESRD claims for the purpose of a payment
adjustment.
Response: We believe it is important for ESRD facilities to be
aware of patients' conditions. For example, Sec. 494.80(a)(1)
indicates that a patient's comprehensive assessment must include
evaluation of current health status and medical condition, including
co-morbid conditions. For the purpose of receiving a payment
adjustment, the appropriate ICD-9-CM codes are required to be present
on the claim, and documentation in the patients' medical record
supporting the diagnosis is also required.
We discussed in previous responses that bacterial pneumonias and
gastrointestinal tract bleeding with hemorrhage as short-term, acute
co-morbidity diagnostic categories that would be recognized for the co-
morbidity payment adjustment under the ESRD PPS. In addition, our
analysis for this final rule supports the inclusion of pericarditis as
a co-morbidity diagnostic category because ESRD patients with
pericarditis have increased ESA utilization. Therefore, we believe
pericarditis would be a predictor of higher costs in ESRD patients with
this condition.
We evaluated the pericarditis co-morbidity diagnostic category
using the criteria discussed earlier. Because there are distinct
clinical definitions for
[[Page 49099]]
pericarditis (and diagnostic criteria) and we do not believe that
pericarditis has the potential for adverse incentives or the potential
to be directly influenced by ESRD facilities (in that an ESRD facility
could not influence the development or prevalence of pericarditis), we
are finalizing pericarditis as a co-morbidity diagnostic category
recognized for the co-morbidity payment adjustment under the ESRD PPS.
We will require ESRD facilities to provide documentation in the
patient's medical/clinical record to support any diagnosis recognized
for a payment adjustment, utilizing specific criteria. We will address
these documentation requirements in sub-regulatory guidance. As we have
responded to previous comments, we will be monitoring the prevalence of
any co-morbidity diagnoses recognized for the co-morbidity payment
adjustment under the ESRD PPS as compared to the prevalence of these
categories over the past several years. In this manner, we will be able
to identify any changes in the prevalence of any of the co-morbidity
diagnoses recognized for purposes of the co-morbidity payment
adjustment as compared to previous trends.
Comment: We received a wide variety of comments suggesting an array
of co-morbidities that commenters believed should or should not be
included as being eligible for the co-morbidity payment adjustment.
Most commenters opposed the inclusion of the proposed co-morbidity
categories, either in totality or in part.
Of the commenters who supported the inclusion of the proposed co-
morbidity categories, most supported the chronic co-morbidity
categories such as cancers,
Hepatitis B, hereditary hemolytic anemias/sickle cell anemia,
monoclonal gammopathy, and myelodysplastic syndrome. Some commenters
offered suggestions regarding co-morbidities they believed should have
been included in the ESRD PPS such as senility and Alzheimers;
methylcyline resistance staphlococcus aureus (MRSA); staphylococcus
septicemias; and diabetes. Other commenters opposed the inclusion of
cardiac arrest, pericarditis, septicemia, bacterial pneumonia,
gastrointestinal bleeding, sickle cell anemia, cancer, myelodysplastic
syndrome and monoclonal gammopathy. Some commenters indicated that they
were unaware of patients' prior medical histories, such as a history of
cancer.
Response: As we explained in the proposed rule, we found that
certain co-morbidities are predictors of variation in resources for
ESRD patients. We discussed the process we used to identify the ICD-9-
CM codes that we initially used in the analysis and how we derived the
proposed eleven diagnostic categories. We also explained why certain
conditions such as diabetes and vascular disease were excluded from the
proposed diagnostic categories (74 FR 49952).
With regard to the cancer co-morbidity diagnostic category, we
recognize that a co-morbidity payment adjustment would be applied for
patients that may differ greatly in the clinical severity of their
cancer diagnosis.
For example, we believe that for patients successfully treated in
the past for their cancer, there may be few or no implications for the
dialysis care currently being received in an ESRD facility. In
contrast, we believe patients undergoing treatment for cancer may
require a higher intensity of care (that is, higher use of separately
billable services) and, therefore, have higher costs.
We believe that the proposed payment adjustment for the cancer co-
morbidity category may have overstated costs for some patients whose
dialysis treatment is no longer affected by their history of cancer and
may have understated the costs of patients whose current cancer
diagnosis and treatment affect their dialysis treatment because, at the
current time, we are unable to differentiate the cost impact between
the two groups. Therefore, we are not finalizing cancer as a co-
morbidity diagnostic category recognized for the co-morbidity payment
adjustment under the ESRD PPS.
Future research may identify the cost of providing dialysis care to
patients receiving active cancer treatment and potentially could be
used to determine a co-morbidity payment adjustment that would more
accurately reflect the ESRD resources being used. We believe that
differentiating a history of a cancer diagnosis from an active cancer
diagnosis, could provide information on how the type of cancer or
whether the cancer is being treated affects the cost of dialysis care.
Using the three criteria referenced above, we evaluated the
proposed co-morbidity diagnostic categories for chronic, long-term
conditions of hereditary hemolytic anemia, myelodysplastic syndromes,
and monoclonal gammopathy. Due to the consistent effect (that is, not
limited to a short period of time) of the hereditary hemolytic anemias
(including sickle cell anemia) on higher EPO useage and therefore,
higher separately billable costs, we are finalizing this as a co-
morbidity diagnostic category eligible for a payment adjustment to the
ESRD PPS. We also believe that myelodysplastic anemia and monoclonal
gammopathy should be finalized as co-morbidity diagnostic categories
because both of these co-morbidity diagnostic categories have shown an
association with higher ESA usage and, therefore, higher separately
billable costs. However, we have excluded multiple myeloma, a form of
cancer included in the monoclonal gammopathy diagnostic co-morbidity
category, because multiple myeloma is a form of cancer and, as we noted
above, additional research is needed on the effect of cancer on
dialysis costs.
Accordingly, we are finalizing six co-morbidity diagnostic
categories and the associated payment adjustment multipliers, which are
as shown in Table 22, recognized for the co-morbidity payment
adjustment under the ESRD PPS for renal dialysis services provided on
or after January 1, 2011. We also are finalizing the diagnostic codes
for each of the six diagnostic categories found in Table E in the
Appendix. For the co-morbidity payment adjustment to apply, an ESRD
facility must document in the patient's medical or clinical records the
presence of one of the diagnosis codes eligible for the co-morbidity
payment adjustment under the ESRD PPS. We will provide specific
instructions for such documentation in the future.
[[Page 49100]]
[GRAPHIC] [TIFF OMITTED] TR12AU10.026
The ICD-9-CM diagnostic codes should be reported in compliance with
coding requirements on the ESRD 72x claim, as well as the official ICD-
9-CM Coding guidelines. Accurate reporting of co-morbid diagnoses will
enable CMS to evaluate the need to update the co-morbidities that would
be recognized for the co-morbidity payment adjustment under the ESRD
PPS.
Comment: One commenter believed that facilities should receive
higher payments for certain ``problematic'' patients to balance losses
on average patients with few adjustments.
Response: We believe that the commenter is referring to financial
losses that ESRD facilities may experience under the ESRD PPS treating
patients with few characteristics that would be recognized for a
payment adjustment. We do not agree with the commenter that ESRD
facilities will experience losses on the average patient to whom few
payment adjustments would apply and that this would be balanced by
higher payments for certain ``problematic'' (that is, patients for whom
the facility receives multiple payment adjustments) patients. The ESRD
PPS base rate reflects the cost of the average patient.
Our analysis has identified certain co-morbidity diagnostic
categories that have shown higher use of separately billable renal
dialysis items and services, which are recognized for a payment
adjustment under the ESRD PPS. The co-morbidity payment adjustments are
based on evidence from the regression model that the presence or
absence of certain co-morbid conditions are related to costs.
Therefore, the payment model should neither favor nor disfavor patients
with co-morbidity adjustments relative to those who do not qualify for
such adjustments; rather the payment adjustment should reflect the
higher costs associated with providing renal dialysis services.
As we discussed above, we will need to conduct further research to
identify additional co-morbidity categories and diagnoses that could be
recognized for the co-morbidity payment adjustment. For these reasons,
for this final rule, we have reduced the number of co-morbidity
diagnostic categories from eleven to six and among these categories, we
are finalizing three acute, short-term diagnostic categories
(pericarditis, pneumonia, and gastrointestinal bleeding) and three
chronic diagnostic categories (hereditary hemolytic anemia,
myelodysplastic syndrome, and monoclonal gammopathy).
Under the final ESRD PPS, the three acute co-morbidity adjustments
will be paid for the month the diagnosis is reported on ESRD facility
claims and for the next three months. The chronic co-morbidity
adjustments will continue to apply to all claims submitted.
Comment: One commenter questioned how the Form 2728 would be
updated once it has been completed. Another commenter expressed concern
about the time period for applying the co-morbidity adjuster,
particularly for gastrointestinal bleeding.
Response: The purpose of the Form 2728 is to attest to the initial
ESRD diagnosis. Included in that attestation are additional demographic
and clinical information that are present at the time of the initial
ESRD diagnosis. As we indicated earlier, the Form 2728 is a snapshot of
the ESRD patient's status at the onset of dialysis. Therefore, we would
not use information on the Form 2728 to determine the presence of a co-
morbid condition for payment adjustment under the ESRD PPS. Instead,
co-morbidity payment adjustments under the ESRD PPS will be based upon
the diagnosis codes reported by ESRD facilities on their Medicare
claims. We plan to use those reported diagnoses for future refinements
to the co-morbidity categories and diagnoses.
Comment: Several commenters indicated that they were unable to
replicate the proposed co-morbidity adjustments. One commenter claimed
that we had overestimated the number of co-morbidities, resulting in an
overestimation of reimbursement. Several commenters provided their own
analyses (using data resources available to them, such as their own
medical records, electronic medical records, hospital discharge
summaries, paper charts, health care professional notes, and
discussions with professional staff) and were unable to replicate our
findings. The commenters indicated that in each of their analyses,
their calculated adjustment was lower than the adjustments in the
proposed rule. The commenters acknowledged that they do not have access
to the vast data resources regarding patient conditions and, therefore,
CMS can more accurately determine the adjustments. The commenters
questioned CMS' projections of the financial consequences on ESRD
facilities due to the proposed ``overstated'' adjustment factors.
Response: We regret the inability of commenters to replicate our
findings. As the commenters acknowledged, claims data are not available
due to confidentiality requirements and, therefore, commenters are
unable to replicate our findings. We believe that the inability of the
commenters to replicate CMS' findings may contribute to the commenters'
belief that we have over- or under estimated reimbursement amounts.
Historically, there has not been a financial incentive for ESRD
facilities to document the presence of co-morbidities. We believe that
by including co-morbidity adjustments under the ESRD PPS, ESRD
facilities
[[Page 49101]]
will implement more active processes for gathering diagnostic
information, which will facilitate care planning. We appreciate that
commenters were able to identify co-morbidities for their patients for
their analyses as it confirms our belief that co-morbidity information
is available to ESRD facilities.
Comment: One commenter claimed that six of the proposed co-
morbidities were unstable. The commenter indicated that when comparing
the co-morbidity adjusters in the proposed rule with the adjusters
published by UM-KECC in 2008, six of the adjusters (HIV/AIDS, Hepatitis
B, bacterial/other pneumonias/opportunistic infections, hereditary
hemolytic/sickle cell anemias, cancer and monoclonal gammopathy) were
highly ``unstable'' and not reliable predictors of cost and, therefore,
they should be eliminated as payment adjustments.
Response: Three of the six co-morbidities referred to by the
commenter as unstable are not being used to adjust payments in this
final rule (HIV/AIDS, Hepatitis B, and cancer). Their exclusion as co-
morbidity adjusters was based on other factors which are described
above in the response to other comments.
For the three remaining co-morbidities mentioned by the commenter
(bacterial/other pneumonias/opportunistic infections, hereditary
hemolytic/sickle cell anemias, and monoclonal gammopathy), similar
measures are included as payment adjusters for the final rule. These
measures, which have undergone several refinements since the proposed
rule, are bacterial pneumonia, hereditary hemolytic/sickle cell
anemias, and monoclonal gammopathy. In conjunction with the exclusion
of cancer as a co-morbidity adjuster, the monoclonal gammopathy
category has been narrowed by the exclusion of multiple myeloma (a
malignancy). As with the bacterial pneumonia category being used for
the final rule that excludes other pneumonias and opportunistic
infections, making this category more homogeneous may also serve to
enhance its stability. Similarly, sickle cell trait is no longer
sufficient for the patient to be classified into the heredity hemolytic
anemia/sickle cell anemia category, which should also serve to focus
this classification on relatively severe cases most likely to impact
dialysis facilities.
For each of these co-morbidity measures, the adjustments in the
final rule are for separately billable services only, where the
estimated payment multipliers were found to be relatively stable both
in the analyses for the final rule and in previous analyses of similar
measures that were used for the proposed rule and for the 2008 UM-KECC
report. It should be noted that for some co-morbidities, there has been
less stability in the estimated payment multipliers based on facility
level models for composite rate services. Partly for this reason, the
co-morbidity adjusters in this final rule are based on separately
billable services only, and are not based on composite rate services.
Generally, the payment adjusters are those deemed to best satisfy
multiple criteria for inclusion (for example, objective measurability,
limited variability in severity, not likely to result from poor quality
care, consistent relationship to costs in multiple years of data, and
non-trivial impact on costs).
Comment: One commenter asserted that the co-morbidities were not
predictive of dialysis costs because they involved medical conditions
that are not relevant to dialysis treatment, especially when
significant time has elapsed between the condition and the onset of
dialysis. Another commenter believed the purpose of case-mix adjusters
was valid, but questioned how well the adjustments reflect resource
consumption. Another commenter complained that the co-morbidity
adjustments do not identify differences in patient utilization of drugs
and other resources. One commenter believed the proposed co-morbidity
categories did not align with actual resource utilization for dialysis
treatment. The commenter believed that CMS was inconsistent in
assigning co-morbidity adjustments used for the regression analysis
which casts doubt on the predictive value of adjusters produced.
Response: We do not agree with the commenter who believed the co-
morbidities were not predictive of dialysis costs because they involved
medical conditions not relevant to dialysis treatment. We believe that
the co-morbidity adjustments reflect resource consumption and
utilization because they reflect higher separately billable payments
made for ESRD-related drugs and biological and laboratory tests for
patients with certain co-morbid diagnoses. Our analysis has
demonstrated that the co-morbidity adjustments have predictive value as
evidenced by the overall predictive power of the model. We articulated
in the proposed rule how we determined co-morbidities. We began by
discussing the process initiated in the CY 2005 PPS proposed rule,
whereby we proposed a limited number of patient characteristics
including a large number of specific co-morbidities. We explained the
methodology we used in selecting the co-morbidities as well as why
certain ones were excluded (74 FR 49952). We then explained the
rationale used for the CY 2005 final rule (including why we did not
include co-morbidities), which implemented the current case-mix
adjusted composite payment system (74 FR 49953).
In the proposed rule (74 FR 49953), we explained that the
relationship between patient characteristics and cost for composite
rate services was estimated using a facility level regression model. We
stated that the average patient characteristics were related to the
reported facility costs. We further stated that a patient level model
was used to identify potential payment adjusters for separately
billable services. While the modeling approach used separate equations
for the composite rate and separately billable services to select
patient characteristics as payment variables, we combined the estimated
payment multipliers for composite rate and separately billable
services. The payment multipliers were calculated as the weighted
average of the composite rate and separately billable multipliers (74
FR 49953), where the weights are the shares of total costs attributable
to composite rate and separately billable services. As the cost reports
are not patient specific, we believe that we addressed costs using the
best methodology with the data available.
The range used in the analysis in the proposed rule was based on
the years during which our contractor began and continued analyzing
ESRD data. For some categories, which we identified as acute, there was
a clear break in the data at the 4-month interval, with the presence of
the co-morbidity more than 3 months prior to the current month
resulting in a substantially weaker relationship to current costs. For
others, which we identified as chronic conditions, we could not
identify a clear break. For this final rule, the analysis of the co-
morbidity diagnostic categories looked at 2006, 2007, and 2008 claims
for acute conditions and claims since 2000 for a 6-year span for the
chronic conditions. We used 2006, 2007, and 2008 claims for the
separately billable analyses.
While the proposed rule used a patient year separately billable
model to create consistency between the composite rate and the
separately billable models, for this final rule, we used a patient-
month level separately billable model for the acute short-term
diagnostic category, as the coding of the variable will differ
substantially on the annual versus monthly basis because patients only
have the condition for part of the year. Measurement for a chronic
[[Page 49102]]
condition at the annual or monthly level generally does not vary
because the patient either has the condition or does not. The change to
the monthly observation tended to reduce the multipliers, especially
the short-term acute co-morbidity diagnostic categories. Statistically,
this reduction in multipliers for acute conditions is likely to have
occurred because patients coded as having the acute condition for part
of the year may also have had higher costs at other times of the year.
Therefore, the multiplier in an annual model can reflect not just the
costs during the months in which an acute condition was present.
Because we wanted the short-term multipliers to reflect short-term
increases in costs, we believe that changing to a monthly model is
appropriate. The net effect in the changes to the separately billable
model is smaller adjustments for the acute, short-term diagnostic
categories. By using the patient-month separately billable model, the
multipliers would more closely reflect costs associated with the
specific co-morbidity being measured and occurring in the specific
months in which the co-morbidity was present.
The composite rate model continues to be based on data only
observed annually. In the proposed rule, the only short-term co-
morbidity adjustment in the composite rate model was for bacterial
pneumonias/other pneumonias and opportunistic infections. For the final
rule, we dropped a measure of bacterial pneumonia from the composite
rate model. The exclusion of this co-morbidity adjustment from the
composite rate model involves the same reasoning that was used in
changing the unit of analysis for the separately billable model from
the patient year to the patient-month. We found, for example, that the
bacterial pneumonia multiplier in the composite rate model was
relatively sensitive to the presence of other co-morbidities in the
model, including those that were used in the composite rate model for
the proposed rule. As a result, a relatively large portion of this
adjustment is likely to capture the effects of other unmeasured factors
that increase facility costs. Unlike the separately billable model,
however, the same option is not available to change the unit of
analysis for modeling composite rate costs, because the cost data are
only available at the facility level.
Another concern with applying the bacterial pneumonia adjustment
from the composite rate model was that the magnitude of the effect was
relatively unstable from year to year in the analysis for the final
rule. Therefore, in this final rule, the composite rate model was not
applied.
Comment: One commenter suggested that we calculate co-morbidity
adjustments not from data from other settings, but on data readily
available to ESRD facilities. Other commenters claimed that use of
hospital and emergency department records to determine co-morbidities
overstated adjusters because these claims include acute illnesses.
Commenters suggested that CMS delineate chronic outpatient co-
morbidities, resulting in higher reimbursement, and discount the
unadjusted mean bundled payment.
Response: We presume that the commenter is referring to sources,
such as hospital and physician claims, that were used in conjunction
with the ESRD claims. In the proposed rule, we explained our rationale
for using the Form 2728, the ESRD cost reports, and claims from various
health care providers (74 FR 49952 through 49954). We indicated that we
had encouraged ESRD facilities in the past to report co-morbidities on
the ESRD claims (74 FR 49953) for purposes of establishing future
payment refinements. However, as sufficient co-morbidity diagnoses were
not reported on ESRD facility claims, we used other sources of data for
the regression analyses.
We believe that given the co-morbidity adjustments under the ESRD
PPS, ESRD facilities will take a more active role in gathering
information in order to receive a payment adjustment. If so, it may be
possible to use diagnostic information reported on claims for future
refinements to the ESRD PPS.
With regard to the comment concerning chronic co-morbidities, we
believe that the commenter is alleging that chronic co-morbidities
rather than acute co-morbidities should be considered for payment
adjustment. We do not share this view. As we explained in detail above,
we believe the methodology used in determining acute and chronic co-
morbidities recognized for the co-morbidity payment adjustment captures
those conditions that require more composite rate and separately
billable services.
Comment: One commenter expressed concern that many of the proposed
co-morbidity adjusters were neither reliable nor robust and, therefore,
the commenter recommended the exclusion of the proposed 11 co-morbidity
categories. The commenter claimed that the regression methodology that
CMS proposed results in overestimation of the adjuster values. The
commenter further stated that unless clinical evidence exists to
support the independence of the variables in the model, as they pertain
to ESRD services furnished and such services' cost distribution, the
co-morbidities should be excluded.
One commenter stated that it was not clear how the co-morbidities
were identified in the regression analysis or in assigning patients.
The commenter also stated there was no reference, analysis, or
statistical evaluation of the period of time in the past, for which the
co-morbidity condition is relevant. The commenter concluded that
flagging patients for each adjuster could be different if co-morbidity
codes were searched on claims at different time periods. The same
commenter stated that in the proposed rule, we did not provide an
explanation about how we determined that an ``old'' diagnosis no longer
affected treatment and, therefore, did not qualify as an adjuster, nor
did we discuss how we had historically evaluated which co-morbidity
condition was relevant.
Response: As we discussed in the proposed rule (74 FR 49952), we
proposed case-mix adjusters in the CY 2005 PFS proposed rule. We
explained in the proposed rule that for some diagnoses, such as cancer,
we looked at any occurrence since 1999. We also explained that in the
proposed rule we used 2007 claims (74 FR 49954). For this final rule,
co-morbidities referred to as ``acute'' were identified in the current
month of the analysis or previous 3 months of claims. Co-morbidities
referred to as ``chronic'' were identified in claims since 2000.
For some categories, which we identified as acute, there was a
clear break in the data at the four-month interval, with presence of
the co-morbidity more than three-months prior to the current month
resulting in a substantially weaker relationship to current costs. For
others, which we identified as chronic conditions, we could not
identify a clear break.
For this final rule, the analysis of the co-morbidity diagnostic
categories involved 2006, 2007, and 2008 claims for acute conditions
and claims since 2000 for a six-year span for the chronic conditions,
although the actual Medicare history will vary based on when a patient
became entitled under Medicare. Because some patients have shorter
Medicare histories, the claims may miss some diagnoses that were
actually present, resulting in an underestimate of their clinical
prevalence.
We used 2006, 2007, and 2008 claims for the separately billable
analyses. Estimating the regression models year by year (rather than
for the full 3-year
[[Page 49103]]
period) showed that the same co-morbidities tended to predict costs in
each year, which suggested the adjusters were reliable and robust. In
our analysis for this final rule, we once again identified a clear
break in the higher utilization of separately billable items and
services after 4 months for the acute conditions and no break for the
chronic conditions.
In the proposed rule, we used a patient year separately billable
model to create consistency between the composite rate and the
separately billable models. For this final rule, we used a patient-
month level separately billable model for the acute short-term
diagnostic category. The coding of the variable will differ
substantially on the annual versus monthly basis because patients only
have the condition for part of the year. Measurement for a chronic
condition at the annual or monthly level generally does not vary,
because the patient either has the condition or does not. The change to
the monthly observation tended to reduce the multipliers, especially
the short-term acute co-morbidity diagnostic categories.
Statistically, this reduction in multipliers for acute conditions
is likely to have occurred because patients coded as having the acute
condition for part of the year, may also have had higher costs at other
times of the year. Therefore, the multiplier in an annual model can
reflect not just costs during the months in which an acute condition
was present. Because we wanted the short-term multipliers to reflect
short-term increases in costs, we believe that changing to a monthly
model is appropriate. The net effect in the changes to the separately
billable model is smaller adjustments for the acute, short-term
diagnostic categories. The composite rate model remains as data only
observed annually because the cost reports which are used are completed
on an annual basis. By using the patient-month separately billable
model, we believe that the multipliers would more closely reflect costs
associated with the specific co-morbidity being measured and occur in
the specific months in which the co-morbidity was present.
As for the assertion by commenters that there was a lack of
independence of predictors, we found that there were no strong
correlations between the presence of different co-morbidities.
Regression analysis identifies the independent contribution of
different variables on the outcome of interest. If multiple variables
were highly correlated, the regression analysis would be unlikely to
show that each of the variables had a statistically significant,
independent effect on the outcome.
Comment: One commenter opposed the inclusion of the proposed co-
morbidities out of the belief that ESRD facilities' lack access to
reliable data, which would prevent facilities from tracking and
reporting co-morbidities in a manner that is adequate to support
reimbursement. The commenter argued that the disparity in the findings
using data available to ESRD facilities was not surprising and
referenced an article published in the Journal of the American Society
of Nephrology. The commenter alleged that in the article, the CMS
contractor, UM-KECC, had conceded that additional data not currently
available to CMS is required to improve the predictive power of its
case-mix model. The commenter further alleged that what data exists is
incomplete or inaccurate with respect to occurrence, frequency, and
severity. The commenter also stated that in the article, UM-KECC
acknowledged that some co-morbidities were difficult to collect and the
prevalence varies with the ``look-back'' period. The commenter further
noted that in the article, UM-KECC stated that reporting on the claims
would create a new administrative burden and that adjusting payments
for co-morbidities could create inappropriate incentives.
Response: Although UM-KECC acknowledged that the article does refer
to limitations that exist in the available data, they believe that the
available data are sufficient to estimate some of the important
predictors of costs. UM-KECC has indicated that it does not doubt that
additional data would improve the predictive power of the models, but
acknowledges that such data are not available. UM-KECC noted the
prevalence varied most with look-back period for those co-morbidities
that were used as acute conditions. For those conditions, older
diagnoses had substantially weaker relationships to costs and
therefore, were not proposed as case mix adjusters.
Given the low level of reporting of co-morbid conditions on current
ESRD claims, UM-KECC agrees that obtaining and reporting the
information could create some new burden, but hopes that encouraging
facilities to increase awareness of co-morbid conditions will
facilitate improvements in the care planning process. Given that in-
center dialysis patients typically are in the facility three times
weekly and see a nephrologist about four times per month, we believe
the additional burden will be relatively minor.
Comment: Some commenters claimed that we overstated the prevalence
of the co-morbidity diagnoses because their findings did not
demonstrate the same prevalence for the adjusters we identified. One
commenter noted their findings about prevalence were lower than the
prevalence that we reported in the proposed rule, with the magnitude of
the difference very large for hepatitis B, septicemia, cancer HIV/AIDS,
hemolytic or sickle cell anemia, monoclonal gammopathy, myelodysplastic
syndrome, and pericarditis. One commenter reported a higher prevalence
for cardiac arrest, pneumonia/other opportunistic infections, alcohol-
drug dependence, and gastrointestinal bleeding, but noted that in each
case the difference was less than 2 percent.
One commenter stated they were only able to replicate the
prevalence rate for cardiac conditions. The commenters acknowledged
that they used their own data sources, which they recognize are not as
comprehensive as the data available to CMS.
Response: We appreciate that commenters were able to identify co-
morbidities for their patients for their analyses, as it confirms our
belief that co-morbidity information is available to ESRD facilities.
As we discussed above in response to commenters' inability to
replicate our findings, historically there has not been a financial
incentive for ESRD facilities to document the presence of co-
morbidities because there was no payment associated with a co-
morbidity. We believe that given the co-morbidity adjustments under the
ESRD PPS, ESRD facilities will take a more active role in gathering and
reporting co-morbid diagnostic information.
However, frequencies of co-morbidities found in the Medicare claims
files may still differ from those found in the historical records of
ESRD facilities, because each ESRD facility may not have the same
number or percentage of patients with the same co-morbidities as other
ESRD facilities or they may differ from the national average. The
reported diagnosis information provided by ESRD facilities will serve
as the basis for subsequent revisions to and improvements in the case-
mix adjustments.
Comment: One commenter believed that without access to all the
claims data that was used to ascertain the adjusters, ESRD facilities
will under-report them, resulting in systematic underpayment.
Response: We believe that the commenter means that if ESRD
facilities do not have access to other claim sources (such as hospital
claims), they may under-report co-morbidities. We acknowledge that ESRD
facilities will
[[Page 49104]]
need to be proactive in obtaining co-morbidity information from other
health care providers.
We will require ESRD facilities to report the appropriate ICD-9-CM
code for the co-morbid condition recognized for purposes of the co-
morbidity payment adjustment under the ESRD PPS, if the ESRD facility
wishes to receive the adjustment. However, as we discussed and
explained above, we are finalizing a smaller number of co-morbidity
diagnostic categories in this final rule. The number of co-morbidity
diagnostic categories we are finalizing for purposes of the co-
morbidity payment adjustment has been reduced from eleven to six.
We also are providing in Table E in the Appendix, the list of ICD-
9-CM codes that would be recognized for purposes of the co-morbidity
payment adjustment. The number of specific diagnostic ICD-9-CM codes
eligible for the co-morbidity payment adjustment has been reduced from
hundreds to eighty-eight. We believe these reductions will mitigate
many of the concerns expressed by commenters.
As we discussed in a previous response, Sec. 494.80 in the ESRD
Conditions for Coverage, specifies that a patient's comprehensive
assessment must include an evaluation of current health status and
medical condition, including co-morbidities. We acknowledge that the
Conditions for Coverage do not require that co-morbidities be
documented on the ESRD claim using ICD-9-CM codes. However, for the
purpose of receiving a co-morbidity payment adjustment for an eligible
co-morbidity, ESRD facilities will be required to document the ICD-9-CM
code on the ESRD claim with documentation to support the ICD-9-CM code
maintained in the patient's medical or clinical chart. We will discuss
the documentation requirements further in the future in administrative
issuances.
Comment: One commenter expressed concern that our reliance on cost
reports is misplaced and claimed that there is nothing to support a
presumption that facility cost report data can be linked with patient-
level variance in the cost of care. The same commenter claimed that
company practices, such as staffing practices, volume discounting, and
group purchasing, may have a greater impact on facility costs than a
transitory combination of patient characteristics and conditions that
may not be tied to the cost reporting period.
Response: We do not share the commenter's view that the use of cost
reports is misplaced. We acknowledge that ESRD facility cost reports
cannot be linked with individual patient level variance in the cost of
care. In the proposed rule, we indicated that the relationship between
patient characteristics and cost for composite rate services was
estimated using a facility-level regression model to relate the average
patient characteristics to the reported facility costs. We further
stated that a patient level model was used to identify potential
payment adjusters for separately billable services. While the modeling
approach used separate equations for the composite rate and separately
billable services to select patient characteristics as payment
variables, we combined the estimated payment multipliers for composite
rate and separately billable services. The payment multipliers were
calculated as the weighted average of the composite rate and separately
billable multipliers (74 FR 49953).
To assess the relationship between patient characteristics and
costs for composite rate services, we are currently limited by the
absence of patient-level cost data. Instead, this analysis must be done
by relating differences in patient characteristics across facilities
with differences in average facility costs for composite rate services,
using cost report data. For example, if each 10 percent increase in the
prevalence of a co-morbidity within an ESRD facility's population is
associated with one percent higher cost per treatment (across all
treatments the ESRD facility provides), that characteristic would have
a multiplier of 1.10. This is the same approach that was used to
develop the basic case-mix adjustment for the composite rate.
We recognize there are limitations to this approach for co-
morbidities that are relatively uncommon, where estimates of the
increment in cost for a particular condition are generally based on
very small differences in the prevalence of the condition across
facilities. Therefore, unlike the payment model in the proposed rule,
the current payment model does not reflect co-morbidity adjustments for
composite rate costs.
Most cost reports cover a calendar year. In cases where the cost
report does not coincide with the calendar year, weighted averages of
success cost reports were calculated to link the cost reporting period
more closely to the period over which patient characteristics were
measured. For example, if a facility's reporting period is October 1
through September 30, its 2006 costs would be a weighted average of its
report covering October 1, 2005 through September 30, 2006 and its
report covering October 2006 through September 30, 2007, with three
quarters of the weight placed on the earliest report (which included
three quarters of the 2006 calendar year).
Comment: One commenter indicated that we did not take into account
certain diseases that require more care and costs. The commenter
believed we failed to take into account the variations in caring for
individual patients, and were penalizing facilities that provide more
comprehensive care (thus eliminating patients' need to spend non-
dialysis days in other health care settings). Examples that the
commenter cited were diabetes management, hypertension management,
anti-coagulant monitoring, and pre-transplant testing.
Response: We do not believe that we are penalizing ESRD facilities
that provide comprehensive care to patients. For example, as discussed
in section II.E.1. of this final rule, commenters indicated that ESRD
facilities administer drugs and biological for purposes other than for
renal dialysis-related conditions. Consequently, we provided for these
services to continue to be paid as separately billable items. In
section II.K. of this final rule, we discuss how we will provide for
laboratory tests that are performed for non-ESRD-related conditions, to
be paid as separately billable items.
With regard to the comment that we have not accounted for other
conditions that require more care or costs, in the proposed and in this
final rule, we have addressed the methodology of how we identified
payment adjustments that capture higher resource utilization and,
therefore, higher costs. We believe that the patient-level adjustments,
the home training add-on adjustment and the outlier payment all address
patients who require higher resource utilization. We will continue to
analyze ESRD claims and costs after the implementation of the ESRD PPS
and will discuss any refinements that may be needed in future
rulemaking.
Comment: Most commenters cited administrative reasons for wanting
to exclude the co-morbidity categories as patient-level adjusters, such
as difficulties in obtaining hospital data; difficulties in determining
beginning and end dates of co-morbidities such as gastrointestinal
bleeding; the financial burden on the facilities due to the cost of
training and hiring coders to document conditions properly with cost
possibly exceeding payment increases; changes in systems to collect and
update data continuously to capture adjusters and codify them on claims
requiring additional staff; limited number of diagnoses that facilities
use to justify dialysis treatment; complexity
[[Page 49105]]
overwhelming facilities; risk of reducing staff time from patient care
to allow them to code diagnoses; incurring fees from other providers
for copying medical records; difficulty in tracking co-morbidities; the
need to create new documentation processes to capture necessary medical
information and accurately code, entailing efforts by medical records
personnel, clinical personnel, nurses, and physicians; and the need to
add complex administrative resource intensive systems.
Several commenters claimed the co-morbidity adjustments would cause
administrative burdens to small dialysis organizations. The same
commenters indicated that the information would be hard to collect and
assure accuracy except for hepatitis B. Others cited lack of reporting
of co-morbidities due to patients' and caregivers with poor memories or
cognitive abilities; multiple hospitalizations in multiple hospitals;
and the need to obtain information from nephrologists.
One commenter believed the adjustments were too high and that there
would be a financial risk to providers who will require increased
resources to code correctly. One commenter claimed that the facilities
facing severe financial losses would reduce costs and shift from the
goal of seeking the best or highest standards of patient care towards
those that are merely acceptable or adequate. Some commenters claimed
that the co-morbidities have not historically been collected and should
be eliminated because it is difficult, unreasonable, unrealistic and
almost impossible to obtain the information that may affect the ability
to provide care. Another commenter stated that the administrative and
information technology burden for tracking co-morbidities outweighed
the benefit.
A few commenters opined that the new payment system should revert
back to the system prior to 2005, whereby all facilities received a
lump sum payment for every dialysis treatment provided to all patients.
Several commenters believed the system is too complex for patients and
families to follow the calculations to determine their responsibility.
Several commenters indicated that most providers accurately code all
chronic ESRD problems and rely on hospital certified coders to code
problems in the discharge summary. The same commenters were concerned
that they will need to capture all new co-morbidities in the month that
they occur with incomplete data thereby delaying claims processing
resulting in lost reimbursement. A few commenters suggested that the
adjusters be limited to those at the time of initiation of dialysis,
because they claim there is no mechanism to update information when co-
morbidities change. Others cited the lack of access to hospital and
other records.
Response: We thank the commenters for sharing their concerns. We
understand that the implementation of the ESRD PPS, including the
requirement to document co-morbidity diagnostic categories to be
eligible for adjustment to the ESRD PPS, will be new to some ESRD
facilities. However, since the ESRD Conditions for Coverage were issued
in 2008, ESRD facilities have been aware of their responsibility to
assess and record co-morbid medical conditions in the medical records.
We believe that ESRD facilities will obtain diagnostic information
through increased communication with their patients, their patients'
nephrologists and their patients' families. When an ESRD patient misses
a treatment, the ESRD facility should determine whether the patient has
been hospitalized and, if so, what was the condition treated. To the
extent the patient is unable to provide the information the ESRD
facility would consult with the patient's nephrologists or family to
seek additional information.
The reduction of the number of co-morbidity diagnostic categories
should reduce the burden on ESRD facilities to identify co-morbidity
diagnostic categories that would need to be entered on ESRD claims to
be recognized for a payment adjustment. Given that we have reduced the
number of co-morbidity adjustments and that in-center dialysis patients
typically are in the ESRD facility three times per week, and that ESRD
patients typically see a nephrologist about four times per month, we
believe the burden of tracking co-morbidities will not be as onerous as
the commenters fear.
Comment: Some commenters suggested that co-morbidity adjusters
should only be those that are chronic in nature and do not change each
month, and that we should consider operating costs in deciding which
adjusters to use.
Response: The determination of which co-morbidity diagnostic
category would be recognized for purposes of the co-morbidity payment
adjustment is based on results of the analyses we described above. We
identified and are finalizing three chronic and three acute co-
morbidity diagnostic categories that would be recognized for the co-
morbidity payment adjustment under the ESRD PPS.
Comment: Several commenters suggested that CMS be responsible for
assessing when adjusters are necessary. The commenters noted that
because CMS has access to all claims, CMS should incorporate the co-
morbidities that it identifies into payment determinations without
burdening providers. The commenters further suggested that if CMS
assumed responsibility for determining which diagnosis were eligible
for a payment adjustment, adjustments would not be subject to fraud and
abuse.
Response: We believe that ESRD facilities should be aware of
patients' co-morbidities and we assume are in the best position to
determine such information and, therefore, should be responsible for
identifying all co-morbidities on the ESRD claim whether or not they
are eligible for a payment adjustment. Accordingly, we do not believe
that we should be assuming responsibility for identifying patient co-
morbidities for ESRD facilities. We do not believe that our assuming
responsibility for identifying payment adjustments would, in itself,
serve to eliminate fraud and abuse, because other health care providers
would be documenting co-morbidities on their respective claims and we
would be obtaining the co-morbidities from those claims. It is
incumbent on all providers to put correct information on claims,
whether or not there are payments associated with the information.
As we noted above, in order to receive a payment adjustment to the
ESRD PPS base rate, ESRD facilities will be required to document on
ESRD claims the co-morbidity using the appropriate ICD-9-CM code in
accordance with ICD-9-CM coding guidelines.
Comment: One commenter expressed concern that ESRD organizations
will determine which combination of co-morbidities would generate large
payments. One commenter suggested that we consider the compound effect
of multiple adjusters that may have a singular association, but may not
warrant compounding when used for a single patient and treatment. Other
commenters believe that the adjusters will result in facilities only
treating the sickest patients with the most co-morbidities in order to
increase revenue. Some commenters expressed their concerns about
adjusters being manipulated resulting in up-coding in order to seek
higher payment. Another commenter indicated that facilities would be
motivated to have patients with as many adjustments as possible
regardless of whether there were appropriate numbers and quality of
trained staff or the ability to care for more complex patients.
Several commenters predicted that the fallout of including co-
morbidities
[[Page 49106]]
as adjusters would result in ``cherry picking'' leading to a crisis in
dialysis care. One commenter expressed concern that extra care may be
the same for a patient with a single co-morbidity, as a patient with
multiple ones. Another commenter indicated adjusters are based on past
history and subject to interpretation and abuse. The commenter
questioned whether ESRD facilities will try to maximize revenues by
qualifying patients for greater reimbursement due to previous medical
histories that have no impact on patients and do not add costs to their
current treatment regimen.
Some commenters expressed concern that sicker patients with
multiple co-morbidities may not find an ESRD facility to provide care.
A few commenters believed patients with few or no co-morbid conditions
may be unable to transfer to another facility because facilities will
fill open slots with patients who have enough co-morbid conditions to
cover the cost of providing dialysis to them. Other commenters
acknowledged the potential of errors and manipulation with the co-
morbidities, citing alcohol dependency as an example. One commenter
suggested eliminating the adjusters, if ESRD facilities would be
responsible for tracking them.
Response: We appreciate the concerns raised by commenters. We do
not agree that the inclusion of co-morbidities as payment adjustments
will lead to ``cherry picking'' of patients, because in the absence of
case-mix adjustments reflecting patient cost, ``cherry picking'' the
healthiest patients may well be a more serious problem. We believe that
ESRD facilities will provide appropriate care under the ESRD PPS and we
believe that our continued monitoring will identify the few ESRD
facilities that do not.
We acknowledge that the number of co-morbidities that an individual
has does not necessarily determine the need for additional care. As
commenters have noted, there may be other factors, such as functional
limitations, that result in the need for additional care. However, at
this time, with the data available to us, we have identified six co-
morbidity diagnostic categories which have shown higher costs due to
higher separately billable costs. These co-morbidity diagnostic
categories will be recognized for the co-morbidity payment adjustment
under the ESRD PPS base. We will continue to look at other factors and
other co-morbidities as ESRD facilities begin to enter co-morbidities
on ESRD claims.
With regard to the commenters expressing concerns about dialysis
organizations determining which combination of co-morbidities would
generate large payments and ``cherry picking'' these patients, we
performed further analysis of the co-morbidity diagnostic categories
for this final rule. We found that although costs were somewhat higher
for patients with multiple co-morbidities, the effect of compounding
two or more co-morbidity adjustments would on average result in a
higher payment adjustment than is warranted. However, because we are
unable to determine the extent of this higher cost, we do not believe
that providing an adjustment for more than one co-morbidity, is
warranted at this time. In addition, the costs the co-morbidity
adjustments are capturing are mostly related to separately billable
services, primarily the use of EPO. We believe that providing multiple
co-morbidity adjustments would overstate EPO utilization, especially in
light of the medically unbelievable edits applied under the EPO Claims
Monitoring Policy.
In order to avoid overly-high payments for co-morbidities, under
the final ESRD PPS an ESRD facility may receive only one co-morbidity
case-mix adjustment per co-morbidity category per claim, regardless of
whether the patient has co-morbid conditions from different co-
morbidity diagnostic categories. In the event that there is more than
one co-morbidity diagnosis category that is applicable, we will apply
the highest payment adjustment in order to reflect the slightly higher
costs associated with patients with multiple co-morbidities.
In addition, our analysis has shown that it is very rare for an
ESRD patient to have more than one of the final diagnostic categories
recognized for a payment adjustment. Using the same comprehensive data
sources we used to identify co-morbidity categories (including claims
from hospital inpatient stays, outpatient encounters, physician,
skilled nursing facilities, etc.), we determined that approximately 92
percent of patient-months have no co-morbidities reported;
approximately 7.4 percent of patient-months had only one reported co-
morbidity. Less than 0.45 percent of patient-months had two co-
morbidities reported.
Therefore, in the rare event that a patient has more than one co-
morbidity diagnostic category, the adjustment for the category with the
highest adjustment factor would be applied. Where there are two chronic
categories reported, a payment adjustment would be applied using only
the chronic co-morbidity category with the highest adjustment. Since
the acute co-morbidity categories all have higher values than the
highest chronic co-morbidity category, in the event a patient with a
chronic condition that is eligible for a payment adjustment acquires an
acute condition that is also eligible for a payment adjustment, the
payment adjustment would only apply for the acute condition. In the
event that a patient has 2 or more acute co-morbidities eligible for a
payment adjustment, the adjustment would only apply to the acute co-
morbidity with the highest adjustment.
We wish to ensure that patients continue to have access to high
quality dialysis care. It will be an important focus of our monitoring
efforts to review multiple data sources on co-morbidities and determine
if these trends change as a result of the ESRD PPS and the co-morbidity
adjustments so that we can ensure continued access for patients. We
will track data on co-morbidities to detect changes in prevalence or
type of conditions coded. To the extent that an ESRD patient has higher
resource needs, as a result of multiple co-morbid conditions, or some
other complication, we expect that the outlier adjustment and blended
transition payments, as set forth in this rule, would provide
sufficient protection against extraordinarily high costs, particularly
in the first year of the transition. We will consider future refinement
of our co-morbidity adjustment policy based on data from ESRD claims
and other sources from the period after implementation of the new
payment system to ensure that patients continue to have access to high
quality care.
As we noted in the onset of dialysis discussion earlier in this
section of this final rule, our analysis for this final rule indicates
an increase in costs for the composite rate portion of the two-equation
model, which may reflect an increase in the level of resource
utilization required to stabilize individuals who are new to dialysis.
The analysis also demonstrates an increase in measured costs for the
separately billable portion of the model, particularly for ESA
utilization. While we found that costs were higher, on average, for
dialysis patients with a co-morbidity during the first 4 months
following the onset of dialysis, the effect of compounding a co-
morbidity adjustment with the onset of dialysis adjustment would, on
average, result in higher payment adjustment than is warranted for
separately billable services. Therefore, the co-morbidity payment
adjusters will not apply for facilities receiving the onset of dialysis
payment adjustment.
With regard to the comment that adjusters are based on past
history, we
[[Page 49107]]
are finalizing three chronic co-morbidity categories which are based on
the patient's medical history and, which would be recognized for a
continuous payment adjustment (except when there is an acute co-
morbidity as described above); and, three acute co-morbidities that are
based on the co-morbidity's presence in the current claim month and for
three subsequent months.
With regard to commenters' concern about errors and manipulation of
the reporting of co-morbidities, specific documentation of co-morbid
conditions in patient medical/clinical records using specific
guidelines will be required for this payment adjustment and we will
address such details in future administrative issuances. We anticipate
monitoring the use of co-morbidities. We will continue to assess the
current as well as future co-morbidity diagnostic categories to ensure
that all Medicare beneficiaries with ESRD have access to appropriate
renal dialysis services.
Comment: One commenter cautioned that the number of co-morbidities
would go up, stating the analogy of increased Epogen[supreg] use by the
LDOs due to financial gains. The same commenter suggested that
providers will encourage physicians to admit high-cost patients to
other facilities and order expensive medications and tests at these
facilities. One commenter expressed concern that the current claims
processing system does not accommodate the potential number of
adjustments needed.
Response: The current claims are able to accommodate the reporting
of nine co-morbidities as secondary diagnoses. We will explain billing
issues relating to co-morbidity adjustments in sub-regulatory guidance
in the future.
As we indicated above, we expect ESRD facilities to furnish
appropriate care to their patients under the ESRD PPS, but we will
monitor the ESRD PPS to identify the ESRD facilities that may not. We
believe the concerns raised by the commenters could also exist under
the current basic case-mix adjusted composite payment system.
Comment: Some commenters explained that many adjustments do not
have significant impact on the delivery of care. One commenter believed
that the case-mix adjusters are for the purpose of protecting small
providers against financial consequences of high-risk patients.
Response: We recognize that the presence of a co-morbidity does not
always result in high costs. As explained in the discussion of the
regression model in this final rule, adjustments to the ESRD PPS base
rate are based on average costs. In other words, on average, patients
with diagnoses in the co-morbidity diagnostic categories will have
higher separately billable costs. The payment adjustment reflects this
average. There may be patients with the co-morbidity who have less-
than-average separately billable costs and others with higher costs.
Because of this variability, some patient costs will be lower than the
adjusted payment rate while others will be higher. In the absence of
co-morbidity payment adjustments, differences between patient costs and
payment are greater. The purpose of adjusting for co-morbidities and
other patient characteristics is to reduce the average difference
between actual patient cost and payment.
Comment: Several commenters expressed concern that the adjustments
decrease the base rate. These commenters recommended a higher base rate
with fewer adjustments. Some commenters stated that in order to
recapture the payment lost to the base rate, ESRD facilities would have
to ensure that some of their patients have the co-morbidities
recognized for a payment adjustment to the ESRD PPS base rate. Several
commenters suggested eliminating all adjustments and providing the same
payment for all.
Response: The commenters are correct that the base rate has been
reduced as a result of the co-morbidity diagnostic categories in order
to maintain budget neutrality as discussed in section II.E.3. of this
final rule. Failure to adjust for patient characteristics related to
cost could result in reduced access to care for patients with
characteristics generally known to be associated with cost.
Eliminating all adjusters and providing the same payment for all
facilities is not an option, as section 1881(b)(14)(D)(i) of the Act
specifies that the Secretary shall include a payment adjustment based
on case-mix that may take into account patient weight, body mass index,
co-morbidities, length of time on dialysis, age, race, ethnicity, and
other appropriate factors. We believe that providing for the case-mix
and other adjustments we are including in this final rule to account
for the higher costs for certain patients meets the intent of the
statute.
Comment: One commenter believed that bundling oral drugs would
impact management of common co-morbidities such as anemia, secondary
hyperparathyroidism and metabolic bone disease.
Response: We discuss the oral drugs in section II.A.3. of this
final rule. With regard to the co-morbidities that the commenter
identified (anemia, secondary hyperparathyroidism, and metabolic bone
disease), we are not finalizing these three diagnoses for purposes of
the co-morbidity payment adjustment under the ESRD PPS. We explained in
detail in the proposed rule and in this final the methodology that was
utilized in identifying co-morbidities that would be recognized for a
payment adjustment. Furthermore, anemia, secondary parathyroidism and
metabolic disease are complications that occur in ESRD patients (that
is, they are ESRD-related). If we apply the criteria that we discussed
above, these conditions would meet two of the three criteria. That is,
because these conditions are ESRD-related, there is a potential for
adverse incentives regarding care (criteria number 2) and there is a
potential for ESRD facilities to directly influence the prevalence of
the co-morbidity either by altering dialysis care, diagnostic patterns,
or liberalizing the diagnostic criteria. Therefore, they would not be
considered as co-morbidities recognized for a payment adjustment.
Comment: One commenter expressed concern that facilities obtaining
multiple co-morbid adjustments would result in patients paying more co-
insurance and those lacking supplemental coverage facing financial
hardship or even involuntary discharge for non-payment. One commenter
suggested adding money for units that provide care to higher-acuity
patients.
Response: As discussed in section II.K.l. of this final rule,
beneficiary co-insurance liability is based upon the total payments
made to an ESRD facility on behalf of the beneficiary. As we discussed
earlier, ESRD facilities will only receive a payment adjustment for one
co-morbidity and, therefore, beneficiaries will not be held financially
accountable for a co-insurance based upon multiple co-morbidities.
With regard to the commenter who suggested adding money for units
that provide care to higher acuity patients, we note that the patient-
level adjustments are intended to provide additional payment for higher
cost patients.
f. ICD-9-CM Coding
We proposed that in order to receive a co-morbidity payment
adjustment, the appropriate ICD-9-CM code, using the official ICD-9-CM
Coding Guidelines, would need to be entered on the claims (74 FR
49954). This includes codes from both the individual body system
chapters (codes 001.0-999.2), as well as appropriate codes from the
supplementary classification of factors
[[Page 49108]]
influencing health status and contact with health services chapter
(VO1.0-V89.09). We acknowledge that many of these codes, such as those
for a history of a disease would not be eligible for a co-morbidity
adjustment. We noted that we would issue through sub-regulatory
guidance, any changes in codes eligible for a co-morbidity payment
adjustment in the event of any changes in coding in the future (74 FR
49954). For example, ICD-10-CM will be implemented for services
occurring on or after October 1, 2013. (See 74 FR 3328-2238-3362 for
information on the Implementation of ICD-10-CM). We are finalizing our
determination that in order to receive a co-morbidity payment
adjustment, the appropriate ICD-9-CM code, using the official ICD-9-CM
Coding Guidelines, would need to be entered on the claims.
In the proposed rule (74 FR 50027), we explained the analyses that
we performed to determine the extent that specific diagnoses within the
eleven co-morbidity categories are on ESRD claims. We also explained
our analysis of the ICD-9-CM diagnosis codes, as identified by UM-KECC,
and we provided a complete list of the codes identified by UM-KECC. We
also provided a list of codes associated with diseases/conditions that
we proposed would be recognized for the purposes of an ESRD co-
morbidity payment adjustment (74 FR 50069).
We also explained that we eliminated specific ICD-9-CM codes
associated with specific diseases/conditions that we proposed would not
be recognized for purposes of a co-morbidity payment adjustment, and we
provided a listing of these ineligible codes (74 FR 49955).
Comment: Some commenters expressed concern that facilities will
face a huge administrative burden to ensure accuracy of data in order
to be eligible for the patient-level adjusters, which ``could and
likely will result in cutting corners in care delivery.'' Others
expressed concern about the need to change systems or lack of data to
support eligibility for adjusters. A few commenters suggested including
only adjustments that do not require administrative time, have a real
impact on care, and do not need to be changed or documented. Other
commenters stated that they have access neither to ICD-9-CM codes nor
to claims from other health care providers who do document ICD-9-CM
codes. Some commenters lamented that the co-morbidity adjustments did
not offset the cost to change systems, obtain staff, and document codes
correctly. One commenter believes that the difficulty of documenting
ICD-9-CM codes would indicate that the co-morbidities should be
eliminated.
Response: We do not believe that changes in a payment structure
that represent appropriately case-mix adjusted payments should be
eliminated because of administrative changes that result. We also do
not agree that patient-level adjusters should be comprised of only
those that do not require staff to ensure accuracy or are easier to
manage administratively. We agree with the comment that adjustments
with ``real impact on patient care and care planning should be
principle factors for which information should be reported,'' as we
believe that our analysis on correlating payment with the adjustments
does support patient care and planning principles.
Comment: We received two comments indicating that the elimination
of the heading for myelodysplastic syndrome resulted in no codes for
this condition that would be eligible for the co-morbid payment
adjustment.
Response: We thank the commenter for bringing this to our attention
and for providing a list of codes that can be used. We acknowledge that
we inadvertently omitted the specific ICD-9-CM codes for
myelodysplastic syndrome in the proposed rule. We have indicated the
specific ICD-9-CM codes for myelopdysplastic syndromes in Table E of
the Appendix.
In the proposed rule (74 FR 49955 through 49962), we proposed a
number of tables identifying specific ICD-9-CM codes which would not be
recognized for purposes of the co-morbidity payment adjustment. We
solicited comments on the ICD-9-CM codes which we proposed to not
recognize. We did not receive any comments pertaining to the ICD-9-CM
codes we proposed not to recognize for purposes of the co-morbidity
adjustments. Therefore, in this final rule, we are eliminating the
tables with ICD-9-CM codes for co-morbidities not affecting costs in
outpatient ESRD facilities; NEC/NOS/Unspecified codes; benign tumors;
and category headings.
In this final rule, we are finalizing in Table E of the Appendix,
the ICD-9-CM codes for the six co-morbidity diagnostic categories which
would be recognized for an adjustment to the ESRD PPS base rate. As we
have reduced the final co-morbidity diagnostic categories to six and
made changes to the diagnoses we are finalizing in this final rule, we
have updated Table E to contain only the ICD-9-CM codes which will be
recognized purpose of the co-morbidity payment adjustment under the
ESRD PPS. We note that we have included the list of ICD-9-CM codes that
were used by UM-KECC in the analysis of the co-morbidity diagnostic
categories for this final rule. This list is in Table E in the Appendix
of this final rule. We are also finalizing the inclusion of co-
morbidities as patient-level adjustments in Sec. 413.235(a).
As we discussed earlier, documentation supporting the eligible co-
morbidity diagnosis on the ESRD claim will be required in the patient's
medical record. We will be providing specific instructions about such
documentation requirements in the future.
g. Race/Ethnicity
Section 1881(b)(14)(D)(i) of the Act requires that the ESRD PPS
include a payment adjustment based on case-mix that may take into
account a patient's race and ethnicity (as well as other patient
characteristics such as patient weight, body mass index, etc.). In the
proposed rule, we presented analyses of potential case-mix adjustments
based on race and ethnicity (74 FR 49962). We indicated that while the
inclusion of race and ethnicity factors may improve the predictive
value of the proposed ESRD PPS, we had concerns about whether the data
were of sufficient quality upon which to base payment adjustments (74
FR 49966). The regression analysis we conducted for purposes of the
proposed rule relied on two separate data sources for race and
ethnicity status to assess the extent to which race and ethnicity would
account for cost factors that are otherwise unexplained in the model.
The first analysis was based on race and ethnicity data retrieved from
the Renal Management Information System (REMIS) and the second analysis
was based on data retrieved from the Medicare Enrollment Database
(EDB). We note that in the proposed rule we inadvertently indicated
that race and ethnicity data that were collected on the Form 2728 were
retrieved from REMIS for purposes of conducting the analysis. We wish
to clarify that these data were retrieved from the Standard Information
Management System (SIMS). From this point forward we refer to data that
were collected from the Form 2728 as SIMS data.
In the proposed rule, we presented a comparison between SIMS and
EDB data of the potential for race and ethnicity to predict differences
in composite rate costs among ESRD facilities, as well as differences
in MAP for separately billable services at the patient level (74 FR
49962 through 499650). We identified several concerns with the quality
of the SIMS and the
[[Page 49109]]
EDB data (74 FR 49966). With respect to the SIMS data, we noted that
for data analysis purposes, it was necessary to default beneficiaries
into the category of ``Other'' making it more difficult to assess the
effect of race and ethnicity on costs and payments (74 FR 49966). With
respect to the EDB data, we noted that race and ethnicity data was
either unavailable or defaulted into the ``Unknown'' category (74 FR
49966). We also indicated that in accordance with MIPPA, we planned to
explore opportunities for improving Medicare program data on race and
ethnicity for purposes of addressing health care disparities (74 FR
49966).
Although we did not propose case-mix adjustments for race and
ethnicity, we requested comments on the data issues presented, other
potential data sources for race and ethnicity that we could consider,
and specifically, the need for adjustments for race and ethnicity in
the final ESRD PPS. The comments that we received on whether race or
ethnicity adjustments may be warranted under the ESRD PPS and our
responses are set forth below.
Comment: We received three types of comments--some in support, some
in opposition and some that requested that CMS delay the inclusion of
race and ethnicity as payment adjusters until the accuracy of Medicare
race and ethnicity data could be improved. Commenters presented a
variety of views. Some commenters believed that we should implement
race and ethnicity adjustments in the final rule as a mechanism of
preserving access to care for patients in the high cost racial
categories. Many commenters believed that an adjustment for race has
the potential to improve payment accuracy and to meet clinical needs of
African Americans and other minority dialysis patients. Some commenters
asserted that the exclusion of an adjustment for race would produce
significant social and racial inequalities. Commenters cited
fundamental concerns with the implementation of race or ethnicity
adjustments indicating that such policy would not be appropriate. The
commenters expressed concerns pertaining to individual rights,
equality, and stereotyping. Commenters also opposed the implementation
of adjustment factors that were not clinically or biologically based.
Several commenters expressed concern about basing payment on racial or
ethnic status indicating that race or ethnicity adjustments may
infringe on individual rights. Some commenters believed that we should
not implement race or ethnicity payment adjustments, suggesting that
such a policy could be viewed as discriminatory. One commenter believed
that implementation of race or ethnicity adjustments would open CMS up
to risk of claims of racial bias and legal challenge.
Finally, other commenters believed that we should continue to work
to improve the accuracy of the data, study the extent to which race or
ethnicity discrimination was occurring, and consider implementing race
or ethnicity adjustments at a future date.
Response: To maximize Medicare payment accuracy, we considered
targeting higher payments to facilities on behalf of patients of
certain racial or ethnic groups that, as demonstrated in the regression
analysis, have been shown to have higher resource needs. We note the
regression analysis is discussed further in section II.F. of this final
rule. However, given the concerns we noted in the proposed rule, we do
not believe it is appropriate to provide a patient-level payment
adjustment based on race or ethnicity at this time.
In particular, we are not convinced that race or ethnicity
adjustments are necessary to ensure beneficiary access to ESRD
services. That is, we believe that there may be race-neutral biological
factors that have not yet been identified in the ESRD PPS modeling that
could explain the increased cost associated with providing renal
dialysis services to members of certain racial or ethnic groups. We
intend to work to identify underlying patient-specific conditions that
may result in increased treatment costs and also how a race/ethnicity
adjuster might be applied. To the extent that these factors are
identified, they could be incorporated into the ESRD PPS model as
patient-level adjustments. We anticipate presenting our further
analyses in future rulemaking.
Comment: Several commenters believed that a race adjustment may
shift payment for a large portion of the population on behalf of one
racial group, African Americans. Another commenter noted that some
groups, such as African Americans, would ``gain'' with the adjuster,
while other groups such as Asians and Hispanics would ``lose''.
Response: We believe the commenter is referring to the financial
implications of a race adjuster. While a case-mix adjustment may result
in higher payments to ESRD facilities that treat patients with the
specified characteristic, the adjustment is intended to offset a
demonstrated increased cost associated with treating patients with that
characteristic. As described further in section II.E.3. of this final
rule, all adjustment factors are accounted for in reductions to the
base rate. As a result, all facilities will be impacted by the reduced
base rate whereas only those facilities that treat patients who qualify
for the adjustment factors would receive the higher payments associated
with those factors. We intend to continue to study this issue and will
present our findings in future rulemaking.
Comment: Some commenters opposed adjustments based on race or
ethnicity, including patients who would be included as part of the
class/group to which the adjustment would apply. One commenter who
opposed implementation of race or ethnicity adjustments, raised
concerns about being labeled or stereotyped based on race, especially
when the label may adversely affect that individual's care. Other
commenters argued that it would be wrong to reimburse dialysis based on
a patient's identification with a particular ethnic group. The
commenters believed that all dialysis patients, without regard to
racial or ethnic status, deserve the best care that is provided equally
to all.
One commenter who supported the inclusion of an ethnicity
adjustment suggested that in clinical practice certain patient ethnic
groups are more or less compliant as patients. The commenter further
indicated that non-compliant patients require greater effort in
counseling, monitoring and communication with physicians.
Response: ESRD facilities are required to provide care that is
based on individual patient need without regard to race or ethnicity.
It is not our intent for ESRD facilities to rely on collective identity
whereby the characteristics of a group are attributed to every member
of that group, rather than basing treatment decisions on individual
patient characteristics. We believe that patients should be assessed
and treated according to their individual need, not according to the
stereotypical traits ascribed to or manifested by (many or most but not
all members of) their group.
Comment: Several commenters opposed the implementation of race and
ethnicity adjustments stating that these factors would not be
clinically verifiable. Commenters expressed concern about whether race
has been shown to be a clinically-driven, independent variable that
predicts the cost of providing ESRD services. One commenter stated that
race is not a biological concept, but rather, it is a social concept.
The commenter asserted that basing public policy on the social concepts
of race or ethnicity has been judged by the Supreme Court to deserve
[[Page 49110]]
condemnation. The commenter further asserted that there would need to
be a biological basis for racial and ethnic classifications upon which
payment adjustments would be made. The commenter stated that there is
no biological basis for racial categories noting that a person's
classification is commonly based on self-reported information.
Other commenters who supported race or ethnicity adjustments
asserted that scientific literature supports the validity of self-
reported data. In addition, a commenter stated that major
epidemiological entities in the U.S. government such as the U.S.
Census, CDC, NIH and OMB use self-reported race and self-reported race
is used to make national policy decisions.
Response: We agree with the commenter that race and ethnicity are
not biological factors. According to the OMB, racial and ethnic
categories should not be interpreted as being biological or genetic in
reference. Rather, the race and ethnicity variables are based purely on
categorization. By definition, race and ethnicity are based on social
and cultural characteristics and ancestry.
OMB considers self-reported race and ethnicity classification to be
the most appropriate mechanism for establishing an individual's race or
ethnicity. As OMB further indicated in its Provisional Guidance on the
Implementation of the 1997 Standards for Federal Data on Race and
Ethnicity, self-identification means that the race and ethnicity
responses are based on self-perception and therefore, are subjective,
but by definition, the responses are accurate (December 15, 2000,
http://www.whitehouse.gov/omb/assets/information_and_regulatory_affairs/re_guidance2000update.pdf).
While race and ethnicity are not biologically based, as described
above, we intend to perform additional studies to determine whether
there are underlying clinical or biological factors contributing to the
increased cost of providing renal dialysis services to certain racial
or ethnic groups. For this reason, we are not implementing a case-mix
adjustment for race or ethnicity in this final rule. We intend to
continue analyses that may identify the race-neutral factors that
explain the higher costs concentrated in certain racial or ethnic
groups. If associations between race or ethnicity and cost are present
after addressing race-neutral factors that may be associated with
increased treatment cost, we will consider development and
implementation of race or ethnicity adjustments in future rulemaking.
In the interim, we will continue to monitor for evidence of decreased
access to renal dialysis services by racial or ethnic groups, following
implementation of the ESRD PPS.
Comment: Several commenters expressed concern over decreasing the
base rate and adjustment amounts for case-mix variables that are
objective and clinically verifiable, to account for the factors of race
and ethnicity, which are not objective and clinically verifiable. The
commenters indicated that it would be better to provide a sufficient
base rate to support better treatment delivery.
Response: As described above, we are not implementing in this final
rule, case-mix adjustments under the ESRD PPS for race or ethnicity. As
a result, there will be a lower standardization factor resulting in a
higher base rate as described further in section II.E.3. of this final
rule.
Comment: A patient asserted that if CMS were to consider a
patient's perception of their racial or ethnic status as a basis for an
adjustment, then CMS should also consider accounting for the patient's
perception of their dialysis provider's performance based on how they
feel, whether they are informed about the dialysis process, etc.
Response: We appreciate the commenter's suggestion to consider an
adjustment based on patient's satisfaction with care received at the
ESRD facility. We intend to take this suggestion under consideration in
future rulemaking, as we develop QIP measures.
Comment: Many commenters cited studies demonstrating differences in
cost and utilization of renal dialysis services, primarily medications,
among racial and ethnic groups. These commenters asserted that research
demonstrates that race is a predictor of health care cost and believe
that race may explain cost variability in patients more effectively
than other adjusters. These commenters stated that African American
patients require more ESAs, vitamin D therapies, and calcimimetics for
bone and mineral metabolism disorders than other racial and ethnic
groups. Commenters also stated that African Americans have higher rates
of venous catheter use than other groups. Several commenters cited
studies illustrating differences in disease severity and clinical
management for secondary hyperparathyroidism between African Americans
and other races.
Several commenters provided alternative suggestions for race
adjustments including a patient-level ``black vs. non-black''
adjustment or a facility-level race adjustment.
Response: We thank the commenters for their analysis of studies on
race and we will take them into consideration.
Comment: Several commenters noted that case-mix adjusters help
ensure equal access to care, especially for those with higher costs of
care. Several not-for-profit small dialysis organizations (SDOs) did
not believe that facilities would discriminate against African American
patients in the absence of race or ethnicity adjustments by withholding
adequate doses of ESAs.
Response: We agree with the commenters and intend to monitor access
to care under the ESRD PPS and stand poised to take necessary measures
to ensure equal access to care for all ESRD patients regardless of
cost.
Comment: Commenters believed that the payment policy should not
hinder access to care for minority populations. Many commenters
provided their analyses of regional impacts, and compared them to CMS'
impact analysis in the proposed rule.
Commenters were concerned that in instances where higher costs are
associated with a racial group, such as costs for ESAs associated with
hypo-responsive patients, and given that these costs would be bundled
into the ESRD PPS and no longer separately paid, facilities with
patients who are mostly in the high cost racial group will be
negatively impacted.
Many commenters referred to CMS' impact files showing that
facilities serving the African American population have the most
significant reduction in payments. We received divergent comments with
respect to where the most severe impact of not implementing race or
ethnicity adjustments would be realized including those facilities in
various regions of the country according to facility-type, urban and
rural status.
Response: We expect facilities to treat ESRD patient regardless of
their race or ethnicity. To a certain extent, variations in resource
intensity and the associated cost of providing renal dialysis services
to individual patients, are reflected in the patient-level adjustments
within the ESRD PPS model. However, to protect ESRD facilities from
unusually high costs attributed to individuals, we have finalized an
outlier policy described in section II.H. of this final rule. In
instances where costs of providing ESRD services exceed the projected
amount plus a fixed dollar loss amount, we will pay a percentage of the
difference.
Comment: One commenter asserted that scientific studies provide
evidence that for-profit ESRD facilities engaged in gaming behavior
that resulted in higher
[[Page 49111]]
cost to the Medicare ESRD program and compromised patient safety.
Commenters claim that these studies illustrated that ``* * * patients
in for-profit facilities were EPO ``sensitive'' during the period of
time that payments were being made per administration and they became
EPO ``resistent'' when the reimbursement system changed.'' These
commenters believed that a large portion of increased pharmaceutical
costs related to African Americans are based on past over-utilization
of anti-anemia drugs and that factoring out the overuse identified in
scientific studies may result in a smaller cost difference among racial
or ethnic groups.
One commenter asserted that for-profit providers will rely on race
and ethnicity adjustments to circumvent the elimination of incentives
currently in place related to drugs such as Epogen[supreg].
Response: We thank the commenter for identifying these scientific
studies. We plan to consider such information for further analysis of
race or ethnicity adjustments in the future.
Comment: Several commenters questioned whether other factors in the
model may be correlated with the increased cost associated with
treating African American patients. One commenter stated that race and
weight or BMI, may be correlated and points to a study that found a
correlation between African Americans and higher than average weight
and BMI. A commenter also noted that the manufacturer of EPO includes
dosing instructions calling for an increase in dose as the patient's
BMI increases. The commenter believes that one may infer that treating
African American patients may be more costly simply based on their
higher than average BMI and associated greater use of EPO.
Another commenter questioned whether adjusting for co-morbidities
would address the variability between patients of different races. The
commenter stated that there is not enough scientific evidence for CMS
to account for every underlying cause of utilization differences among
races. A commenter who conducted an independent analysis of the
proposed rule asserted that based on their analysis, race is a better
predictor of cost than the co-morbidities and onset of dialysis that
were specified in the proposed rule.
Many commenters supported the concept of patient level adjustments
that are based on a demonstrated variation in resource utilization.
MedPAC reiterated this point in referring to our analysis in the
proposed rule that demonstrated associations between race and ethnicity
and composite rate costs and separately billable payments (74 FR
49966). MedPAC stated that if race and ethnicity predict providers'
resource needs, then these factors should be included as adjusters.
Alternatively, MedPAC suggested that we include clinical factors that
are correlated with race and ethnicity that would make moot the effect
of race and ethnicity on predictors' resource needs.
Response: We believe that a portion, but not all, of the
incrementally higher dialysis costs among African American patients are
accounted for by other patient characteristics in the model, such as
body size and co-morbidities. Despite the remaining effect that race
has on the model, we have decided not to implement race or ethnicity as
case-mix adjustments in this final rule. As described above, we believe
that there are specific underlying factors that contribute to higher
costs among certain racial groups and intend to study this further. We
will continue to assess payments made on behalf of patients under the
ESRD PPS during the transition. The results of this additional study
potentially could be incorporated into future refinements of the ESRD
PPS.
Comment: Several commenters indicated that according to their own
analyses, when the basic case-mix adjusters were implemented under the
basic case-mix adjusted composite payment system, reimbursement for
Chinese, Japanese and other Asians with smaller body size dropped.
These commenters were concerned that a case-mix adjuster for race or
ethnicity would extend this reimbursement inequality to laboratory
tests and medications under the expanded bundle of services in the ESRD
PPS, resulting in lower reimbursement for laboratory tests and
medications on behalf of average Asian patients, than average White or
African American patients. Commenters believed that the basic case-mix
variables have little impact on providers' overall cost of care.
One commenter indicated that Asian patients do not have shorter
dialysis times nor the associated decrease in the ESRD facility's
staffing and salaries. This commenter asserted that Asian patients have
the same needs regarding assessment, dietary education and monitoring,
psychosocial issues, medications and laboratory tests. The commenter
asserted that race and ethnicity adjustments would create a bias
against patients of Asian descent and further decrease reimbursement
for dialysis care that is already below the national average and create
inequalities in reimbursement.
Response: Many of the services described by the commenter have been
taken into account in developing the base rate amount. As described
above, we are not implementing a case-mix adjustment for race or
ethnicity under the ESRD PPS in this final rule. We intend to continue
studying the underlying clinical conditions behind the increased cost
that is linked to certain racial groups. We note that, as described in
section II.F.3. of this final rule, we are finalizing our proposal to
retain the adjusters for body size, BSA and low BMI, that are currently
in place under the basic case-mix adjusted composite payment system in
the final ESRD PPS.
Comment: One commenter was concerned about a decrease in
reimbursement for medications noting that beneficiaries of certain
races may be perceived as potentially costly, which could result in
these patients being denied access to care. Another commenter believed
that individuals who require the most resources may be at increased
risk of not receiving adequate care for conditions such as anemia and
bone and mineral disorders under the ESRD PPS.
Response: We are also concerned about beneficiaries being denied
access to care based on racial or ethnic status and are concerned about
any potential for a provider to make choices to provide treatment
solely based on that provider's perception of an individual's racial or
ethnic status. For this reason, and as discussed previously, we have
decided to continue to study this issue and therefore, we will not
implement race or ethnicity case-mix adjustments under the ESRD PPS at
this time. We have been and will continue to monitor inappropriate care
based upon race and ethnicity.
Comment: Several commenters believe that the inclusion of
calcimimetics and phosphate binders in the ESRD PPS is likely to result
in negative consequences disproportionately for African Americans.
Response: As discussed previously in section II.A.3. of this final
rule, the implementation of the oral-only medications, including
calcimimetics and phosphate binders, into the ESRD PPS will be delayed
until January 1, 2014. Potential impacts of including these drugs under
the ESRD PPS, including those on racial and ethnic groups, will be
addressed through future rulemaking.
Comment: Several commenters asserted that considering each
patient's differing makeup, there may be a built-in disparity in
patient co-insurance
[[Page 49112]]
amounts for relatively the same care plan. Another commenter indicated
that a race case-mix adjuster would increase individuals' co-insurance
obligations regardless of whether the individual required increased
amounts of medications such as ESAs.
Similarly, MedPAC indicated that including payment adjusters for
beneficiaries' demographic and clinical characteristics would result in
some beneficiaries having higher copayments than others. MedPAC intends
to study this issue in the future.
Response: For the various reasons we have discussed above, we have
decided to exclude the race and ethnicity case-mix adjustments from the
ESRD PPS. Similarly, as described in section II.F.3. of this final
rule, we have narrowed the list of patient co-morbidity case-mix
adjusters which will decrease beneficiary co-insurance obligations. In
doing so, we believe that co-insurance payment obligations will be more
uniform among beneficiaries. We are targeting higher payments and the
associated higher beneficiary co-insurance obligations to facilities
that treat patients with verifiable conditions known to be associated
with an increased treatment cost.
Comment: Several commenters indicated that they were unable to
replicate UM-KECC's regression analysis that supported the proposed
case-mix adjustments in the proposed rule. Commenters further noted
that higher costs are not distributed evenly or randomly across the
population but are concentrated in areas where demographics are
dominated by one group. These commenters also found increased payment
by racial group, primarily for medications for African Americans. In
addition the commenters' analyses revealed that whites have higher
costs compared to Native American, Hispanic and Asian patients.
Another commenter indicated that its analysis differed from the
regression analysis set forth in the proposed rule. The commenter's
findings suggested that the case-mix adjustment for African Americans
would be approximately 11 percent and 3 percent for Whites.
Response: The results of the regression based case-mix adjustments
for the race and ethnicity categories are summarized in the proposed
rule (74 FR 49965). We believe that the reason for the differing
results between our proposed rule analysis and that of the commenter
relates to the data that was used. Specifically, we believe that the
commenter's data was more limited in scope to the facility or chain
with which the commenter was associated. As indicated above, we have
decided to study this further and are not implementing race and
ethnicity case-mix adjustments in this final rule.
Comment: One commenter indicated that minorities are
disproportionately affected by chronic kidney disease (CKD) and
believes that the solution lies in addressing the root cause of this
problem by providing stage 4 CKD education, pre-dialysis anemia and
access care and other means rather than race and ethnicity case-mix
adjusters within the ESRD PPS.
Response: We appreciate the commenter's view on this matter and
note that kidney disease patient education provisions authorized under
section 152(b) of the MIPPA were implemented in the CY 2010 Medicare
PFS final rule (74 FR 61894). We intend to evaluate the extent to which
patient participation in the new kidney disease patient education
benefit impacts the cost of dialysis and whether these patient outcomes
would be relevant to the adoption of race or ethnicity adjustments.
Comment: Several commenters believed that the data sources
identified in the proposed rule provided a significant amount of data
to inform decisions regarding race and CMS currently has the means to
implement a case-mix adjuster based on race. Commenters referred to
CMS' efforts that have improved the quality of race data including
beneficiary surveys, annual file updates from NUMIDENT, and work with
the Indian Health Service that helps to identify American Indians and
Alaska Natives. Other commenters were skeptical about the
implementation of race or ethnicity adjustments and suggested that we
conduct further analysis.
Response: As described in the proposed rule, we considered two
distinct sources of race and ethnicity data upon which the race or
ethnicity adjustments could be modeled. We believe this commenter is
referring to the EDB data source. We agree that the accuracy of the EDB
data has improved as a result of our supplementary data file matching
procedures over the last 15 years such as the annual updates, surveys
and coordination with the Indian Health Service (74 FR 49963). Despite
these efforts, the core race and ethnicity data for the Medicare
population that are sent to us by the Social Security Administration
(SSA) on a daily basis from the master beneficiary record (MBR) are not
currently collected in a format that is compliant with OMB standards
for the collection of this data.
To summarize, OMB requires race and ethnicity data to be collected
using a two-question format, with the ethnicity question preceding the
race question. In addition, OMB also requires the following minimum set
of race categories: (1) White, (2) Black or African American, (3)
American Indian or Alaska Native, (4) Asian, and (5) Native Hawaiian or
Other Pacific Islander. However, as described in the proposed rule, the
SSA's collection instrument includes the following categories: (1)
Asian, Asian-American or Pacific Islander; (2) Hispanic; (3) Black (Not
Hispanic); (4) North American Indian or Alaska Native; or (5) White
(Not Hispanic). Conversely, the SSA's collection instrument groups race
and ethnicity into one question with instructions to ``check one
only.'' We are obligated to follow OMB standards.
We note that OMB's standards were last updated in the October 30,
1997 Federal Register Notice: Revisions to the Standards for the
Classification of Federal Data on Race and Ethnicity (62 FR 58782). OMB
also released Provisional Guidance on the Implementation of the 1997
Standards for Federal Data on Race and Ethnicity on December 15, 2000.
That guidance is available at: http://www.whitehouse.gov/omb/assets/information_and_regulatory_affairs/re_guidance2000update.pdf.
As a result, these data with EDB are known to be inaccurate. Only
an improvement of the MBR's race and ethnicity data collection will
provide a long-range solution to the problem. We do not believe that it
would be appropriate to establish race or ethnicity adjustments that
would be based on EDB data until additional improvements are made to
ensure that EDB race and ethnicity data are collected in a manner that
is consistent with OMB standards.
Comment: Several commenters suggested that CMS continue to improve
the data. One commenter suggested methods set forth in various reports
generated from public, private and academic entities. One commenter
suggested that HHS issue guidelines for the uniform collection of data
on race by health care organizations. Another commenter specified that
CMS should consider conducting a mailing to persons with race coded as
``other'' or ``unknown'' and evaluate the effectiveness of using
surnames to identify the race of enrollees.
One commenter believed that we may be able to develop coding
modifiers to further verify the accuracy of the data provided. A
commenter also believed that Medicare Advantage plans should be
required to collect and report to CMS the race of all Medicare members.
The commenter further suggests that the SSA should collect race
information on
[[Page 49113]]
the SS-5 Form and through the enumeration at birth process using 1997
OMB standards for race.
Response: We appreciate the commenters' suggestions for improving
race and ethnicity data. Improving the accuracy of race and ethnicity
data by establishing consistent mechanisms by which race and ethnicity
data are collected are essential for identifying and addressing health
disparities. We are in the process of carrying out provisions of MIPPA
and the Affordable Care Act (ACA) of 2010 that require the Secretary of
Health and Human Services to evaluate race and ethnicity data and
provide recommendations for improving the quality of the data.
We appreciate the commenter's suggestion that Medicare Advantage
plans should collect and report the race of their enrollees. We will
take this suggestion under consideration, but note that Medicare
Advantage plan requirements are beyond the scope of this rule.
Similarly, we clarify that it would be beyond our authority to impose
requirements on the SSA.
Comment: Several commenters believed that race and ethnicity should
not be case-mix adjusted asserting that the current data does not
provide a rigorous statistical basis for reaching a reliable conclusion
on the relevance of this characteristic.
Other commenters believed that the reliability of CMS' existing
data sets (REMIS and EDB) is sufficient for purposes of implementing
race and ethnicity case-mix adjusters. Several commenters referred to a
presentation at the 2009 American Society of Nephrology meeting that
revealed near perfect agreement between the Medicare EDB and REMIS for
three major U.S. race groups (Caucasian, African American and Asian)
suggesting that race could be used as a case-mix adjuster for these
three race groups.
Another commenter believed that ESRD facilities may face
operational difficulties in collecting race and ethnicity data, but
believed that the 4-year phase-in period would allow providers to
operationalize data collection. Other commenters stated that if deemed
appropriate upon reconsideration, CMS should implement race and
ethnicity adjustments. Several commenters stated that race and
ethnicity adjustments would be more administratively manageable to
report and would not require ongoing documentation especially for
facilities that do not have sophisticated systems capabilities to track
multiple patient-level adjusters.
Response: Based on subsequent analyses, we agree with the commenter
that the agreement between data collected on the Form 2728, located in
SIMS, as compared to data in EDB is very high for Blacks and Whites.
However we continue to have concerns that about the level of accuracy
for the remaining racial and ethnic groups. Specifically, analyses
reveal that the agreement for Asians is considered substantial and low
moderate for American Indians or Alaska Natives and Hispanics. As
indicated previously, we intend to continue to evaluate race and
ethnicity data and provide recommendations for improving the quality of
the data and re-evaluate the extent to which it would be appropriate to
adopt race or ethnicity adjustments. As described above, we intend to
set forth our additional analyses and proposal for handling race or
ethnicity adjustments in future rulemaking.
Comment: In comparing the two data analyses conducted by CMS, REMIS
and EDB, one commenter believes that payment amounts would vary by as
much as $21,000 on behalf of individuals whose race is defaulted to
``Other.'' The commenter believes that this difference is unacceptable
considering the volume of Medicare ESRD beneficiaries. Another
commenter stated that the category ``Other'' produced wildly different
results for adjusters in REMIS as compared to other databases.
Response: To the extent that we were to implement race or ethnicity
payment adjustments in the future, we do not believe that it would be
appropriate to provide an adjustment for ``Other'' as this category may
fail to reflect the characteristics of the individual. Rather, we would
rely on OMB's established list of racial categories including: (1)
White, (2) Black or African American, (3) American Indian or Alaska
Native, (4) Asian, and (5) Native Hawaiian or Other Pacific Islander.
As mentioned previously we intend to consider the extent to which OMB's
guidance for allocating individuals who select more than one racial
category into a single category would be appropriate for payment
adjustment purposes.
Comment: One commenter believed that we would need to further
refine the race and ethnicity categories to avoid distortions that
might result from lumping Native Hawaiians (the largest race/ethnic
group) with Asians (one of the smallest race/ethnic groups).
Response: As indicated in the proposed rule (74 FR 49963) the EDB
is populated with race and ethnicity data that come from the SSA. The
SSA's race and ethnicity data are collected on the SS-5 form which
groups Asian, Asian-American or Pacific Islander into a single
category. We agree with the commenter that to the extent we were to
rely on data obtained from the EDB, there would be an increased risk of
distortion. We further believe that it would be essential to base any
proposed race or ethnicity adjustments on data collected from a source
that is supplied by data that is collected in a manner that is
consistent with OMB standards.
Comment: One commenter asserted that Native Hawaiians have the
highest average BMI and increased rates of obesity and diabetes. As
such, the commenter believes that CMS should include a payment adjuster
for ESRD patients in the state of Hawaii to reflect the higher costs
involved in treating patients in that state.
Response: As described in section II.F.3. of this final rule, we
are finalizing the BMI case-mix adjustment under the ESRD PPS. To the
extent Native Hawaiians have higher than average BMI, the ESRD
facilities that provide treatment to these individuals will be
compensated for this factor. In addition, our impact analysis reveals
that the ESRD PPS would adequately reimburse ESRD facilities located in
Hawaii. Specifically, facilities located in Hawaii are expected to see
a 4.2 percent increase in payment. Therefore, consistent with our
decision to not implement race or ethnicity adjustments, we decline to
adopt the commenter's suggestion.
Comment: One commenter suggested that we collect patient-level data
for purposes of determining the extent to which race and ethnicity are
independent predictors of cost associated with the treatment of ESRD.
The commenter believed that implementation should only occur after CMS
has an appropriate mechanism by which to collect the data. Another
commenter questioned the extent to which the race and ethnicity
variables used in the proposed rule were independent in relation to the
other factors being used in the model. The commenter emphasized the
importance of independence of the variables to assure accurate payments
that are reflective of the differences in cost in treating certain
patients. The commenter asserted that the discussion in the proposed
rule pertaining to the findings from the different regression models
suggests that the variables may not be independent. Thus, the model may
result in overpayment to certain patients and underpayment to others.
Response: As we indicated in the proposed rule, the race and
ethnicity case-mix adjustments were based on a regression analysis that
used patient-level separately billable payments and
[[Page 49114]]
facility-level costs (74 FR 49962). Each of the proposed payment
variables, including race and ethnicity were independent variables.
However, we believe that the race and ethnicity adjustment factors may
reflect factors that are not otherwise reflected in the model. We
intend to study this further and include our findings in future
rulemaking.
Comment: One commenter stated that many minority populations are of
lower socioeconomic status and lack sufficient insurance coverage
outside of Medicare. As such, the commenter indicated that race and
ethnicity adjustments are even more important. Another commenter
requested that we consider an adjustment for socioeconomic status to
encourage dialysis providers to establish facilities in disadvantaged
communities. The commenter suggested that a socioeconomic status
adjustment may be a less problematic patient-level adjustment, as
compared to other adjustments in the proposed ESRD PPS. For example,
the commenter asserted that socioeconomic status cannot be gamed and
would not raise privacy issues.
Response: We do not have access to socioeconomic status data within
our Medicare databases. However, because Medicaid eligibility is based
on an individual's income and resources, we consider it to be one
measure of socioeconomic status and one for which we have data. We have
started to explore the extent to which Medicaid status is associated
with increased cost. To date, we have not found that Medicaid status is
associated with increased cost but we intend to study this potential
variable in future proposed rulemaking.
Comment: Several commenters believed that we should delay
implementation of race and ethnicity case-mix adjusters and continue to
investigate the degree to which such adjusters would be appropriate.
Commenters asserted that the goal should be to close health disparity
gaps first and then create an adjuster for any differences that remain.
The commenters stated that to provide an adjustment without fully
understanding the cause of the health disparity would create
inappropriate incentives.
The commenters suggested that we work to improve the adequacy of
data that could be used as the basis of future race or ethnicity
adjustments. For example, commenters asserted that specifying the race
adjuster eligibility criteria would improve data accuracy and decrease
the risk of provider gaming. Commenters requested that we specify the
timeframe for completing refinements that would allow for adjustment.
In the meantime, commenters stated that we should continue to collect
data based on the categories included on the Form 2728 that was
implemented on June 1, 2005 and develop a placeholder that recognizes
the impact of race on the cost of dialysis. Other commenters believed
that we should implement an adjustment for race while working with the
community to develop further appropriate case-mix adjusters in the
future. Another commenter stated that the initial adjusters could be
periodically revised as additional, proven sources of data become
available.
Response: As described in the most recent IOM report in December
2009 (Standardization for Health Care Quality Improvement, Institute of
Medicine, 2009), Kilbourne and colleagues identify three key phases in
addressing disparities: Detecting, understanding and reducing. We are
currently in the detecting phase of accurately identifying vulnerable
racial and ethnic groups and developing valid measures. Part of this
phase involves implementation of a reliable tool for collecting racial
and ethnic data that will ensure the linking of data to quality
measures. Once we have a more complete understanding of the
determinants of health disparities, we will be positioned to consider
the extent to which a payment intervention is appropriate. We do not
believe that it would be appropriate to implement payment intervention
until the earlier phases of detecting and understanding racial and
ethnic health disparities have been completed.
As indicated previously, section 185 of MIPPA requires further
study to identifying and addressing healthcare disparities in the
Medicare program including those related to race or ethnicity. In
addition, section 4302 of ACA requires ongoing analysis of race and
ethnicity data to detect and monitor for trends in health disparities.
In addition to these analyses, we intend to issue a Report to Congress
recommending improvements to identifying health care disparities.
Comment: Several commenters believed that we should continue to
explore race and ethnicity case-mix adjustments and develop a
methodology to collect racial and ethnic data that is reliable for
reimbursement purposes. MedPAC suggested that CMS use current OMB
categories to collect race and ethnicity data. This data could be
collected via Form 2728. Other commenters believed that Form 2728 has
sufficiently provided the race and ethnicity data for USRDS utilization
analyses for several years.
Other commenters were concerned about the potential for providers
to misidentify racial and ethnic status to qualify for greater
payments. The commenter suggested that we consider expanding racial and
ethnic categories to minimize gaming and account for patients who
associate with more than one racial category. Another commenter
believed that instructions to patients to identify themselves with only
one supplied race and ethnicity category on the form would mitigate
data quality issues. Another commenter suggested that patients who
elect to not select race or ethnicity categories should default to
other or unknown and thus, become ineligible for the race or ethnicity
adjustments.
Other commenters indicated that many facilities rely on clerical
personnel to complete the Form 2728. The commenter was concerned that
this practice may result in incorrect or missing data which would have
an impact on reimbursement.
Response: To the extent we were to implement race or ethnicity
adjustments in the future, we would rely on a collection instrument
that is consistent with OMB standards. However, as discussed
previously, we are not including a race or ethnicity adjustment in the
ESRD PPS at this time. With the exception of the self-identification
criteria, race and ethnicity data collected on the Form 2728 after May
31, 2005 is consistent with the OMB collection standards. As mentioned
previously in section II.C. of this final rule, the final ESRD PPS
model is based on 2006-2008 data. Therefore, race and ethnicity data
collected on the Form 2728 during the timeframe and reflected in SIMS
is consistent with OMB's race categorizations. We note that ESRD
facility costs and payments on behalf of patients during 2006-2008 that
have been incorporated into the ESRD PPS model would not have been
limited to incident patients. That is to say, costs and payments on
behalf of patients between 2006-2008 included patients for whom the
Form 2728 was completed prior to June 1, 2005. As indicated in the
proposed rule, the Form 2728 that was in use prior to June 1, 2005 did
not reflect the current OMB standards for collecting racial and ethnic
information (74 FR 49963).
With respect to addressing individuals who identify with more than
one racial category, we note that OMB standards do not permit guiding
an individual to select only one race. However, to account for
individuals who select more than one racial
[[Page 49115]]
category, we believe that it may be possible to allocate these
individuals into one race category. OMB has issued guidance to agencies
for the allocation of multiple race responses for use in civil rights
monitoring and enforcement. The March 9, 2000 OMB bulletin No. 00-02 is
available on OMB's Web site at: http://www.whitehouse.gov/omb/BULLETINS_b00-02/?print=1.
While we believe that this guidance may also be appropriate for
purposes of establishing individuals' most appropriate payment
adjustment factor related to racial designation, we intend to consider
this issue further and present our analyses in subsequent rulemaking
and solicitation of public comments.
In response to the commenters concern that data on the Form 2728
may be incorrect or missing, we believe that for the majority of
patients the information is correct. We note that block 49 includes a
physician attestation that the information on the form is correct. For
this reason, we expect that information collected on the form to be
correct and reliable.
In summary, we believe that the use of data collected from the Form
2728 may be appropriate both for purposes of establishing race or
ethnicity adjustments and making payment adjustments under the ESRD PPS
in the future. However, to ensure consistency with OMB's standards for
the collection of race and ethnicity data, we intend to modify the
administration instructions for completing the Form 2728 to specify
that the information on race and ethnicity must be self reported. We
believe that this modification will further improve the accuracy of the
race and ethnicity data collected on the Form 2728. In addition, we
believe that the physician attestation would verify that the patient
had self-reported the racial and ethnic status. At that time we could
also consider the extent to which it would be appropriate to expand the
race categories.
For the various reasons we discussed above, and after considering
the public comments, we are not finalizing race or ethnicity case-mix
adjustments in this final rule. We intend to continue efforts in
improving Medicare program data on race and ethnicity. As described
above, we intend to modify the Form 2728 to ensure consistency with
OMB's standards for data collection. We also intend to complete the
studies required under MIPPA and ACA that will assist us in identifying
and monitoring health disparities on the basis of race or ethnicity.
Upon completion of these studies, further analysis of studies
referenced by commenters, and using updated data, we intend to re-
evaluate the extent to which it would be appropriate to include
patient-level case-mix adjustments for race or ethnicity under the ESRD
PPS. We will set forth a description of our further analysis and the
basis of any proposed race or ethnicity adjustments in rulemaking to
the extent that it is warranted.
h. Modality
Section 1881(b)(14)(D)(iv) of the Act, as added by section 153(b)
of MIPPA, gives the Secretary the authority to establish an ESRD PPS,
which may include payment adjustments as the Secretary determines
appropriate. Therefore, the Act gives the Secretary the authority to
develop an ESRD PPS under which payment rates are based on dialysis
modality.
In the proposed rule, we presented data showing that per treatment
composite rate PD costs were approximately 11 percent less than HD
costs ($151.15 vs. $168.99) (74 FR 49967). Separately billable PD per
treatment payments were about 60 percent less than those for HD
payments. (See tables at 74 FR 49967.) We also cited data from the
United States Renal Data System (USRDS) (74 FR 49967) showing that the
average annual cost for PD patients ($53,327) was substantially less
than that for HD patients ($71,889) (74 FR 49967).
Despite these differences in cost between HD and PD, we did not
propose to develop an ESRD PPS which uses type of dialysis modality as
a payment variable. Using modality as a payment variable would result
in increased predictive power in the resulting regression equations.
Because composite rate costs and separately billable payments are lower
for PD, the use of a modality payment variable would result in
substantially lower payments for PD patients. The payment rates for HD
patients would be slightly higher, because of the greater volume of HD
patients, and the exclusion of the smaller proportion of PD patients
from the average payment amount that would apply to HD patients. We
stated that we believed the substantially lower payments for PD
patients that would result if modality were used as a payment adjuster
in the ESRD PPS would discourage the increased use of PD for patients
able to use that modality (74 FR 49967). Because we want to encourage
home dialysis, in which PD is currently the prevailing mode of
treatment, we proposed an ESRD PPS which did not rely on separate
payment rates based on modality (74 FR 49967). We stated that by
establishing prospective payment rates that are higher for PD patients
than they otherwise would be if separate payments were established
based on modality, we believed home dialysis would be encouraged for
patients able to use PD. We invited comments on this approach.
The comments we received and our responses are as follows:
Comment: Several commenters expressed gratitude that CMS had not
proposed an ESRD PPS in which differential payments were made based on
modality. By using the same base rate for HD and PD, the commenters
maintained that this would encourage PD. A few commenters cited their
own personal experiences on both HD and PD, pointing out the benefits
of home PD, and how their quality of life, certain clinical outcome
measures, and sense of well being improved after switching to PD. These
commenters stated that more should be done to encourage PD.
Response: We agree with the commenters, and we are finalizing the
application of the same base rate payment amount for both HD and PD
patients. We are hopeful that this will encourage the use of home PD
for those patients able to benefit from that modality.
Comment: One commenter stated that in countries such as Canada and
Australia, payers incentivize PD when patients can benefit from
dialysis at home. The commenter noted that currently there is no
incentive to make PD more available in the U.S., but supported one
bundled payment system for both HD and PD.
Response: We believe that by providing one basic payment rate under
the ESRD PPS for both PD and HD, facilities will have a powerful
financial incentive to encourage the use of home PD among dialysis
patients where feasible. Accordingly, we are finalizing the application
of the same base rate payment amount under the ESRD PP for both HD and
PD patients in this final rule. We will be monitoring the degree to
which home dialysis increases in the future under the ESRD PPS.
In the proposed rule, we pointed out that the case-mix adjustments
proposed for pediatric patients (74 FR 49981), distinguished between HD
and PD as a payment variable. The small number of pediatric dialysis
patients, the limited ability of the two-equation regression model to
accurately predict the separately billable MAP for pediatric patients,
and the far greater prevalence of PD among pediatric patients, led us
to examine alternative approaches in devising case-mix adjustments for
those patients. The pediatric payment
[[Page 49116]]
adjustments described in the proposed rule, used modality, in part, to
determine the case-mix adjusters for pediatric dialysis patients.
For responses to the comments on the use of modality as a payment
variable in connection with the proposed pediatric payment model, see
section II.G. of this final rule.
4. Proposed Facility-Level Adjustments
a. Wage Index
Section 1881(b)(14)(D)(iv)(II) of the Act, as added by section
153(b) of MIPPA, specifies that the ESRD PPS may include such other
payment adjustments as the Secretary determines appropriate, such as a
payment adjustment by a geographic index, such as the index referred to
under the existing basic case-mix adjusted composite payment system.
In the current basic case-mix adjusted composite payment system, we
use an index based on hospital wage and employment data from Medicare
cost reports. In the CY 2006 PFS final rule with comment period (70 FR
70167), we announced our adoption of the Office of Management and
Budget's (OMB's) CBSA-based geographic area designations to develop
revised urban/rural definitions and corresponding wage index values for
purposes of calculating ESRD composite rates under the basic case-mix
adjusted composite payment system. OMB's CBSA-based geographic area
designations are described in OMB Bulletin 03-04, originally issued
June 6, 2003, and is available online at: http://www.whitehouse.gov/omb/bulletins/b03-04.html. In addition, OMB has published subsequent
bulletins regarding CBSA changes, including changes in CBSA numbers and
titles. We stated that this and all subsequent ESRD rules and notices
are considered to incorporate the CBSA changes published in the most
recent OMB bulletin that applies to the hospital wage index (73 FR
69758). The OMB bulletins may be accessed online at: http://www.whitehouse.gov/omb/bulletins/index.html.
We also stated in the proposed rule that we intended to update the
current ESRD wage index values annually (70 FR 70167). The ESRD wage
index values used in the basic case-mix adjusted composite payment
system are calculated without regard to geographic reclassifications
authorized under sections 1886(d)(8) and (d)(10) of the Act and utilize
pre-floor hospital data that are unadjusted for occupational mix (71 FR
69685 and 73 FR 69758). Also as stated in proposed rule, we applied the
current ESRD wage index to a 53.711 labor-related share of the
composite rate. As we indicated, this labor-related share was developed
from the labor-related components of the ESRD composite rate market
basket (70 FR 70168). The ESRD wage index in the current basic case-mix
adjusted composite payment system applies a wage index budget
neutrality factor to ensure that the ESRD wage index is made in a
budget neutral manner (70 FR 70170). As we previously noted, in our
current basic case-mix adjusted composite payment system, we
incorporate the wage index budget neutrality factor into the wage
index. We compute a wage index factor and adjust it so that wage index
budget neutrality can be achieved by the labor share component only.
In the ESRD PPS proposed rule (74 FR 49968), we proposed to use the
same method and source of wage index values as we have been using for
the basic case-mix adjusted composite payment system. Specifically, we
proposed that the ESRD wage index values to be used in the proposed
ESRD PPS, would be calculated without regard to geographic
reclassifications authorized under sections 1886(d)(8) and (d)(10) of
the Act, and would utilize pre-floor hospital data that are unadjusted
for occupational mix (74 FR 49968). We also proposed to use the OMB's
CBSA-based geographic area designations to define urban/rural areas and
corresponding wage index values. Consistent with those definitions, we
proposed to define urban and rural areas at Sec. 413.231(b) (74 FR
50024).
Under the current basic case-mix adjusted composite payment system,
we apply a floor as a substitute wage index for areas with very low
wage index values. However, we have gradually reduced the ESRD wage
index floor from 0.90 in CY 2005, to 0.85 in CY 2006, 0.80 in CY 2007,
0.75 in CY 2008, 0.70 in CY 2009, and 0.65 in CY 2010 (74 FR 33637 and
33638). We also stated that a gradual reduction was needed to ensure
patient access in areas that have low wage index values, and that we
would continue to reassess the need for a wage index floor in future
years.
In the ESRD PPS proposed rule, we proposed not to adopt a wage
index floor (74 FR 49968). We noted that ESRD facilities affected by
the floor may opt to go through the transition to the ESRD PPS, where
the portion of their payment that is based on the ESRD PPS would be
gradually increased from 25 percent of their payments in 2011 to 100
percent of their payments in 2014. We intended to continue to gradually
reduce the ESRD wage index floor for the portion of the payment that is
based on the current basic case-mix adjusted composite payment system
during the transition. Applying a gradual reduction only to the floor
that applies to the existing basic case-mix adjusted composite payment
system ESRD wage index was intended to accelerate the decline in the
floor so that ESRD facilities would be less dependent on the floor. At
the end of the transition, we indicated that we would apply their
actual wage index values (74 FR 49968).
In CY 2006, while adopting the CBSA designations for the basic
case-mix adjusted payment system, we identified a small number of ESRD
facilities in both urban and rural areas where there are no hospital
data from which to calculate ESRD wage index values. Since there are
ESRD facilities in these areas, we developed policies for each of these
areas. The areas with ESRD facilities that have no hospital data are
rural Massachusetts, rural Puerto Rico, and Hinesville, GA (CBSA
25980). In the ESRD PPS proposed rule (74 FR 49969), we proposed to
continue with our current policies for rural Massachusetts and
Hinesville, Georgia (74 FR 49969). For rural Massachusetts, we proposed
to adopt the methodology originally adopted, for CY 2008 PFS final
rule, in which we compute the entire rural area consists of Dukes and
Nantucket Counties. We determined that the borders of Dukes and
Nantucket Counties are contiguous with CBSA 12700, Barnstable Town, MA,
and CBSA 39300, Providence-New Bedford-Fall River, RI for establishing
a wage index value. For Hinesville, GA (CBSA 25980), we proposed to
continue to use the methodology, that is, we computed the average wage
index value of all urban areas within the State of Georgia, that was
adopted in the CY 2007 PFS final rule.
Since the publication of the ESRD PPS proposed rule, we have
determined that there is an additional urban area, Anderson, South
Carolina (SC) (CBSA 11340), with no hospital data. For this urban area,
Anderson, SC, we are using the same methodology we have used for the
other urban area with no hospital data, that is, Hinesville-Fort
Stewart, GA (CBSA 25980). Under the methodology used for that area, we
computed the average of all urban areas within the State of South
Carolina. We continue to believe that this method of establishing a
wage index value for areas with no hospital data is the most
appropriate method.
We did not receive comments on the proposed continuation of our
current policies for rural Massachusetts and Hinesville, Georgia.
Therefore, in this
[[Page 49117]]
final rule we are finalizing the same methodology we have used for
areas with no hospital data in the past, that is, compute the average
wage index value of all urban areas within the state and use that value
as the wage index.
In the ESRD PPS proposed rule (74 FR 49969), we proposed to
eliminate the wage index floor under the ESRD PPS and to use the value
for rural Puerto Rico (0.4047) that has been used by other payment
systems for rural areas that do not use a wage index floor. In
particular, we have previously applied the ESRD wage index floor for
rural Puerto Rico, because all areas in Puerto Rico that have a wage
index were eligible for the ESRD wage index for the proposed ESRD PPS
(74 FR 49969).
We also proposed to use the labor-related share as measured by the
proposed ESRD bundled market basket, which was 38.160 percent in the
proposed rule (74 FR 49969, 50003). Our proposed adjustment for wages
was set forth in Sec. 413.231 (74 FR 50024).
For the proposed rule (74 FR 49969), we used the most current final
wage index available at that time to complete the analysis. As we
indicated, we anticipated that the proposed CY 2011 ESRD PPS wage index
data for purposes of the ESRD PPS (that would not include any wage
index budget-neutrality adjustment) along with the CY 2011 proposed
update to the existing basic case-mix adjusted composite payment
system, would be published in the CY 2011 PFS proposed rule (75 FR
40167 through 40168). We also proposed to publish the final CY 2011
ESRD PPS wage index along with the CY 2011 final rule update to the
existing basic case-mix adjusted composite payment system in the CY
2011 Physician Fee Schedule final rule, which we expect would be
published in November of 2010 (74 FR 49969).
The comments we received on the wage index proposal and our
responses are set forth below.
Comment: One commenter indicated that the CMS' use of the composite
rate separately billable wage index listed on the facility level impact
file is inaccurate and questioned the accuracy of the spreadsheet used
in the proposed rule. Also, the commenter believed that the labor-
related share of the proposed bundle would be significantly lower than
the share under the current rate.
Response: The labor-related share based on the ESRD PPS bundled
market basket ESRDB is lower than the labor-related share under the
basic case-mix adjusted composite payment system. This is due to the
fact that the labor-related share for the current system does not
include the labor-related share component associated with separately
billable items and services. The labor-related share in the proposed
ESRDB market basket was 38.160 percent (74 FR 50003). This share
represents the proportion of an ESRD facility's payment that is
adjusted for geographic wage differences. For this final rule, in
response to public comment, we made several methodological changes to
the ESRDB market basket described in section II.J. of this final rule.
The revised labor-related share is 41.37 percent.
Comment: Many of the commenters agreed that for some rural
facilities, additional staff must be recruited from nearby large
cities, and travel costs and wage premiums are paid to encourage
employees to endure the long commutes.
Response: The wage data used to construct the wage index are
updated annually, based on the most current data available and are
based on OMB's definitions when applying the rural definitions and
corresponding wage index values. As a result, the wage index reflects
increased efforts by rural ESRD facilities.
Comment: Commenters believed that the wage index floor should be
maintained for all rural geographic locations to prevent access
barriers and resulting rural disparities. The commenters also expressed
concern that the proposed removal of this floor would aggravate
disparities in care and would impair access to care at rural
facilities.
One commenter believed that the elimination of the wage index floor
will result in a decline in a per treatment cost and questioned the
adequacy of the methodology used to develop the wage index. Commenters
from Puerto Rico strongly urged CMS to retract its proposal to
eliminate the wage index floor applicable to dialysis services rendered
in Puerto Rico in order to avoid endangering timely and accurate renal
dialysis services to their patients. The commenters also believed that
the wage index values are flawed because of the use of 4-year-old data
to calculate current values in all areas of Puerto Rico.
Response: As stated above, the wage data used to construct the wage
index are updated annually, based on the most current data available
and are based on OMB's definitions when applying the rural definitions
and corresponding wage index values. Since publication of the ESRD PPS
proposed rule, we have proposed a CY 2011 wage index floor of 0.60 for
the case-mix portion of the blended payment for purposes of the
transition in the CY 2011 PFS proposed rule (75 FR 40167).
The only CBSAs that would be affected by the proposal to eliminate
the wage index floor value for the ESRD PPS wage index are located in
Puerto Rico. In Puerto Rico, the majority of ESRD facilities' wage
indices are significantly below the current floor. As a result of
public comments, we believe maintaining the wage index floor under the
ESRD PPS will benefit ESRD facilities that have low wage index values.
Therefore, for this final rule, we will finalize our proposal
regarding the use of the OMB's CBSA-based geographic area designations
to define urban/rural areas and corresponding wage index values as
proposed. Also, although we proposed to eliminate the wage index floor
under the ESRD PPS, we will continue to apply the wage index floor
during the transition to the PPS portion of the ESRD PPS payment in
2011. We note that eliminating the wage index floor over the course of
the transition, provides an additional cushion to those facilities
going through the transition, because they will continue to receive the
benefit of the floor as they adjust to payments under the ESRD PPS.
Although a commenter suggested that we apply the floor to all rural
area values, it is important to note that no rural ESRD facilities
outside Puerto Rico would benefit from the current floor because their
wage indexes exceed 0.60.
As we indicated in the proposed rule (74 FR 49969), we issued the
proposed CY 2011 wage index for the composite rate portion of the
blended payment in the CY 2011 PFS proposed rule (75 FR 40167) and will
respond to public comments and finalize the CY 2011 ESRD PPS wage index
in the CY 2011 PFS final rule later this year. Lastly, we are
finalizing 413.231 (Adjustment for wages), however, we are revising the
provision to indicate the wage index is applied to the labor-related
share of the base rate.
b. Low-Volume Adjustment
Section 1881(b)(14)(D)(iii) of the Act requires a payment
adjustment that ``reflects the extent to which costs incurred by low-
volume facilities (as defined by the Secretary) in furnishing renal
dialysis services exceed the costs incurred by other facilities in
furnishing such services, and for payment for renal dialysis services
furnished on or after January 1, 2011, and before January 1, 2014, such
payment adjustment shall not be less than 10 percent.''
[[Page 49118]]
i. Defining a Low-Volume Facility
As indicated above, section 1881(b)(14)(D)(iii) of the Act
authorizes the Secretary to define ``low-volume facilities'' for
purposes of a payment adjustment in the proposed ESRD PPS. As discussed
in the proposed rule (74 FR 49969), we believed the low-volume
adjustment should encourage small ESRD facilities to continue to
provide access to care to an ESRD patient population where providing
that care would otherwise be problematic. For the proposed rule, UM-
KECC performed analyses using data from CMS Medicare cost reports,
SIMS, and OSCAR for years 2004-2006 to assist us in determining what
the ESRD facility-level characteristics are that best demonstrate a
low-volume facility (74 FR 49969). In the proposed rule, we described
the methodology used to define a low-volume facility by setting the
parameters for ESRD facility size. We explained that the term `year'
would be established by the ESRD facility's final-settled cost report,
where the final-settled cost report reports costs for 12 consecutive
months (74 FR 49970).
For purposes of exploring possible definitions for low-volume
facilities, we began by developing a measure for facility size. Under
the initial categorization, an ESRD facility that furnished less than
5,000 treatments per year was considered small, an ESRD facility that
furnished 5,000 to 10,000 treatments per year was considered medium,
and an ESRD facility that furnished 10,000 treatments per year or more
was considered large. We then categorized all ESRD facilities into four
ESRD facility ownership types: (1) Independent, (2) regional chains,
(3) Large Dialysis Organizations (LDOs), and (4) unknown ownership
type. Of the hospital-based ESRD facilities, we found that 75.5 percent
were independent, 10.7 percent were members of a regional chain/other
category, 0.7 percent were members of an LDO, and 13.2 percent had
unknown ownership status.
The comparison between ESRD facility size and ownership type
indicated that ownership varied with ESRD facility size and smaller
ESRD facilities, especially those with less than 3,000 treatments, were
relatively more likely to be independent than larger ESRD facilities.
The comparison also indicated that while smaller ESRD facilities were
less likely to be members of an LDO than larger ESRD facilities, a
relatively large fraction of smaller ESRD facilities were members of an
LDO. As a result of the comparison between ESRD facility size and ESRD
facility ownership type, we chose to use ESRD facility ownership type
as a variable in a two-equation regression analysis to test whether
cost varied by ESRD facility ownership type within an ESRD facility
size category (74 FR 49970).
We also looked at the distribution of ESRD facility size across
ESRD facilities that have an urban or rural status. We found that
nearly half of the small ESRD facilities were rural and larger ESRD
facilities were less likely to be rural. The comparison also indicated
that because most ESRD facilities were urban, even with the lower
percentage of small ESRD facilities in urban areas, more urban ESRD
facilities than rural ESRD facilities would benefit from a low-volume
payment adjustment. As a result of the comparison between ESRD facility
size and urban/rural status, we used urban/rural status as a variable
in a two-equation regression analysis to test whether cost varies by
urban/rural status within an ESRD facility size category (74 FR 49971).
In the proposed rule, we discussed the methodology used to identify
the factors that could be targeted to ensure that we had the right
population of ESRD facilities that were low-volume as well as the
methodology used to identify the treatment threshold (74 FR 49971
through 49975). We found that the cost multipliers for small ESRD
facilities were greater than 1.1 for any of the definitions for small
ESRD facility size with respect to number of treatments per year and
that the cost multipliers tended to decline for successively higher
cutoffs for defining small ESRD facilities. We also noted that if a
payment multiplier fully reflected the cost multiplier, there would be
a strong disincentive for ESRD facilities to increase volume above the
cutoff. However, to the extent that a payment multiplier was smaller
than the cost multiplier, this disincentive was somewhat diminished (74
FR 49974).
We explained that since the analyses included data that spanned a
3-year period (2004-2006), we further evaluated the three ESRD facility
size categories that we applied in the previous regression analysis,
that is, less than 2,000 treatments, less than 3,000 treatments, and
less than 4,000 treatments per year. We were interested to see the
number of small ESRD facilities that were able to maintain their ESRD
facility size status each year of the 3-year period. We proposed to use
a threshold of ESRD facilities that provide less than 3,000 treatments
per year across the 3-year period because it struck a balance between
establishing an increment in payment that reflected the substantially
higher treatment costs incurred by low-volume facilities (an increment
that tended to decrease as the low-volume threshold was raised) but
still applied to a sufficiently large number of ESRD facilities to have
an impact (74 FR 49975).
In the proposed rule, we explained that in accordance with the
statute, we defined low-volume facilities in Sec. 413.232, as an ESRD
facility that meets the following criteria: (1) Furnished less than
3,000 treatments in each of the 3 years preceding the payment year; and
(2) has not opened, closed, or received a new provider number due to a
change in ownership during the 3 years preceding the payment year (74
FR 49975).
In the proposed rule, we expressed our awareness that there are
Medicare-certified ESRD facilities that solely furnished support
services and training for home hemodialysis and home peritoneal
dialysis to ESRD beneficiaries. We expressed our concern that it may
not be appropriate to extend low-volume eligibility to these types of
facilities (74 FR 49975).
In addition, in the proposed rule, we expressed our concerns about
potential misuse of the proposed low-volume adjustment. Specifically,
our concern was that the low-volume adjustment could incentivize
dialysis companies to establish small ESRD facilities in close
geographic proximity to other ESRD facilities, thereby leading to
unnecessary inefficiencies, in order to obtain the low-volume
adjustment. To address our concern, we proposed criteria for ESRD
facilities to be eligible for the low-volume adjustment. We proposed
that for the purposes of determining the number of treatments under the
proposed definition of a low-volume facility, the number of treatments
considered furnished by the ESRD facility would be equal to the
aggregate number of treatments actually furnished by the ESRD facility
and the number of treatments furnished by other ESRD facilities that
are both: (i) Under common ownership with; and (ii) 25 road miles or
less from the ESRD facility in question. However, we proposed to
grandfather those commonly owned ESRD facilities that had been in
existence and certified for Medicare participation on or before
December 31, 2010, thereby exempting them from the geographic proximity
restriction (74 FR 49975).
In the proposed rule, we discussed that there would need to be a
method in place so that existing ESRD facilities that met the
definition of a low-volume facility could be identified. We proposed
that ESRD facilities could
[[Page 49119]]
attest to the FI/MAC that they qualify as a low-volume facility (74 FR
49975 through 49976).
We solicited comment on the change of ownership element of the
proposed definition of a low-volume facility. We did not receive any
comments and, therefore, we are finalizing the change of ownership
element of the low-volume definition at Sec. 413.232.
We did not receive comments on the proposed grandfathering
provision nor the ESRD facilities attestation of low-volume status
requirement. Therefore, in this final rule, we are finalizing those
provisions as proposed. We received a few comments on the
appropriateness of applying the low-volume adjustment to training ESRD
facilities as set forth below.
Comment: One commenter was opposed to applying the low-volume
adjustment to ESRD facilities that solely furnish support services and
training to home patients. The commenter believed that because these
facilities do not treat patients, they should not be eligible for the
low-volume adjustment. Two commenters believed that it is appropriate
to apply the low-volume adjustment to eligible ESRD facilities that
solely furnish support services and training to home patients. One
commenter explained that allowing these types of facilities to be
eligible for the low-volume adjustment is consistent with encouraging
home dialysis options. Another commenter provided a detailed
explanation as to why small facilities that only furnish PD should
qualify for the adjustment. This commenter also asked for clarification
as to how CMS would identify facilities that solely furnish support
services and training and if these facilities would be excluded from
the analysis. One commenter expressed concern about CMS' treatment of
home dialysis services in the low-volume policy indicating that CMS
does not have the ability to properly identify training programs.
Response: We maintain a database of all ESRD facilities and their
respective Medicare certifications. We are able to use this database to
develop reports and to analyze and monitor the different facility
characteristics and trends. The cost reports used in determining low-
volume ESRD facilities for the analyses of costs for composite rate and
separately billable services identifies both home and in-facility
dialysis treatments, including training treatments.
With regard to the comments concerning the facilities that solely
furnish support services and training, in our analysis we controlled
for the percentage of training treatments in the facility so that the
adjustment for low-volume facilities would be independent of costs
associated with home dialysis training. Therefore, we are including
ESRD facilities that solely furnish support services and training as
being eligible for the low-volume adjustment. We believe that including
this type of ESRD facility as being eligible for the low-volume
adjustment could encourage ESRD facilities in rural areas, to provide
home dialysis training. We will monitor the extent to which facilities
that solely furnish home dialysis training support receive the low-
volume payment adjustment and whether the number of these facilities
increases after implementation of the ESRD PPS.
We received many comments on the possible unintended effects of
establishing a treatment threshold and other comments on the definition
of a low-volume ESRD facility as set forth below.
Comment: Many commenters expressed concern regarding potential
disincentives low-volume facilities could have regarding patient care.
The commenters suggested that CMS consider strategies for monitoring
the low-volume adjustment in addition to those stated in the proposed
rule. The commenters claimed that facilities will not offer additional
treatments if it means that those additional treatments will render the
facilities ineligible for the low-volume adjustment. The commenters
also asserted that dialysis chains will establish facilities in a
market where another facility is sufficiently servicing a location just
to be able to take advantage of the adjustment. The commenter stated
that a dialysis chain could create an artificial low-volume facility
that purposely operates below its efficiency level in order to receive
the adjustment. The commenters recommended that CMS enact controls and
measures to prevent gaming of the low-volume adjustment and to ensure
that those facilities which serve disadvantaged areas are correctly
identified. One commenter suggested that CMS only apply the adjustment
to facilities that are not within 30 road miles of another facility.
Response: We share the commenter's concerns and agree that there is
potential for gaming as a result of the low-volume adjustment. At this
time, we are not finalizing any additional criteria or requirements. We
believe that the geographic proximity restriction, as described in the
ESRD PPS proposed rule (74 FR 49975), produces the same effect as the
commenter's suggestion of not allowing ESRD facilities that are within
30 road miles of another ESRD facility to be eligible for the low-
volume adjustment. We believe that the commenter's suggestion is too
restrictive in that there could be independent small ESRD facilities
that are servicing areas efficiently even if there are within 30 road
miles of another independent ESRD facility. We will monitor payments
under the ESRD PPS and the location of new facilities to determine if
changes in the criteria that qualify ESRD facilities as being low-
volume are warranted.
Comment: Many commenters supported the low-volume adjustment
indicating that the adjustment would encourage small ESRD facilities to
continue to provide access in areas where the patient base is low.
Response: We thank the commenters for their support.
Comment: A couple of commenters questioned the rationale we used in
determining the treatment threshold. Specifically, the commenters
stated that CMS used an arbitrary selection of 3,000 treatments, which
ignores the real and measurable higher costs per treatment incurred by
low-volume facilities performing 4,000 or 5,000 treatments per year. A
few commenters requested that CMS provide a detailed explanation of its
methodology for selecting facilities as being eligible for the low-
volume adjustment and verify that facilities identified as low-volume
meet the criteria of providing less than 3,000 treatments.
A few commenters expressed concern that the proposed treatment
threshold of less than 3,000 treatments would capture too low of a
population of small facilities leaving out many facilities that they
believe should receive the adjustment. Several commenters expressed
concern that most pediatric facilities may not qualify based on the
less than 3,000 treatment threshold. The commenters suggested that CMS
raise the treatment threshold portion of the low-volume definition to
less than 4,000 treatments.
Response: We disagree with the comment that our proposal to
establish a threshold of less than 3,000 treatments was arbitrary. As
discussed in the proposed rule, we began the development of the low-
volume adjustment by analyzing facility size. We determined facility
size by looking at the total number of treatments that a facility
furnished annually because that was the basis for which they receive
payment. We used the total treatment counts from cost reports for 2004,
2005, and 2006. We carefully assessed treatment counts beginning at
less than 1,000 and moved upward to more than 10,000. We performed
comparisons of
[[Page 49120]]
different facility characteristics against the different treatment
thresholds and studied the trends. We found that in each comparison,
when the number of treatments increased, the cost that facilities
incurred for composite rate services decreased (74 FR 49970).
For this final rule, we repeated the analyses using cost reports
for 2006, 2007, and 2008. We also used SIMS data for total treatments
for calendar year 2008 to see the change in the percentage of certain
ESRD facility types that would be eligible with a less than 4,000
treatment threshold that may not have been eligible with a less than
3,000 treatment threshold. As displayed in Tables 23 and 24, we
compared characteristics of facilities eligible for a low-volume
adjustment that are based on a 3,000 treatment threshold for
determining low-volume status to characteristics of facilities eligible
for the low-volume adjustment that are based on a 4,000 treatment
threshold. We found the percent of Medicare HD-equivalent dialysis
treatments that would qualify for the low-volume adjustment increased
from 0.7 percent using a 3,000 treatment threshold to 1.9 percent using
a 4,000 treatment threshold. The tables also show that when compared to
larger facilities, facilities that would be eligible for the low-volume
adjustment are more likely to be located in a rural area, less likely
to be part of an LDO, more likely to be hospital based, likely to have
a somewhat higher percentage of Medicare patients, more likely to be a
pediatric facility, more likely to have previously received an isolated
essential facilities (IEF) composite rate payment exception, and more
likely to concentrate on home dialysis.
Based on the commenter's arguments and our subsequent analysis
regarding the treatment threshold, in this final rule, we are
finalizing a threshold of less than 4,000 treatments and we are
revising the regulation at Sec. 413.232 to reflect this threshold.
BILLING CODE P
[[Page 49121]]
[GRAPHIC] [TIFF OMITTED] TR12AU10.027
BILLING CODE C
[[Page 49122]]
Comment: One commenter recommended that CMS consider a stratified
differential payment to all ESRD facilities based on treatment
thresholds. The commenter further explained that under a differential
payment method, facilities would receive the largest adjusted payment
for the first 1,000 treatments and then as the number of treatments
increases, the payment amount would decrease.
Response: We thank the commenter for their suggestion. We will
monitor the number of facilities that are low-volume throughout the
initial years of the ESRD PPS and analyze their behaviors to decide if
we should develop a different methodology in determining low-volume
eligibility in future refinements.
Comment: We received a few comments objecting to our proposal to
use total annual treatments as a criterion in the low-volume
definition. The commenters explained that there are too many variables
associated with using treatments, such as, patients hospitalized,
patients who travel, patient-visitors, and missed treatments. The
commenters stated that a stable method of determining the volume of a
facility is by patient census or by counting the number of chairs
available for furnishing treatments (stations) in the facility.
Response: We disagree that a stable method of determining the
volume of an ESRD facility would be by patient census or stations in
the facility. In the proposed rule, we explained that in the initial
analysis, an ESRD facility size was defined by the number of treatments
(74 FR 49970). Payments to ESRD facilities are paid on a per treatment
basis and we noted that patient census accounted for by the number of
treatments that are furnished. We believe that furnishing care to
patients that get hospitalized, patients who travel, patient-visitors,
and those patients that miss treatments is a universal occurrence among
all ESRD facilities and, therefore, these circumstances neither serve
as an advantage nor a detriment in an ESRD facility's eligibility for
the low-volume adjustment. We do not consider patient census or number
of stations as indicators of low-volume status, because these would not
reflect the actual number of treatments provided. In addition, we
continue to believe the use of total treatments, including those
covered by other payers, is necessary to determine eligibility for low-
volume status.
Comment: A few commenters from hospital associations requested
clarification on which treatments would count toward the proposed
treatment threshold, because they furnish both inpatient and outpatient
dialysis services.
Response: Payment for renal dialysis services under the current
payment system and under the ESRD PPS is made to Medicare-certified
ESRD providers of services or renal dialysis facilities for furnishing
outpatient maintenance renal dialysis items and services. Given that
the ESRD PPS pertains to outpatient maintenance dialysis, the low-
volume adjustment treatment threshold only pertains to outpatient
dialysis and therefore, the treatments counted do not include inpatient
dialysis treatments.
Comment: One commenter suggested that CMS include payer mix as a
criterion in determining the eligibility of a low-volume facility. The
commenter expressed concern that facilities that have a higher
percentage of Medicare-only patients, or patients that are Medicare and
Medicaid eligible, have a high risk of having low profit margins.
Response: We disagree with the commenter that payer mix should be
used as a criterion in determining low-volume eligibility. As we stated
in the proposed rule (74 FR 49969), we believe the low-volume
adjustment is intended to encourage small ESRD facilities to continue
to provide access to care to an ESRD patient population where providing
that care would otherwise be problematic. Therefore, we will provide an
adjustment based on the volume of treatments provided and not on the
basis of a payer mix. We note that many ESRD facilities determined
eligible for the low-volume adjustment have a high percentage of
Medicare patients (see Table 24).
Comment: Some commenters suggested that the implementation of the
low-volume criteria should be more specific and clear in stating
eligibility for the adjustment. Two commenters questioned how CMS will
determine when a facility reaches its 3000th treatment. The commenters
suggested that one way we could determine when a facility reached the
3,000 treatment threshold is to use Medicare claims. The commenter
explained that if CMS uses Medicare claims to make this determination,
then this would suggest that CMS is not including non-Medicare
treatments. The commenters suggested that the alternative to using
Medicare claims would be to use cost reports. However, the commenters
expressed concern that using cost reports would create too long of lag
time from when the facility is no longer eligible for the low-volume
adjustment and when the FI/MAC would be able to identify total
treatments. The commenters expressed concern that using the cost
reports to verify that a facility does or does not continue to be
eligible for the low-volume adjustment means that CMS would
retroactively collect monies paid out on all treatments that exceeded
the threshold in that payment year. Other commenters suggested that CMS
use cost reports to terminate the application of the low-volume
adjuster at the time the cost report is submitted and to not claw back
the dollars already paid out.
Response: We believe that we were explicit in our discussion of
criteria in the proposed rule (74 FR 49975), but we agree that we did
not discuss the implementation in the proposed rule. We will provide
additional information on the implementation of the low-volume
adjustment in the future. Therefore, we are finalizing the low-volume
definition and the applicable criteria as set forth in Sec. 413.232.
We used all treatments including non-Medicare treatments from the
cost reports to establish the low-volume threshold, as we believe that
inclusion of all treatments regardless of payer type represents the
true volume of treatments that are provided to ESRD patients. If we had
not included treatments from other payer types, we would have not
determined the actual volume of services provided to individuals with
ESRD. Therefore, we will use cost reports to confirm facility status as
low-volume.
We agree with the commenter that there is a lag time from when the
facility may no longer be eligible for the low-volume adjustment and
when the FI/MAC finalizes its cost report for that payment year. It is
our understanding that ESRD facilities have accounting systems in place
that allow them the ability to record the number of patients that they
currently care for, and are therefore aware of the number of treatments
it furnishes on a monthly basis.
We recommend that once a facility determines it has furnished over
4,000 treatments in the payment year that it would notify its
respective FI/MAC that it no longer qualifies as a low-volume facility
and request to no longer have the adjustment applied to its treatments.
Where a facility no longer meets the eligibility requirements and does
not notify its FI/MAC, CMS will develop procedures to ensure that ESRD
facilities receive the appropriate payments. We will address these
procedures in detail in the future.
Comment: A few commenters stated that they do not believe that the
data CMS used to develop the low-volume adjustment was appropriate. The
commenters explained that cost reports
[[Page 49123]]
have not been used for purposes of setting payment and that their
experience with cost reports is that they typically have extreme
values/errors that can distort results. The commenters suggested that
CMS perform a more detailed review of the individual facilities that it
identified as being qualified to receive the low-volume adjustment to
ensure that the correct facilities are being identified. The commenters
recommended that we consider adhering to the statutory recommendation
of a 10 percent adjustment in absence of clear, concrete data.
Response: We use the cost report information to obtain facility
level information that includes facility costs for composite rate
services and the number of dialysis treatments provided by a facility.
Because the low-volume payment adjustment is a facility level
adjustment, whereby an ESRD facility would receive a payment adjustment
based on the number of maintenance dialysis treatments it furnished, we
believe the cost report would be the appropriate source to obtain that
information. We agree with the commenter that in our data analysis for
the ESRD PPS, we found that there were individual cost reports with
extreme values or errors and a methodology has been used to exclude
these records from the analyses (discussed further in section II.C. of
this final rule). We will be monitoring the use of the low-volume
adjustment to ensure that appropriate ESRD facilities, which have not
exceeded the 4,000 treatment threshold, will receive the low-volume
payment adjustment. In the meantime, we believe using the adjustment
derived from the regressions analysis is a better measure of the costs
of low-volume facilities.
Comment: We received two comments requesting clarification of why
we used 89 low-volume facilities in the low-volume adjustment analysis
but listed 166 low-volume facilities in the impact file. The commenters
provided examples of facilities that were identified by CMS as low-
volume in the impact analysis, but according to their research, did not
meet the low-volume criteria, such as (1) 6 facilities closed in 2007
or 2008; (2) 11 facilities had greater than 3,000 total treatments for
cost report year 2006; (3) 2 facilities were start-ups or may have
changed ownership in 2007; and (4) 30 facilities have zero workstations
which would indicate that they appear to be home dialysis programs. The
commenters stated that these examples indicate that CMS is incorrectly
identifying facilities as low-volume.
Response: As discussed in the proposed rule (74 FR 49969), the data
used for the regression analysis which was used to determine the
magnitude of the adjustment for low-volume facilities (not to identify
the actual ESRD facility), was made from Medicare cost reports, SIMS,
and OSCAR for the years 2004, 2005, and 2006. Using the data available
at the time the analysis was completed, we estimated that 89 facilities
with cost report data available for the regression analysis would
qualify as low-volume facilities (74 FR 49975).
However, to assess the impact of the ESRD PPS in 2011, we used the
most recent data available to determine total facility treatments.
Because cost reports for 2007 were generally not complete at the time
of the analysis, we used SIMS data to identify low-volume facilities
that would be eligible for the adjustment. The information in SIMS is
populated from the Annual Facility Survey which is submitted by all
ESRD facilities on a yearly basis. Based on the data available at the
time the impact analysis was completed, 166 facilities met the low-
volume definition proposed at Sec. 413.232 (74 FR 50018). Therefore,
it is possible that there is conflict between CMS's data and the data
that was being analyzed by the commenter due to the timing of when the
analysis was completed and the difference in data sources.
Comment: One commenter disagreed with the proposed requirement that
an ESRD facility must provide less than the treatment threshold for
three consecutive years before becoming eligible for the low-volume
payment adjustment if the ESRD facility serves a population of patients
located in remote areas. The commenter suggested reducing the
qualification time period to one year. One commenter expressed concern
that limiting the low-volume adjustment to facilities that have been in
operation for three years would freeze the number of ESRD facilities in
rural areas, thereby causing patient access issues.
Response: We appreciate the commenter's suggestion however we do
not have a mechanism in place to determine if a facility is in a remote
area. We discuss rural facilities later in this section of this final
rule.
We believe that a 3-year waiting period serves as a safeguard
against facilities that have the opportunity to take a financial loss
in establishing new facilities that are purposefully small. We
structured our analysis of the ESRD PPS by looking across data for
three years as we believe that the 3-year timeframe provided us with a
sufficient span of time to view consistency in business operations.
Comment: Several commenters recommended that the IEF be considered
eligible for the low-volume adjustment regardless of the number of
treatments they provide each year. Two commenters expressed concern
that twelve of the 37 facilities with current IEF Medicare exceptions
exceeded the 3,000 low-volume threshold. The commenters believe that
the facilities that currently have IEF status have been deemed as an
IEF through the exception process by providing evidence of their excess
costs due to furnishing dialysis treatments in areas that are isolated.
One commenter suggested that CMS review the cost reports for these IEFs
and base the adjustment on current and accurate costs. Another
commenter suggested the same idea but added that the adjustment be at
least 10 percent.
Response: To be eligible for an IEF exception rate under the
current basic case-mix adjusted composite payment system, an ESRD
facility was required to demonstrate that it met the criteria
established by us. As discussed in section II.L. of this final rule,
all exceptions currently in place will no longer apply under the ESRD
PPS. The IEFs that retained their exception rate after the
implementation of the basic case-mix adjusted composite payment system
will no longer be able to retain that rate after the implementation of
the ESRD PPS. As a result, there is no mechanism to reassess or grant
exceptions. However, in the event that an ESRD facility elects to
receive payment under the ESRD PPS transition period, any existing
exceptions would be recognized for the purpose of the basic case-mix
adjusted composite payment system portion of the blended payment
through the transition.
In the proposed rule, we indicated that there are currently 37
facilities that retained their exception rates (74 FR 50018). However,
the 37 facilities are not exclusively IEFs. The total represents both
facilities that met the criteria for an IEF exception and facilities
that demonstrated they have atypical service intensity.
We do not believe that IEF facilities should automatically be
considered low-volume because the criteria required for the IEF
exceptions differ from the criteria established to be eligible for the
low-volume adjustment.
Comment: One commenter recommended that CMS develop a methodology
similar to the one used to identify critical access hospitals (CAH).
The commenter further explained that this would include mileage
proximity to
[[Page 49124]]
another dialysis facility as well as number of treatments per year.
Response: We appreciate this suggestion; however, we believe that
ESRD facilities and CAHs are not comparable provider types. CAHs,
defined at section 1820(c)(2)(B) of the Act, furnish a multitude of
services and have provider-specific conditions of participation, and
therefore, have criteria established to identify them. We believe that
we have developed criteria that are appropriate to establish if an ESRD
facility is eligible for a low-volume payment adjustment. Therefore, as
we indicated in the previous response, we are finalizing the criteria
to be used to determine low-volume eligibility in Sec. 413.232. We
will monitor the growth of low-volume facilities to see if additional
criteria are warranted in the future.
Comment: Several commenters expressed concern that the low-volume
adjustment would not ``level the marketplace between competitors and
therefore would not help the average small dialysis organization
(SDO)''. Some commenters stated that CMS should support small
businesses because most SDOs are dependent on Medicare patients for the
majority of their treatments. The commenters further stated that only
facilities that are not part of an LDO should receive the low-volume
adjustment because in comparison with the LDOs, SDOs furnish a small
percentage of the dialysis patient population. As a result, commenters
claimed that they are unable to benefit from the economies of scale of
LDOs.
Response: We appreciate the commenters' concerns, however, we
continue to believe that the definition of a low-volume facility
discussed in the proposed rule (74 FR 49975), and subsequently modified
by this final rule which increased the treatment threshold from 3,000
treatments to 4,000 treatments, identifies the ESRD facilities that
incur high costs for furnishing renal dialysis items and services in
areas that would otherwise be problematic. We believe that with our
data analysis which provided empirical evidence of higher costs and our
selection of criteria, we have identified those facilities that are
low-volume. We note that in response to comments from SDOs, we have
done an analysis to compare how the smaller dialysis facilities that
are neither low-volume nor affiliated with a large dialysis
organization will fair after implementation of the ESRD PPS. This
analysis is discussed in section IV.B.1. of this final rule.
We received a few comments on the proposed geographic requirements
used to determine the number of treatments furnished by an ESRD
facility to be eligible for the low-volume payment adjustment as set
forth below.
Comment: One commenter expressed concern that the low-volume
adjustment should be developed based on the proximity of a facility to
all other facilities and the total volume of services a facility
furnishes. The commenter suggested that CMS implement a low-volume
adjuster that is based on the total volume and proximity of the
facility in question to other facilities. Another commenter suggested
that CMS consider the regularity and frequency of dialysis care that
patients need when determining the distance threshold as most dialysis
patients are treated three times weekly. The commenter indicated the 25
road mile standard may not be appropriate and that CMS may want to
consider a shorter distance.
Response: In the proposed rule, we explained that we were concerned
about the potential misuse of the proposed low-volume adjustment
because the low-volume adjustment could incentivize dialysis companies
to establish small ESRD facilities in close geographic proximity to
other ESRD facilities leading to unnecessary inefficiencies. Therefore,
for the purposes of determining the number of treatments, we proposed
that the number of treatments considered furnished by the ESRD facility
would be equal to the aggregate number of treatments furnished by the
other ESRD facilities that are both under common ownership, and 25 road
miles or less from the ESRD facility in question. We developed the
proximity criteria as a parameter to be used by the FI/MACs when they
evaluate eligibility for the low-volume adjustment of new facilities
that open in the future (74 FR 49975). We do not believe that the
frequency that a patient receives dialysis treatments is relevant to
determine the location of a new facility as the distance traveled would
be different for each patient.
Therefore, for the reasons above and those set forth in the
proposed rule (74 FR 49975), in this final rule we are finalizing the
geographic requirements used to determine the number of treatments
furnished by an ESRD facility, which is to consider the total number of
treatments furnished by an ESRD facility to be equal to the aggregate
number of treatments furnished by the other ESRD facilities that are
both under common ownership, and 25 road miles or less from the ESRD
facility in question, to be eligible for the low-volume payment
adjustment at Sec. 413.232.
Comment: One commenter expressed concern that although they agree
with the extra monies being allocated to high cost facilities for
meeting the low-volume criteria, the effect on the patients that
receive care in these facilities will be an increase in their co-
insurance amounts.
Response: We agree with the commenter that the ESRD PPS will affect
patient co-insurance amounts. However, we note that this adjustment was
required under the statute.
ii. Defining the Percent of Increase
Section 1881(14)(D)(iii) of the Act also requires the ESRD PPS
include a ``payment adjustment that reflects the extent to which costs
incurred by low-volume facilities (as defined by the Secretary) and for
payment for renal dialysis services furnished on or after January 1,
2011, and before January 1, 2014, such payment adjustment not be less
than 10 percent.'' In the proposed rule, we discussed the definition
and our analysis for a low-volume facility (74 FR 49969). Based on the
definition and the analysis, the resulting low-volume payment
adjustment was determined to be 20.2 percent (74 FR 49974). Using our
proposed low-volume criteria, we measured the payments received by
these ESRD facilities and determined that 76.4 percent of ESRD
facilities meeting the proposed low-volume criteria would get an
adjustment of 10 percent or more increase in payment relative to what
they received under the current system.
In our proposed rule (74 FR 49977), we proposed a 20.2 percent
increase to the base rate to account for the costs incurred by low-
volume facilities for renal dialysis services furnished on or after
January 1, 2011, and before January 1, 2014. The proposed low-volume
adjustment policy was set forth at proposed Sec. 413.232 (74 FR
49969). We invited comments on the low-volume facility proposed
adjustment, which was discussed above.
In addition, for purposes of determining the appropriate adjustment
for the low-volume facilities defined above, we considered other
options in addition to the 20.2 percent adjustment (74 FR 49978). As
mentioned previously, section 1881(14)(D)(iii) of the Act requires the
payment adjustment for low-volume facilities be not less than 10
percent during the transition. One alternative we considered in
determining the adjustment for low-volume facilities was the minimum
statutory adjustment
[[Page 49125]]
of 10 percent. We stated that this adjustment would provide relief to
low-volume facilities of the costs they incur to provide services. In
addition, providing a lower payment adjustment results in less of a
decrease in the ESRD PPS base rate that would apply to treatments
furnished by all ESRD facilities and less beneficiary co-insurance
obligation.
The other alternative we mentioned for the low-volume adjustment
was use of the midpoint between the statutory adjustment of 10 percent
and the results of our data analysis which was 20.2 percent (74 FR
49978). We stated that we believed that a 15 percent increase could
establish an appropriate adjustment amount that would provide low-
volume facilities the incentive to utilize resources more efficiently
and control their costs.
We invited comments on these alternative options for determining
the percent low-volume adjustment.
The comments we received on this proposal and our responses are set
forth below.
Comment: Two commenters recommended that we reduce the 20.2 percent
increase to the minimum 10 percent permitted by law because at 10
percent, facilities would be less likely to deny treatments to ensure
that they remain under the threshold.
Response: For this final rule, we updated our ESRD PPS model with
data for 2006, 2007, and 2008 and found that with a treatment threshold
of 4,000 treatments, the updated increase to the base rate is 18.9
percent. We believe that since we will be monitoring payments under the
ESRD PPS and the location of new facilities as they are established,
the 18.9 percent increase to the base rate is an appropriate adjustment
that will encourage small facilities to continue to provide access to
care. In addition, we believe it is more appropriate to use the
regression driven adjustment rather than the 10 percent minimum
adjustment mentioned in the statute. We believe that using the
regression driven adjustment which is based on empirical evidence
allows us to implement a payment adjustment that is a more accurate
depiction of higher costs.
Therefore, in this final rule we are finalizing a 18.9 percent
increase to the base rate to account for the costs incurred by low-
volume facilities for renal dialysis services furnished on or after
January 1, 2011.
c. Alaska/Hawaii Facilities
Section 1881(b)(14)(D)(iv) of the Act permits the Secretary to
include other payment adjustments as the Secretary determines
appropriate. The basic case-mix adjusted composite payment system
currently does not provide a separate adjustment for ESRD facilities
located in Alaska and Hawaii. However, some prospective payment
systems, such as the hospital inpatient PPS and the inpatient
psychiatric facility PPS, provide a cost of living adjustment (COLA)
for facilities located in Alaska and Hawaii. These COLA adjustments are
applied to the non-labor portion of the payment and are based on the
rationale that the wage index adjustment to the labor portion of the
payment is not sufficient to provide for the higher costs incurred by
facilities in Alaska and Hawaii. For example, the same supplies used by
an ESRD facility located in Hawaii may cost more because there are
additional (higher) transportation costs incurred to receive the same
supplies compared to an ESRD facility located in the United States
mainland. An analysis completed for the 2008 Report to Congress
indicated there was no need for a COLA for these areas. After all
adjustments (including wage and other adjustments), our analysis of
ESRD facilities located in Alaska and Hawaii did not demonstrate any
adverse impact from the ESRD PPS.
In the proposed rule, we stated that our analysis continues to
support that the ESRD PPS would adequately reimburse ESRD facilities
located in Alaska and Hawaii (74 FR 49978). Therefore, we did not
propose to adopt COLA adjustments for ESRD facilities in Alaska and
Hawaii under the ESRD PPS. We invited public comments on the proposal.
We received a few comments regarding the COLA for Alaska and Hawaii
as set forth below.
Comment: Two commenters believed that the adjustments contained in
the proposed ESRD PPS did not adequately address the incremental costs
incurred by providing dialysis services and supplies to ESRD patients
in Alaska and Hawaii. The commenters urged CMS to reconsider the
proposal to not apply a COLA adjustment for these States and indicated
that the costs associated with furnishing ESRD treatments in these
States remains higher than the cost of providing dialysis services in
the contiguous United States.
Response: We recognize the costs incurred by Alaska and the many
islands of Hawaii might be attributable to the geographical barriers
that may not be a burden to ESRD facilities located in the contiguous
United States. However, as we indicated in the ESRD PPS proposed rule
(74 FR 49978), the various analyses of ESRD facilities located in
Alaska and Hawaii did not demonstrate any adverse impact from the ESRD
PPS.
Therefore, we do not believe that application of the COLA would be
appropriate. As a result, in this final rule, we are not adopting COLA
adjustments for ESRD facilities in Alaska and Hawaii under the ESRD
PPS.
d. Rural
Section 1881(b)(14)(D)(iv)(III) of the Act provides that the ESRD
PPS may include payment adjustments as the Secretary determines
appropriate such as a payment adjustment for facilities located in
rural areas. We proposed to define rural facilities at Sec.
413.231(b)(2) as facilities that are outside a Metropolitan Statistical
Area or a Metropolitan Division (in the case where a Metropolitan
Statistical Area is divided into Metropolitan Divisions), as defined by
OMB (74 FR 49978).
In the proposed rule, we indicated that based on our impact
analysis, rural facilities would be adequately reimbursed under the
proposed ESRD PPS. Therefore, we did not propose a facility-level
adjustment based on rural location and we invited public comments on
our proposal (74 FR 49978).
Many of the commenters were concerned about beneficiary access to
care that may result from insufficient payment to cover the costs of
delivering renal dialysis services to patients in rural areas. This was
particularly concerning to commenters who pointed out that ESRD
beneficiaries who reside in rural locations already have fewer choices
with regard to their care.
We received comments opposing our proposal not to include a
facility-level adjustment that is based on rural location, which
included the following two assertions: (1) Currently the costs of
providing renal dialysis services in rural areas are higher than in
urban areas and that costs would further increase by expanding the
bundle to include additional medications and laboratory tests; and (2)
currently patient access to renal dialysis services in rural areas is
limited and insufficient reimbursement would result in closure of these
facilities further hindering patient access.
The specific comments that we received on this proposal and our
responses are set forth below.
Comment: Several ESRD facilities and health care professionals
indicated that rural and small facilities have higher operating cost
and lower revenue than the larger, urban or suburban facilities. These
facilities are forced to operate at a low margin or at a financial
loss. Commenters identified several factors
[[Page 49126]]
that contribute to higher costs including: higher recruitment costs to
secure qualified staff, a limited ability to offset costs through
economies of scale, and decreased negotiating power in contractual
arrangements for medications, laboratory services or equipment
maintenance. One commenter indicated that compared to the large chains,
rural dialysis providers will be unable to compete in negotiating
prices for drugs and that this would be especially problematic for the
manufacturers' monopoly on EPO and Cinacalcet.
Commenters further noted that the lower revenues among rural ESRD
facilities are attributed to serving a smaller volume of patients of
which a larger proportion are indigent and lack insurance, and a
smaller proportion have higher paying private insurance. Several
commenters requested that CMS consider cost differentials in
determining whether rural ESRD facilities warrant a payment adjuster.
Other commenters requested that small rural facilities be paid based on
the cost of providing services to allow them to break even.
Response: As indicated in section II.L. of this final rule, rural
facilities are expected to experience a -1.5 percent decline in
payments in 2011 due to implementation of the ESRD PPS. We note,
however, in accordance with section 1881(b)(14)(A)(ii) of the Act and
discussed in section II.E.4. of this final rule, the ESRD PPS base rate
was reduced by 2.0 percent so that the estimated total amount of
payments in 2011 equals 98 percent of what would otherwise be paid if
the ESRD PPS were not implemented. Therefore, rural facilities as a
group are projected to receive less of a reduction than urban
facilities and many other subgroups of ESRD facilities.
We also note that as described in section II.A.3. of this final
rule, implementation of oral-only Part D drugs will be delayed until
2014. This delay will provide small, rural facilities additional time
to consider negotiating options for obtaining the most favorable prices
on drugs possible. For example, small rural facilities may benefit from
joining cooperative arrangements to improve negotiating capacity. We
intend to monitor how rural ESRD facilities fare under the ESRD PPS and
will consider other options if access to renal dialysis services in
rural areas is compromised under the ESRD PPS.
Comment: Some commenters claimed that under the proposed rule, some
rural facilities may not receive adequate reimbursement to continue to
provide dialysis services in remote areas, resulting in compromised
patient access to care. Commenters requested that CMS reassess its data
for rural facilities following its reassessment of the data for low-
volume facilities.
Response: As the commenter suggested, we reassessed the impact on
ESRD facilities based on the final payment adjustments described in
this final rule. As mentioned previously, the impact analysis conducted
for this final rule indicates a 1.5 percent decrease in total payments
to rural ESRD facilities. This small decline reflects the fact that
44.5 percent of low-volume ESRD facilities are located in rural areas
(as discussed earlier in this section of this final rule).
Comment: One commenter was concerned that the 3 percent transition
budget neutrality adjustment may particularly disadvantage the quality
of care for rural dialysis patients, given their higher costs for
patient transport, staff salary, and facility maintenance costs.
Response: As described in section II.E.5. of this final rule, we
are required by section 1881(b)(14)(E)(ii) of the Act to apply a
transition budget neutrality adjustment to account for the effect of
the transition on aggregate payments in order to stay within the
overall requirement for a 2 percent reduction in expenditures in 2011.
Comment: One commenter questioned whether defining every facility
not located within a Metro statistical area (MSA) as rural reflects the
variation in the degree of geographical isolation and therefore, cost
among providers that are not located within an MSA. The commenter noted
that cost differences may exist among facilities classified as rural
that are further from an MSA compared to facilities closer to an MSA.
Response: We recognize that there may be differences among rural
facilities based on distance from an MSA. However, we do not have a
separate mechanism to identify additional variation among facilities in
the area outside of a particular MSA.
Comment: A few commenters indicated that in rural settings the
nephrologist facilitates care for other specialties by drawing
laboratory tests or administering medications for conditions other than
ESRD. One commenter stated that because the rural patients often do not
have transportation to access these services separately from the
dialysis visits, the ESRD facility cooperates by drawing these
laboratory tests or administering medications ordered by the
nephrologist in the interest of providing the patient with efficient
healthcare delivery. The commenter stated that non-ESRD-related
laboratory tests and medications ordered by the nephrologist should
remain separately payable.
Response: In the interest of patient convenience and in minimizing
their transportation burden, we will not preclude ESRD facilities from
drawing non-ESRD related laboratory tests on behalf of ESRD patients.
As described in section II.K.2. of this final rule, the laboratory
tests used for non-ESRD-related purposes would be identified with a
modifier and paid separately. Similarly, as described in section
II.K.2. of this final rule, there may be instances in which non-ESRD-
related medications may be administered in the ESRD facility. These
medications would also be identified with a modifier and paid
separately.
Comment: Several commenters indicated that ensuring access to home
dialysis and home dialysis training is essential to successfully
serving a rural area.
Response: We share the commenters' view with respect to the
importance of ensuring access to home dialysis and home training. As
discussed in section II.A.7. of this final rule, all home dialysis
services will be included in ESRD PPS payments to ESRD facilities as of
January 1, 2011. In addition, as discussed in section II.A.7. of this
final rule, we are finalizing a training add-on adjustment to
compensate ESRD facilities for the additional resources associated with
home dialysis or self-dialysis training.
For the reasons we explained above in response to the public
comments and based on the data analysis conducted for this final rule,
we are finalizing the proposed definition of rural facilities at Sec.
413.231(b)(2) of this final rule and we are not implementing a
facility-level payment adjustment that is based on rural location.
e. Site Neutral ESRD PPS Rate
For dialysis services furnished before January 1, 2009, the basic
case-mix adjusted composite rate differentiated between hospital-based
and independent ESRD facilities. That is to say, the composite rate for
hospital-based facilities was on average $4.00 more per treatment more
than the composite rate for independent dialysis facilities.
Section 1881(b)(12)(A) of the Act, requires a site neutral
composite rate so that the payment rate for services furnished on or
after January 1, 2009, by hospital-based ESRD facilities is the same as
the payment rate paid to independent facilities under the current
system. In addition, section 1881(b)(12)(A) of the Act requires that
[[Page 49127]]
in applying the geographic index to hospital-based facilities, the
labor-related share shall be based on the labor-related share otherwise
applied to the renal dialysis facilities. In the CY 2009 final rule (72
FR 69881 and 72 FR 69935), we revised Sec. 413.174, which described
the methodology for prospective rates for ESRD facilities, to conform
to the statutory requirement.
Section 1881(b)(14)(A)(i) of the Act provides that for services
furnished on or after January 1, 2011, the Secretary shall implement a
payment system under which a single payment is made under this title to
ESRD facilities for renal dialysis services, in lieu of any other
payment. Therefore, the site neutral payment provisions discussed above
will be incorporated under the ESRD PPS and used to establish a single
base rate that will apply to ESRD facilities.
5. Determination of ESRD PPS Payment Adjusters
In the proposed rule, we described the selection of patient
characteristics as potential case-mix adjusters using a modeling
approach that relied on separate regression equations for CR and SB
services (see Table 29 in the proposed rule 74 FR 49979). We stated
that the predictive power of the separate estimating equation for CR
services in terms of the proportion of variance explained (R\2\) was
46.0 percent. The comparable figure for the SB regression equation was
8.7 percent. The overall estimated R\2\ for the ESRD PPS payment model
is 39.0 percent (74 FR 49978). While the case-mix adjustments were
based on separate estimating equations, the equations were combined
into a single payment formula for the ESRD PPS. The methodology for
combining the separate composite rate and separately billable
estimating equations was described in the proposed rule (74 FR 49980
through 49981).
We did not receive any public comments in connection with our
methodology for combining the separate composite rate and separately
billable estimating equations into a single payment formula for
calculating the ESRD PPS payment adjusters. Accordingly, we are using
that same methodology to combine the separate composite rate and
separately billable payment adjusters using the payment variables
adopted for this final rule.
Table A in the Appendix shows how the payment adjusters from the
separate CR and SB regressions were combined. The first two columns in
Table A in the Appendix represent the CR and SB model results for each
of the regression equations, carried to three significant figures. The
third column of Table A of the Appendix presents a single payment
multiplier for each patient characteristic based on its relationship to
resource use for both CR and SB services. The payment adjusters in the
third column (PmtMultEB) were calculated as the weighted
average of the CR and SB multipliers. The weights correspond to each
component's proportion of the sum of the average CR costs and SB
payments per treatment for CYs 2006-2008, as shown in Table 25.
[GRAPHIC] [TIFF OMITTED] TR12AU10.029
The weights were calculated using the three years of pooled data.
Based on this analysis, the average cost for CR services per treatment
as computed from the Medicare cost reports was $177.72. The average MAP
per treatment for SB services based on Medicare claims for the same
period was $83.97. Based on total estimated costs of $261.69 per
treatment ($177.72 + $83.97), the relative weights are
weightCR = 0.6791 for composite rate services ($177.72/
$261.69) and weightSB = 0.3209 for separately billable
services ($83.97/$261.69). The payment multipliers presented in the
third column of Table A in the Appendix were calculated as
PmtMultEB = 0.6791 x PmtMultCR + 0.3209 x
PmtMultSB. In this manner, the separate case-mix adjusters
for composite rate and separately billable services were combined to
obtain a single set of multipliers (shown in the third column of Table
A in the Appendix) to compute the payment rates under the proposed ESRD
PPS.
Six co-morbidities were identified as payment adjusters for
separately billable services only, as they did not have a statistically
significant association with composite rate costs based on the
regression results. These patient characteristic variables have a
composite rate multiplier in Table A in the Appendix of 1.000. For
these co-morbidities, there is no payment adjuster for composite rate
services. Therefore, the payment multiplier is equal to 0.6791 x 1.000
+ 0.3209 x PmtMultSB. The payment multipliers in the third
column of Table A in the Appendix reflect the combined results from the
two-equation model described in this final rule, and represent the
case-mix adjustment factors that will be
[[Page 49128]]
applied to the base rate to compute the payment amount per treatment
under the finalized ESRD PPS.
G. Pediatric Patients
In section IX. of the proposed rule (74 FR 49981 through 49987), we
pointed out that section 1881(b)(14)(D)(iv)(I) of the Act gave the
Secretary the discretionary authority to develop a pediatric payment
adjustment under the ESRD PPS. Consistent with that authority, we
proposed our methodology for developing a pediatric payment adjustment
and proposed pediatric patient-specific case-mix adjustment factors (74
FR 49987).
Using the same two-equation regression methodology developed for
adult patients, the pediatric payment model incorporated the proposed
adjustment factor of 1.199 from the adult payment model for patients
less than age 18 for the purpose of computing the composite rate
portion of the bundled payment for pediatric patients (74 FR 49982). In
order to adjust the separately billable portion of the payment rate, we
proposed the use of specific adjusters for each of eight pediatric
classification categories (see Table 32 at 74 FR 49986). These
classification groups reflected two age groups (<13 and 13-17), two co-
morbidity classification groups (none and one or more) based on the
presence of either HIV/AIDS, diabetes, septicemia within 3 months, or
cardiac arrest, and two modality groups (PD or HD). The result was a
set of eight pediatric classification groups, each of which had its own
bundled ESRD PPS payment multiplier. Those multipliers reflected the
combined composite rate and separately billable adjustment factors
developed in accordance with the two-equation regression methodology
used in connection with the adult payment model. These adjustment
factors were weighted according to the relative utilization of
resources among pediatric patients obtained from the Medicare cost
reports for 2004 through 2006 for composite rate services, and 2004
through 2006 claims for separately billable services. The proposed
adjustment factors, which would be applied to the base rate under the
ESRD PPS, ranged from 0.963 to 1.215 (see Table 33 at 74 FR 49987).
We received numerous comments from industry representatives
including children's hospitals and other dialysis facilities treating
pediatric patients, LDOs, hospital organizations, physician
representatives, dialysis industry groups, and laboratories on our
proposed pediatric payment model. Commenters were opposed to the
methodology used to develop the proposed pediatric payment adjusters.
The comments we received and our responses are set forth below.
Comment: Several commenters stated that the proposed methodology
underestimated the cost of caring for pediatric patients with ESRD, and
that application of the proposed payment adjusters would cause severe
financial hardship for facilities treating ESRD pediatric patients. The
commenters pointed out that the proposed payment multiplier of 1.199
used to adjust the composite rate portion of the pediatric MAP, as well
as the composite rate portion of the MAP, is based on the costs of
adult dialysis units, not pediatric specific services. The commenters
suggested that the composite rate cost portion of the pediatric MAP,
and the composite rate adjustment factor, should be based on actual
cost data from pediatric dialysis units.
The commenters believed that the present multiplier of 1.62 applied
to the composite rate per treatment for pediatric patients was likely
more reflective of actual pediatric costs, not the proposed factor of
1.199. Other commenters recommended that CMS should perform further
statistical analysis which uses the actual costs from pediatric ESRD
facilities, or the pediatric units of ESRD facilities to determine the
composite rate cost portion of the pediatric MAP, and the composite
rate pediatric adjustment factor.
Response: In the proposed rule, we pointed out the current
pediatric adjustment factor of 1.62 was developed from only those ESRD
facilities that sought and obtained an exception to their otherwise
applicable composite payment rates (74 FR 49984). This factor only
reflected the costs of ESRD facilities which exceeded their composite
payment rates. Therefore, the 1.62 adjustment factor was likely biased
upward because it was not developed from the costs of ESRD facilities
with costs below their composite rates.
However, the commenters raise a valid point. The generally lower
payments for treating adult ESRD patients were commingled with
pediatric payments in developing the composite rate portion of the
proposed base rate. The multipliers from the composite rate and
separately billable portions of the proposed pediatric payment
adjustments were weighted based on average ESRD composite rate facility
costs for 2004 through 2006. The multipliers were developed from data
that were not restricted to pediatric ESRD facilities. Similarly, the
adjustment factor of 1.199 applied to the composite rate portion of the
proposed pediatric payment adjustment factors reflect the composite
rate costs of pediatric patients treated in all facilities, not just
pediatric ESRD facilities or the pediatric units of dialysis
facilities. Because these costs reflect predominantly adult patients,
they may be understated if, as is likely, the cost of care for
pediatric patients in primarily adult facilities is less than the cost
of care for pediatric patients in primarily pediatric facilities. We
agree that further additional statistical analysis is warranted to
determine whether a robust case-mix adjusted pediatric payment model
can be developed based on co-morbid characteristics of pediatric
dialysis patients, one which does not dilute the higher composite rate
costs of pediatric patients with the generally lower composite rate
costs of adult patients.
We agree with the commenters that the proposed pediatric case-mix
adjusters reflect composite rate costs that may understate the cost of
treating pediatric dialysis patients, because of the predominance of
adult patients in ESRD facilities. To respond to the commenters'
concern that adoption of the proposed pediatric payment adjusters would
not compensate ESRD facilities for the actual costs of furnishing
dialysis to pediatric patients, we have modified the proposed payment
adjusters applied to pediatric patients (see Table 33 in the proposed
rule at 74 FR 49987). The pediatric payment adjusters we have adopted
for this final rule reflect the higher average composite rate payment
per treatment that we made in CY 2007 for pediatric dialysis treatments
compared to those for adult patients and the lower average per
treatment payments made for separately billable services furnished
pediatric patients in that year. As discussed in section II.E.1. of
this final rule, CY 2007 is the year used to develop the ESRD PPS base
rate amount. Combined composite rate and separately billable average
payments per treatment in CY 2007 for pediatric dialysis patients
exceeded the comparable figure for adult patients by 10.5 percent
($264.55 versus $239.39). This differential has been reflected in the
pediatric payment adjusters set forth in this final rule.
Comment: Several commenters maintained that the four co-morbidities
included in the proposed rule for classifying pediatric ESRD patients
into one of eight classification groups (HIV/AIDS, septicemia,
diabetes, and cardiac arrest) (74 FR 49987) were not appropriate for
the pediatric patient
[[Page 49129]]
population and were not frequently encountered. The commenters stated
that these co-morbidities, while perhaps relevant in the adult
population, do not accurately reflect the complexity and cost of
providing dialysis treatments to children. The commenters recommended
alternative co-morbidities which they believed would be more reflective
of the clinical conditions encountered among pediatric ESRD patients
and require more costly resource intensive care. Suggested co-
morbidities included developmental delay/mental retardation, growth
retardation and renal osteodystrophy, deafness, seizure disorders,
anxiety, secondary hyperparathyroidism, and rare genetic disorders such
as cystinosis, primary hyperoxaluria, congenital hepatic fibrosis and
other congenital diseases, chronic lung disease from hypoplastic lungs,
and bone marrow and other solid organ transplants.
Response: We appreciate the commenters' concerns that any co-
morbidity used as an ESRD pediatric payment adjustment reflects the
cost and intensity of care necessary to provide outpatient dialysis to
children. Unfortunately, because ESRD facilities rarely report co-
morbidities on the Medicare type 72X claims submitted for payment, we
obtained the co-morbidities used to establish the proposed pediatric
classification groups from the same Medicare claims data used to
identify the co-morbidities in the adult payment model. The small size
of the outpatient ESRD pediatric dialysis patient population (about 860
patients in 2008) precluded the development of specific adjusters for
individual co-morbidities due to a lack of statistical robustness.
Therefore, we used a count of the number of defined co-morbidities in
developing the pediatric classification groups.
The commenters' suggestion to use co-morbidities typical of the
clinical conditions encountered among ESRD pediatric patients merits
consideration, although we believe that it might require a specific
data collection effort to obtain the co-morbidities for analysis.
Although the co-morbidities in the proposed rule were derived from
measures originally developed using claims from the adult population,
their inclusion in the pediatric payment model was based on analyses
that showed their relationship to cost specifically in the pediatric
population. As explained below, we have developed pediatric adjustment
factors for this final rule which do not rely on specific co-
morbidities. We will consider the commenters' suggested alternative co-
morbidities in future refinements to the pediatric payment adjusters
adopted in this final rule.
Comment: Several commenters disagreed with the two age
classification groups we used in the proposed pediatric payment model
(age <13; 13-17). The commenters stated that the use of these two age
groups undervalued the complexity and additional facility costs
incurred in dialyzing children. Some commenters recommended only one
age group (age <18) to simplify the bundle for pediatric dialysis.
Other commenters recommended alternative age groups. One commenter
with clinical experience treating pediatric ESRD patients pointed out
that dialysis patients under age 5 use one nurse per dialysis station
and patients ages 5-12 use one nurse for every two stations. The
commenter suggested that adopting age categories using this information
would result in three categories for pediatric ESRD patients (cm.725 *
weightkg.425
Martha's BSA is calculated as:
BSAMartha = 0.007184 * 167.64.725 * 105.425 =
0.007184 * 40.9896 * 7.2278 = 2.1284
Table 29 reveals that the separately billable multiplier for BSA is
1.014. Martha's case-mix adjustment based on her BSA of 2.1284 would
be:
= 1.014(2.1284-1.87/0.1)
= 1.0142.584
= 1.037
Step 1: Determine the predicted, ESRD outlier services MAP amount
using the product of all applicable case-mix adjusters.
The product of the patient-level outlier services case-mix
adjusters as identified in Table 29:
= 66 year old: 1.000, BSA: 1.037, and GI bleeding: 1.571:
= 1.000 * 1.037 * 1.571
= 1.6291
The adjusted, average, ESRD outlier services MAP amount = $82.78
The adjusted, average ESRD outlier services MAP amount * product of
the outlier services case-mix adjusters:
= $82.78 * 1.6291
= $134.86
Step 2: Determine the imputed average, per treatment, ESRD outlier
services MAP amount based on utilization of all separately billable
services on the monthly ESRD facility bill.
Assume the imputed monthly ESRD outlier services amount = $4,000
and that the corresponding total number of treatments in the month = 10
The imputed, average, per treatment, outlier services MAP amount
= $4,000/10
= $400
Step 3: Add the fixed dollar loss amount to the predicted, ESRD
outlier services MAP amount.
The fixed dollar loss amount = $155.44
The predicted, ESRD outlier services MAP amount = $134.86
= $134.86 + $155.44
= $290.30
Step 4: Calculate outlier payment per treatment.
Outlier payment = imputed average, per treatment, outlier services
MAP amount - (predicted, ESRD outlier services MAP amount plus the
fixed dollar loss amount) * loss sharing percentage:
= ($400.00-$290.30) * .80
= $109.70 * .80
= $87.76
Hypothetical Example--Pediatric Patient:
John, is a 13 year old HD pediatric patient.
Step 1: Determine the predicted, ESRD outlier services MAP amount.
As specified in Table 29, determine the patient-level ESRD outlier
services case-mix adjuster:
= 13 year old HD patient = 1.459
The adjusted, average, ESRD outlier services MAP amount = $53.06
The adjusted, average, ESRD outlier services MAP amount * the
product of the outlier services case-mix adjusters:
= $53.06 * 1.459
= $77.41
Step 2: Determine the imputed, average, per treatment, ESRD outlier
services MAP amount.
The imputed monthly ESRD outlier services amount = $4,000
Assume the corresponding total number of treatments = 10
The imputed, average, per treatment, outlier services MAP amount =
= $4,000/10
= $400
Step 3: Add the fixed dollar loss amount to the predicted, ESRD
outlier services MAP amount.
The fixed dollar loss amount = $195.02
The predicted, ESRD outlier services MAP amount = $77.41
= $77.41 + $195.02
= $272.43
Step 4: Calculate outlier payment per treatment.
Outlier payment = imputed, average, per treatment, outlier services
MAP amount -(predicted, ESRD outlier services MAP amount plus the fixed
dollar loss amount) * loss sharing percentage:
= ($400.00 - $272.43) * .80
= $127.57 * .80
= $102.06
The outlier payment amount would be added to the ESRD PPS payment
amount, per treatment. For a detailed description of calculating the
ESRD PPS payment amount per treatment, please refer to the hypothetical
examples in the Comprehensive Payment Examples presented later in this
section of this final rule.
4. Application of Outlier Policy During the Transition and in Relation
to the ESA Monitoring Policy, Other Claims Processing Tools, and Other
CMS Policies
In the proposed rule, we indicated that the outlier payment policy
would be limited to the proposed ESRD PPS (74 FR 49994). We proposed
that for those ESRD facilities that do not elect to be excluded from
the three year transition, outlier payments would be limited to the
portion of the blended rate based on the payment rates under the
proposed ESRD PPS.
We also indicated that nothing within the proposed outlier payment
policy would replace the claims monitoring implications related to the
utilization of separately billable ESAs including currently available
epoetin alfa (EPOGEN[supreg], or EPO), darbepoetin alfa
(ARANESP[supreg]) or any ESAs that may be developed in the future and
used by beneficiaries receiving renal dialysis services (74 FR 49994).
The comments received on application of our proposed outlier policy
during the transition and in relation to the ESA Claims Monitoring
Policy and our responses to them are set forth below. Approximately
half of the commenters supported and half opposed the continuation of
our claims monitoring policy with respect to the utilization of ESAs.
Comment: Some commenters stated that they believed there would be
no incentive to overuse ESAs once the ESRD PPS is implemented in 2011
and, therefore, the ESA Claims Monitoring Policy should be
discontinued. Other commenters supported continuing to apply the ESA
Claims Monitoring Policy under the ESRD PPS, maintaining that it would
help ensure that ESAs would not be overutilized in order to obtain
outlier payments. One commenter suggested that in instances where the
patient's ESA and iron therapies are within the QIP parameters, then
CMS should provide outlier payments. The commenter believed that it
would be appropriate to include the costs of ESA therapy while the
patient's hemoglobin remained at 13 or lower and the patient's iron
stores were adequate, but exclude from the outlier calculation the
costs of ESA therapy in instances where a patient's hemoglobin exceeded
13, or if the patient's iron level was above an adequate level.
Response: Currently there are two claims processing edits
associated with the ESA Claims Monitoring Policy--the reduction in the
payable ESA amount based on reported hemoglobin (or hematocrit) level,
and medically unbelievable edits (MUEs) based on the ESA total
administered dose. During the transition, ESRD facilities will be
expected to meet our quality measures under the QIP, notwithstanding
that the implementation of the QIP does not occur until January 1,
2012, in addition to complying with other policies for coverage and
claims processing.
With respect to the basic case-mix adjusted composite payment
system portion of the blended payment during the transition, we will
continue to apply
[[Page 49146]]
both ESA Claims Monitoring Policy processing edits and implement any
corresponding payment reductions. Although several commenters believed
that the implementation of the ESRD PPS would provide sufficient
incentives not to overutilize ESAs, obviating the need for continuation
of the ESA Claims Monitoring Policy, we believe that the continued
application of this policy will help ensure the proper dosing of ESAs,
and provide an added safeguard against the overutilization of ESAs,
particularly where the consumption of other separately billable
services may be high, in order to obtain outlier payments.
With respect to the commenter's suggestion that payments for ESAs
should only be considered outlier eligible payments when a patient's
hemoglobin is at 13 or lower, and excluded when the value exceeds 13,
this recommendation does not consider the fact that hemoglobin levels
can be volatile even when proper doses are administered. Fluctuations
will occur because of the time required to titrate levels in response
to the patient's specific condition. Therefore, linking ESA eligibility
for outlier payments to a patient's achieved hemoglobin level is not a
feasible payment option.
With respect to the ESRD PPS portion of the blended payment, we
will apply dosing reductions resulting from the application of the ESA
Claims Monitoring Policy prior to any calculations of outlier
eligibility. We believe that continuation of this policy is necessary
in order to provide a disincentive for overutilization of ESAs in order
to receive outlier payments, notwithstanding that the implementation of
the ESRD PPS will tend to discourage overuse of ESAs, as ESAs are part
of the payment bundle.
The ESA dose edits will be applied prior to pricing so that we do
not overvalue these services in determining eligibility for outlier
payments. We note that the ESA Claims Monitoring Policy provides an
opportunity for appeal to address those situations where there might be
medical justification for higher hematocrit or hemoglobin levels.
Beneficiaries, physicians, and dialysis facilities may submit
additional documentation to justify medical necessity, and any payment
reduction amounts may be subsequently reinstated when documentation
supports the higher hematocrit or hemoglobin levels. To the extent
successful appeals impact the amount of outlier payments on behalf of
beneficiaries, those claims will be reprocessed to reflect the correct
amount of outlier payments.
Comment: One commenter believed that EPO dosing among ESRD patients
has been historically high and recommended that we cap the EPO
contribution in the base rate at 14,000 units per week. Similarly, the
commenter questioned whether the inclusion of current ESA dosing
parameters within the outlier calculation would be in the best interest
of the patient and suggested that high doses related to
hyporesponsiveness should be further investigated. The commenter
recommended that we cap ESA dosing at 160,000 units per month (IV
administration) until further valid studies have determined safer
dosing levels.
Response: With respect to the commenter's specific concern about
the extent to which the cap on ESA dosing is appropriate, we note that
this concern is beyond the scope of this rule. We appreciate the
commenter's concern about potential excess ESA dosing of ESRD patients
but, as discussed in section II.E. of this final rule, the amount of
ESA payment included in the base rate comports with limits established
under the ESA Claims Monitoring Policy.
We stated in the proposed rule that both the base rate and the
features of the outlier policy, including the outlier percentage and
fixed dollar loss thresholds, were based on 2007 claims data (74 FR
49990). In developing the base rate for the proposed rule we applied a
medically unbelievable EPO limit of 30,000 units per treatment. This
edit contributed to lower fixed dollar loss amounts. For purposes of
the final rule, we have revised the ESA medically unbelievable edits to
comport with CMS's own ESA Claims Monitoring Policy. Specifically, in
2007, the ESA claims monitoring policy included a monthly medically
unbelievable edit threshold of 500,000 for EPO and 1,500 mcg. for
ARANESP[supreg]. The medically unbelievable edit thresholds were
reduced to 400,000 units for EPO and 1,200 mcg. for ARANESP[supreg] in
2008 (Transmittal 1307, Change Request 5700 (July 20, 2007)).
For purposes of this final rule, the base rate and the features of
the outlier policy, including the outlier percentage and the fixed
dollar loss thresholds as reflected in Table 28 were based on 2007
data. Although the medically unbelievable edits that were in place for
EPO and ARANESP[supreg] were 500,000 units and 1,500 mcg., respectively
in 2007, we chose to apply the edits that are currently in place. That
is, we applied medically unbelievable edits of 400,000 units for EPO
and 1,200 mcg. for ARANESP[supreg] in establishing the outlier policy's
fixed dollar loss amounts. We believe that this edit is necessary for
purposes of reflecting current CMS policy and to bring the projected
fixed dollar loss amounts into line with ESA dosing that is consistent
with the current ESA Claims Monitoring Policy. We point out that we
applied a similar edit to the calculation of the base rate, in that the
medically unbelievable edits that were in place for EPO and
ARANESP[supreg] in 2007 were also used to calculate the components of
the base rate that reflect payments for ESAs.
Comment: One commenter responded to our request for identifying
potential safeguards against the overuse of ESAs under the ESRD PPS.
This commenter noted that there are certain diseases in which ESAs
should not serve as the primary treatment approach for anemia where
transfusion may be the better choice. This commenter suggested that we
could implement measures to ensure that ESAs are not administered or
reimbursed in the absence of evidence of iron depletion.
Response: We agree with the commenter that there are multiple
causes (for example, iron deficiency anemia, vitamin B12 deficiency, or
folic acid deficiency) and treatment approaches for anemia. We expect
that patients will be evaluated to determine the cause of their anemia
and treated appropriately. We would also expect that ESRD facilities
that administer ESAs in accordance with their patients' plans of care
would do so in accordance with the FDA's approved indications.
Comment: One commenter requested that we do further research into
higher hemoglobin levels because the commenter believes that some
patients do not do well with lower hemoglobin levels and therefore need
more EPO.
Response: Although we are not performing such research, we would
agree that any research that attempts to examine the relationships
among hemoglobin levels, ESA utilization, and clinical outcomes is
welcome and should be encouraged.
Comment: One commenter expressed concern that establishing
reimbursement policy based on what the commenter believed are
``misguided/unguided and perhaps dangerous treatment patterns,'' eroded
the opportunity to improve quality of care and establish a financially
sound policy. The comment included a copy of a report from the
Department of Health and Human Services' Office of the Inspector
General (US DHHS OIG) which described inconsistencies in ESRD
facilities' policies and protocols for administering ESAs. Other
commenters submitted comments indicating that there have not been
studies that have reported an
[[Page 49147]]
appropriate target hematocrit and expressed concern that the proposed
rule might encourage underutilization of EPO.
Response: We are closely following the growing body of scientific
evidence that describes the usage patterns of ESAs, as well as their
potential benefits and harm. In order to further evaluate this body of
evidence, CMS held a Medicare Evidence Development and Coverage
Advisory Committee (MEDCAC) meeting on March 24, 2010. The purpose of
the MEDCAC was to provide independent guidance and expert advice to us
about the evidence on the use of ESAs in the management of anemia in
patients with chronic kidney disease and end-stage renal dialysis
disease. On June 16, 2010, we formally opened a new National Coverage
Determination (NCD) regarding ESAs.
Comment: Several commenters questioned specific features of the ESA
Claims Monitoring Policy and ESA dosing of patients with chronic kidney
disease (CKD).
Response: We thank the commenters for stating their concerns.
However, we solicited public comments on the extent to which we should
continue to apply the ESA Monitoring Policy under the proposed ESRD
PPS, which is a payment system applicable to Medicare beneficiaries
with end-stage renal disease, not CKD. Comments concerning the ESA
Claims Monitoring Policy and ESA dosing of patients with CKD are beyond
the scope of this final rule.
In developing this final rule, we have considered the extent to
which it would be appropriate to extend the ESA Claims Monitoring
Policy to include home dialysis patients who self-administer ESAs.
Currently, the ESA Claims Monitoring Policy does not apply to ESA
claims for patients who receive their dialysis at home and self-
administer their ESAs and we will continue this policy in 2011.
We expect ESRD facilities managing home dialysis patients to use
prudent judgment in ESA dosing and monitoring hemoglobin levels.
Because outlier payments may be made on behalf of home dialysis
patients as well as in-facility ESRD patients, we intend to monitor
outlier payments for any unusual trends in outlier payments for all
patients, including home dialysis patients who self-administer ESAs. We
will continue to evaluate outlier payments and, if necessary, will
address changes in the future.
As a result of the public comments received and for the reasons we
addressed above, we will continue to apply the ESA Claims Monitoring
Policy edits on ESRD facility claims for purposes of calculating the
basic case-mix adjusted composite payment system portion of the blended
payment during the transition period, and in connection with
determining the eligibility of ESA payments for outlier payments.
I. Comprehensive Payment Model Examples
In section II.D. of this final rule, we demonstrated how the case-
mix adjustments based on separate estimating equations for CR and SB
services (that is, the two equation model) were combined to obtain a
single payment formula under the ESRD PPS. Table A in the Appendix
contains the case-mix adjustments applicable to adult patients. In
section II.G. of this final rule, we addressed the pediatric payment
adjustments under the ESRD PPS. Table B in the Appendix contains the
four pediatric classification categories and corresponding case-mix
adjusters that will be applied to pediatric patients. In this section,
we explain how the area wage index and case-mix adjustments will be
applied to the adjusted base rate amount described in section II.E.4.
of this final rule, reflecting combined CR and SB services, resulting
in a patient-specific per treatment payment amount under the ESRD PPS,
as set forth in Sec. 412.56. We demonstrate how the case-mix
adjustments presented in Tables A and B in the Appendix would be
applied for eight hypothetical ESRD patients to obtain the per
treatment payment amounts under the ESRD PPS. We refer to the product
of the applicable case-mix adjustment factors as the patient multiplier
or PM. The ESRD PPS case-mix adjusters are shown in Table A in the
Appendix for adult patients and Table B in the Appendix for pediatric
patients.
Each example uses the adjusted base rate of $229.63, covering Part
B renal dialysis services and self-care home dialysis services as set
forth under section 1881(b)(4) of the Act. Each example also assumes an
ESRD wage index value of 1.1000. The labor-related share derived from
the ESRD PPS market basket, described in section II.J. of this final
rule, is 41.737 percent. Therefore, the starting point in each example
prior to determining the patient-specific PM is a wage index adjusted
base rate of $239.21. This amount was computed as follows:
Base rate $229.63
Labor-related share of base rate ($229.63 * .41737 = $95.84) $95.84
Wage index adjusted labor-related share ($95.84 * 1.1000 = $105.42)
$105.42
Non labor-related share of base rate ($229.63 * (1 - .41737) = $133.79
$133.79
Wage index adjusted base rate ($105.42 + $133.79 = $239.21) $239.21
We also point out that each case-mix adjusted payment amount is
reduced by 3.1 percent through the application of an adjustment factor
of .969 to account for budget neutrality during the transition period.
This is referred to as the transition budget neutrality adjustment, and
is included as the last item in the computation of the payment amount
for each patient, after application of all other case-mix adjustment
factors (that is, all PMs), including any applicable add-on amounts for
training treatments. It also applies to any outlier payments.
Example 1--Relatively Healthy ESRD Patient With No ESRD Payment Co-
Morbidities; No Outlier Payments Apply
John, a 45 year old male Medicare beneficiary, is 187.96 cm.
(1.8796 m.) in height and weighs 95 kg. John was diagnosed with ESRD in
early 2010 and has been on HD since July 2010. He has chronic
glomerulonephritis and hypertension, and has an AV fistula. The patient
also has secondary hyperparathyroidism. John's payment rate for
treatments furnished in January 2011 would be calculated as follows.
Table A in the Appendix reveals that none of John's co-morbidities
is among those for which a case-mix adjustment applies. The only
pertinent factors to adjust the base rate amount are age, height, and
weight. Using the formula for BMI, we see that John is not underweight,
having a BMI of 26.89 kg/m\2\, which is greater than the threshold
value of 18.5, the cut-off for underweight status:
BMIJohn = weightkg /height (m2)
= 95/1.87962
= 95/3.5329
= 26.89
Therefore, there is no case-mix adjustment for low BMI. The formula
for calculation of a patient's BSA is:
BSA = 0.007184 * heightcm.725 * weightkg.425
John's BSA is calculated as:
BSAJohn = 0.007184 * 187.96.725 * 95.425
= 0.007184 * 44.5346 * 6.9268
= 2.2161
Using the Table A in the Appendix multiplier of 1.020, John's case-
mix adjustment or payment multiplier (PM) based on his BSA of 2.2161 is
computed as follows:
PMBSA = 1.020(2.2161-1.87)/0.1
= 1.0203.461
[[Page 49148]]
= 1.0709
John's PM would reflect the applicable case-mix adjustments from
Table A in the Appendix for both age and BSA and may be expressed as:
PMJohn = PMage * PMBSA
= 1.013 * 1.0709
= 1.0848
John's ESRD payment rate for treatments furnished in January 2011
would be:
$239.21 * 1.0848 * .969 = $251.45
Example 2--Same as Example 1, Except Dialysis Began November 15, 2010
John's PM would have to include the adjustment for the onset of
dialysis, because the treatments for which we are calculating the
payment amount occur within 4 months of November 15, 2010. Because the
onset of dialysis adjustment is limited to a maximum of 120 days, this
particular adjustment would apply for treatments furnished between
January 1, 2011 and March 15, 2011. John's applicable case-mix
adjustments would be for a patient new to dialysis, age, and BSA, and
may be expressed as:
PMJohn = PMDialQuest * PMAge * PMBSA
Using the adjustment factors from Table 10, John's PM is:
PMJohn = 1.510 * 1.013 * 1.0709 = 1.6381
For treatments furnished between January 1, 2011 and March 15,
2011, John's payment rate per treatment would be:
$239.21 * 1.6381 * .969 = $379.70
After March 15, 2011, when the onset of dialysis adjustment has
expired, the payment would be $251.45, as calculated in Example 1.
Example 3--ESRD Patient With Multiple Co-Morbidities
Mary, a 66 year old female, is 167.64 cm. (1.6764 m.) in height and
weighs 105 kg. She has diabetes mellitus and cirrhosis of the liver.
Mary was diagnosed with ESRD in 2006, and has been on HD since that
time. Mary was admitted for a two week hospitalization from January 2-
16, 2011 due to gastrointestinal tract bleeding, a diagnosis confirmed
upon discharge. Mary's hemorrhaging due to her GI bleeding ceased
during her hospitalization. While in the hospital, Mary received
inpatient dialysis. Mary was also discharged with a diagnosis of
monoclonal gammopathy. After convalescing at home for 3 days, she
resumed HD at an ESRD facility on January 20, 2010. The facility
records the GI bleeding and monoclonal gammopathy diagnoses using the
relevant ICD-9-CM codes for treatments received during the month of
January. For claims submitted beginning with the month of February and
continuing thereafter, the facility reports only the monoclonal
gammopathy diagnosis, a chronic condition.
The BMI calculation is:
BMI = weight kg/height(m2)
BMIMary = 105/1.6764 2
= 105/2.8103
= 37.3626
Table A in the Appendix reveals that the PM in this example must be
considered using the case-mix adjustments for gastrointestinal tract
bleeding, monoclonal gammopathy, age, and BSA. Although Mary has
diabetes and cirrhosis of the liver, these co-morbidities are not used
in determining the case-mix adjusters under the ESRD PPS. The formula
for calculation of a patient's BSA is:
BSA = 0.007184 * heightcm.725 * weightkg.425
BSAMary = 0.007184 * 167.64.725 * 105.425
= 0.007184 * 40.9896 * 7.2278
= 2.1284
Using the Table A in the Appendix multiplier of 1.020, Mary's case-
mix adjustment or PM based on her BSA of 2.1284 is computed as follows:
PMBSA = 1.020 (2.1284-1.87)/0.1
= 1.020 2.584
= 1.0525
Although Mary has both an acute co-morbidity (GI bleeding) and a
chronic co-morbidity (monoclonal gammopathy) for the month of January,
the facility may only be paid using the condition with the higher
adjustment factor for the maximum number of 4 consecutive claim months
in which payment for both co-morbidities must be considered. Because
the case-mix adjustment for GI bleeding (1.183) exceeds that for
monoclonal gammopathy (1.024), Mary's case-mix adjustment for co-
morbidities will reflect GI bleeding only for treatments received in
January 2011 through April 2011. Therefore, for these treatments,
Mary's PM may be expressed as:
PMMary = PMage * PMBSA * PMGIBleed
= 1.000 * 1.0525 * 1.183
= 1.2451
For treatments received from January 20, 2011 through April 2011,
Mary's payment rate per treatment is:
$239.21 * 1.2451 * .969 or $288.61
Beginning with claims for May, only one co-morbidity applies for
payment purposes, monoclonal gammopathy, for which the PM is 1.024. As
this is a chronic condition, beginning with treatments furnished in May
and continuing thereafter, Mary's PM may be expressed as:
PMMary = PMage * PMBSA * PMMono
= 1.000 * 1.0525 * 1.024
= 1.0778
For treatments received in May 2011 and thereafter, provided no
other co-morbidities apply, Mary's payment rate per treatment would be:
$239.21 * 1.0778 * .969 or $249.83
Example 4--ESRD Patient With Multiple Co-Morbidities, Onset of Dialysis
Adjuster, Training Treatments, and Acute Co-Morbidity Recurrence Apply
Ted, a 30-year-old male, began in-center HD on March 20, 2011. Ted
has type II diabetes mellitus, sickle cell anemia, and was diagnosed on
March 2 with bacterial pneumonia, which was treated with antibiotics.
After completing his course of treatment with antibiotics, Ted was
declared free of pneumonia on April 15. Because the patient has family
caregivers available to assist him, Ted expressed a desire to become a
PD patient. His nephrologist agreed that Ted was a suitable candidate
for CAPD. On June 20, 2011, Ted began a series of 12 training
treatments at his dialysis facility (one which does not qualify for the
low-volume adjustment, but which is certified to provide home dialysis
training) to transition to CAPD. These training treatments ended on
July 21, 2011. Between July 18 and July 21, Ted had 2 training
treatments. Ted successfully began CAPD on July 23, 2011, but was again
diagnosed with bacterial pneumonia on August 10. After prolonged
treatment with antibiotics, Ted was declared free of pneumonia on
November 15, 2011.
Ted is 170 cm. (1.70 m.) in height and weighs 78 kg. Table A in the
Appendix reveals that the case-mix adjusters which must be considered
in this case are those for age, BSA, onset of dialysis, bacterial
pneumonia, and sickle cell anemia. As will be shown Ted does not
qualify for the low BMI adjustment. In addition, the training add-on of
$33.44 per treatment (prior to adjustment for area wage levels) must
also be considered in the payment computations.
BMITed = weightkg/height (m\2\)
= 78/1.70\2\
= 78/2.89
= 26.99
Because Ted's BMI exceeds the required threshold value of 18.5,
there is no case-mix adjustment for low BMI. The formula for the
calculation of a patient's BSA is:
BSA = 0.007184 * heightcm\.725\ * weightkg\.425\
[[Page 49149]]
Ted's BSA is calculated as:
BSATed 0.007184 * 170\.725\ * 78\.425\
= 0.007184 * 41.4072 * 6.3700
= 1.8949
Using the Table A in the Appendix multiplier of 1.020, Ted's case-
mix adjustment based on his BSA of 1.8949 is computed as follows:
PMBSA = 1.0201,8949-1.87)/0.1
= 1.020\.249\
= 1.0049
The onset of dialysis adjustment is applicable in Ted's case, and
extends from March 20, 2011 through July 17, 2011 (120 days). During
this period, no case-mix adjustments for co-morbidities may be applied
because the onset of dialysis adjustment supersedes the application of
case-mix adjusters for co-morbidities. Neither may the training add-on
be paid for the 10 training treatments furnished during the period the
onset of dialysis adjustment is in effect. The only pertinent case-mix
adjustments are those for age, BSA, and the onset of dialysis. For the
120 day period from March 20, 2011, through July 17, 2011, Ted's PM is
calculated as follows:
PMTED = PMage * PMBSA *
PMDial/Onset
= 1.171 * 1.0049 * 1.510
= 1.7769
Ted's ESRD payment rate per treatment from March 20, 2011 through
July 17, 2011 would be:
$239.21 * 1.7769 * .969 = $411.88
For the 2 training treatments furnished between July 18 and July
21, the dialysis facility would receive a training add-on for each
treatment, computed as follows:
Training rate--$33.44
Wage index--1.10
Training payment--$33.44 * 1.10 = $36.78
Because Ted has a chronic co-morbidity, sickle cell anemia, the
payment rate per treatment for dialysis treatments beginning July 18
must reflect case-mix adjustments for age, BSA, and sickle cell anemia:
PMTed = PMage * PMBSA * PMSickle
= 1.171 * 1.0049 * 1.072
= 1.2615
Ted's ESRD payment rate per treatment (excluding the training add-
on amount for 2 training treatments) would be:
$239.21 * 1.2615 = $301.76
Total payments for each of the 2 training treatments provided
between July 18 and July 21 would be:
($301.76 + $36.78) * .969 = $328.05
For claims submitted beginning August 2011, Ted's dialysis facility
correctly reported the co-morbidities of sickle cell anemia and
bacterial pneumonia. Because payment can only be made for the condition
which yields the highest payment where two or more co-morbidities
apply, Table A in the Appendix reveals that bacterial pneumonia is the
condition with the higher case-mix adjuster (1.135). Therefore, this is
the co-morbidity that will be reflected in the computation of Ted's PM
as follows for claims submitted for the 4 months of August 2011 through
November 2011 (the maximum number of claim months an acute co-morbidity
case-mix adjuster can be applied without a subsequent recurrence):
PMTed = PMage * PMBSA * PMPneum
= 1.171 * 1.0049 * 1.135
= 1.3356
Ted's ESRD payment rate per treatment for the months of August 2011
through November 2011 would be:
$239.21 * 1.3356 * .969 = $309.58
After November 2011, the only co-morbidity that would apply in
computing the payment rate is Ted's chronic sickle cell anemia, for
which the PM is 1.072. Beginning with claims submitted for the months
of December 2011 and thereafter, assuming no other changes in Ted's
condition, the payment rate per treatment would be based on the
following case-mix adjusters:
PMTed = PMage * PMBSA * PMSickle
= 1.171 * 1.0049 * 1.072
= 1.2615
Beginning with monthly claims for December 2011 and thereafter,
Ted's ESRD payment rate per treatment would be:
$239.21 * 1.2615 * .969 = $292.41
Example 5--Aged ESRD Patient With Low BMI (< 18.5kg/m2),
History of Hospitalization, Multiple Co-Morbidities, and Treatment in a
Facility Qualifying for the Low-Volume (LV) Adjustment
Agnes, an 82 year old female, is 160.02 cm. (1.6002 m.) in height
and weighs 45.36 kg. She has longstanding type II diabetes mellitus and
was diagnosed with ESRD in 2008. The patient has coronary artery
disease and peripheral vascular disease. In January 2009, Agnes began
dialyzing with an upper arm AV fistula which had been created the
previous year. In March 2010, after an unsuccessful attempt to declot
the AV fistula during hospitalization, Agnes experienced additional
bleeding complications and has been dialyzed using a catheter ever
since. In December 2010, the patient was admitted to the hospital after
fainting during an outpatient dialysis treatment. She was diagnosed
with pericarditis and discharged January 11, 2011. She resumed
outpatient dialysis on January 13, 2011 at a facility which qualifies
for the LV adjustment, because it has never had a treatment volume
exceeding 3500 treatments since it opened in 2005. Her treating
physician declared her free of pericardial inflammation on February 12,
2011. On April 10, 2011, Agnes was hospitalized with bacterial
pneumonia and remained hospitalized until April 25. She resumed
outpatient dialysis on April 28. Agnes was declared free of bacterial
pneumonia on May 15, 2011, after post-hospitalization treatment with
antibiotics. The facility submitted monthly claims for the months of
January and February 2011 with the reported diagnosis of pericarditis.
For dialysis treatments furnished during the month of March, the
facility submitted a monthly claim reporting no co-morbidities. For
dialysis treatments furnished Agnes during the months of April and May,
the facility reported on the monthly claims the co-morbidity of
bacterial pneumonia.
We must first use Agnes' height and weight to determine if a case-
mix adjustment for low BMI applies and determine Agnes' BSA. BMI is
computed as follows:
BMIAgnes = weightkg/height(m2)
= 45.36/1.60022
= 45.36/2.5606
= 17.71
Agnes' BMI is less than 18.5. Therefore, her PM must include the
2.5 percent case-mix adjustment for underweight status.
The BSA formula is:
BSA = 0.007184 * heightcm.725 * weightkg.425
Agnes' BSA is calculated as:
BSAAgnes = 0.007184 * 160.02.725 * 45.36.425
= 0.007184 * 39.6302 * 5.0592
= 1.4404
Using the Table A in the Appendix multiplier of 1.020, Agnes' case-
mix adjustment based on her BSA of 1.4404 is calculated as follows:
PMBSA = 1.020(1.4404-1.87)/0.1
= 1.020-4.296
= .9184
The applicable factors that should be used to calculate Agnes' PM
are the case-mix adjusters for age, BSA, low BMI, pericarditis,
bacterial pneumonia, and the facility adjuster for LV.
For the months of January and February 2011, Agnes' ESRD facility
reported on her monthly claims the pericarditis co-morbidity. Using the
[[Page 49150]]
Table A in the Appendix adjusters, Agnes' PM for the months of January
and February may be expressed as:
PMAgnes = PMage * PMBSA * PMBMI * PMPericard * PMLV = 1.016 * .9184 *
1.025 * 1.114 * 1.189 = 1.2668
Agnes' ESRD payment rate for treatments furnished in January,
February, and March 2011 would be:
$239.21 * 1.2668 * .969 = $293.64
Although Agnes no longer had pericarditis as of February 12, 2011,
her facility is entitled to payments for treatments furnished in March
which reflect a case-mix adjustment for this acute co-morbidity,
because case-mix for an acute co-morbidity may be applied for claims
submitted for four claim months unless another co-morbidity yields a
higher payment amount. Agnes' PM for April 2011 reflecting pericarditis
is as follows:
PMAgnes * PMage * PMBSA * PMBMI * PMPericard * PMLV = 1.016 * .9184 *
1.025 * 1.114 * 1.189 = 1.2668
Her PM reflecting the co-morbidity of bacterial pneumonia is:
PMAgnes = PMage * PMBSA * PMBMI * PMPneum * PMLV = 1.016 * .9184 *
1.025 * 1.135 * 1.189 = 1.2907
Agnes' dialysis facility normally would be entitled to a payment
adjustment for treatments reflecting the pericarditis co-morbidity for
3 claim months after February 2011, because a payment adjustment
reflecting a co-morbidity may be paid for 4 claim months, including the
month in which the diagnosis was present and dialysis treatments were
furnished. However, in April Agnes was diagnosed with bacterial
pneumonia. Because Agnes' PM based on pneumonia is higher than that for
pericarditis, her payment rate for April 2011 will be based on the
bacterial pneumonia co-morbidity as follows:
$239.21 * 1.2907 * .969 = $299.18
Because Agnes' dialysis facility is entitled to payments reflecting
the bacterial pneumonia co-morbidity for claims for 4 claim months, the
payment rate of $299.18 per treatment would apply for all treatments
furnished in April through the month of July 2011, provided there are
no other changes in Agnes' condition.
Example 6--Same as Example 1, With Outlier Payments (For a Description
of the Outlier Payment Methodology, See Section II.H. of This Final
Rule)
John receives HD 3 times weekly. However, in January 2011 he
suffered a compound ankle fracture and was hospitalized for 4 days from
January 10 through 14. During the hospitalization John did not undergo
any dialysis treatments. After discharge John resumed his dialysis
treatments, but it was noted that his dialysis clinical indicators were
markedly perturbed from baseline values, requiring additional
laboratory testing and above average doses of several injectable drugs,
particularly EPO, to return them to normal levels. During January 2011
John received 9 outpatient HD treatments at his usual facility. The
facility submitted a claim for allowable outlier services including
drugs and biologicals, laboratory tests, and supplies totaling
$3,000.00
Using Table A in the Appendix, we begin by computing the predicted
outlier services MAP per treatment based on the SB case-mix adjustment
factors for the PM variables applicable to John, age and BSA:
SBPMJohn = PMageSB * PMBSASB
John's BSA from Example 1 is 2.2161. Applying the SB adjustment
factor from Table 10 for BSA, John's outlier services PM for BSA is
computed as follows:
SBPMBSA = 1.014(2.2161-1.87)/0.1 = 1.0143.461 =
1.0493
John's outlier services PM is calculated as:
SBPMJohn = .992 * 1.0493 = 1.0409
From Table 28, we determine that the outlier services MAP per
treatment for adult patients is $82.78. Therefore, the case-mix
adjusted predicted outlier services MAP per treatment for John is:
$82.78 * 1.0409 = $86.17
Next, we determine the imputed outlier services MAP amount per
treatment which reflects the cost of outlier services actually incurred
by the ESRD facility. John's outlier services imputed amount averaged
$3000.00/9 or $333.33 per session.
Next, we must determine if John's dialysis facility is entitled to
outlier payments by comparing the predicted outlier services MAP amount
to the imputed outlier services MAP amount. But first, we must add the
fixed dollar loss amount to the predicted outlier services MAP amount.
The fixed dollar loss (FDL) amount for the predicted outlier
services MAP, reflecting the case-mix adjustments for John for age and
BSA is:
JohnFDL = $86.17 + $155.44 = $241.61
Because John's average outlier services MAP for the outlier
services services received was $333.33, which exceeds the outlier
services MAP plus the FDL totaling $241.61, John's ESRD facility is
eligible for outlier payments beyond the otherwise applicable ESRD PPS
payment amount of $251.45.
The outlier payments are calculated as follows:
Amount by which the imputed amount exceeds the predicted amount plus
the FDL-- $333.33 - $241.61 = $91.72
Loss sharing ratio--80%
Outlier payments per treatment--$91.72 * .80 = $73.38
Outlier payments--$73.38 * 9 treatments * .969 = $639.95
Regular ESRD payments for January 2011--$251.45 * 9 = $2263.05
Total ESRD PPS payments for January 2011--$2263.05 + $639.95 = $2903.00
Example 7--Pediatric ESRD Patient Receiving Treatments in a Low-Volume
(LV) Facility; Outlier Payments Apply
Timmy is a 16 year old male with ESRD due to renal hypoplasia. The
patient was on PD until 2009, when he received a deceased donor kidney
transplant. Timmy's transplant failed in August 2010, and he has been
on HD since that time. The patient receives dialysis through an AV
graft. Timmy has a history of post-transplant lymphoma, which is in
remission. He also has diabetes mellitus, which developed after the
kidney transplantation. Timmy weighs 66.2 kg. and is 161.6 cm. in
height. He was hospitalized in December 2010 with Staph bacteremia. As
part of his HD, Timmy receives ARANESP[supreg] 60 mcg. IV q 2 weeks,
paracalcitol 4 mcg. IV 3 times a week, and iron dextran 100 mg. IV
every 2 weeks. The patient also takes 2 tablets, 667 mg. each of
calcium acetate 3 times per day. Timmy had 12 HD treatments in January
2011. The ESRD facility, which qualifies for the LV adjustment for
adult patients, submitted a January claim for allowable outlier
services including drugs and biologicals, laboratory tests, and
supplies totaling $3800.00.
Co-morbidities are not used to determine a pediatric patient's ESRD
payment rate because these factors have been taken into account in the
pediatric payment adjustments. Neither is the LV adjustment applicable
to pediatric dialysis patients. The only variables relevant in
determining Timmy's payment amount per treatment, without regard to
outlier payments, are age and dialysis modality. Because Timmy is 16
and undergoes HD, Table B in the Appendix reveals that his pediatric
classification group is category 4, for which the PM is 1.277. Timmy's
payment rate per treatment, without regard to outlier payments, is:
$239.21 * 1.277 * .969 = $296.00
Timmy's dialysis facility would receive $296.00 for each of the 12
[[Page 49151]]
treatments it furnished in January 2011. Table B in the Appendix
reveals that the SB case-mix adjustment factor for Timmy's pediatric
classification group (cell 4) is 1.459.
From Table 28, we determine that the outlier services MAP per
treatment for pediatric patients is $53.06. Therefore, the case-mix
adjusted predicted outlier services MAP per treatment for Timmy is:
$53.06 * 1.459 = $77.41
Next, we determine the imputed outlier services MAP amount per
treatment which reflects the cost of outlier services actually incurred
by the ESRD facility. Timmy's outlier services imputed amount averaged
$3800.00/12 or $316.67 per treatment.
We then determine if Timmy's dialysis facility is entitled to
outlier payments by comparing the predicted outlier services MAP amount
to the imputed outlier services MAP amount. But first, we must add the
fixed dollar loss amount to the predicted outlier services MAP amount.
The fixed dollar loss (FDL) amount for the predicted outlier services
MAP, reflecting Timmy's pediatric classification group, is:
TimmyFDL = $77.41 + $195.02 = $272.43
Because Timmy's average outlier services MAP for the outlier
services received was $316.67, which exceeds the outlier services MAP
plus the FDL totaling $272.43, Timmy's ESRD facility is eligible for
outlier payments beyond the otherwise applicable ESRD PPS payment
amount of $296.00.
The outlier payments are calculated as follows:
Amount by which the imputed amount exceeds the predicted amount plus
the FDL--$316.67-$272.43 = $44.24
Loss sharing ratio--80%
Outlier payments per treatment--$44.24 * .80 = $35.39
Outlier payments--$35.39 * 12 treatments * .969 = $411.51
Regular ESRD payments for January 2011--$296.00 * 12 = $3552.00
Total ESRD PPS payments for January 2011--$3552.00 + $411.51 = $3963.51
Example 8--Pediatric ESRD Patient Receiving Training Treatments in a
Low-Volume Facility
Andrew, a 12 year old male with diabetes mellitus, has been on CCPD
since June 2010. Andrew's father has been deceased for 5 years. His
mother, who assists him with his dialysis at home, will be unable to
assist Andrew with dialysis beginning on February 10, 2011, because of
major surgery which will leave her physically unable to participate in
her son's care for an extended period of time. Andrew's Aunt Millie,
who lives nearby, has agreed to be Andrew's caregiver and assist him
with his dialysis. Millie required 17 training sessions at Andrew's
dialysis facility, which is certified to provide home dialysis
training, in order to become knowledgeable and skilled sufficiently to
perform this role. These training sessions began February 16 and ended
March 10. Andrew's dialysis facility, which has been open for 5 years,
has never furnished more than 3100 treatments in a year, and qualifies
for the low-volume (LV) adjustment.
Table B in the Appendix reveals that Andrew's pediatric dialysis
classification group is cell 1, with an associated PM of 1.033.
Although Andrew's dialysis facility is eligible for the LV adjustment
for its adult patients, the LV multiplier does not apply to pediatric
patients. During the months of January and February 2011, Andrew's ESRD
payment rate per HD-equivalent treatment would be:
$239.21 * 1.033 * .969 = $239.44
However, Andrew's dialysis facility is entitled to receive payment
for a maximum of 15 training treatments furnished in connection with
Andrew's new caregiver, Aunt Millie. Because the amount of the training
add-on is adjusted by the dialysis facility's wage index (1.10), the
amount of the training add-on is calculated as follows:
Training rate--$33.44
Wage index--1.10
Training payment--$33.44 * 1.10 = $36.78
For the maximum number of 15 training treatments for which the
training adjustment may be provided in connection with a PD patient,
Andrew's payment rate, including the training add-on, would be:
($239.21 * 1.033 + $36.78) * .969 = $275.08
J. ESRD Bundled Market Basket
Under section 1881(b)(14)(F)(i) of the Act, as added by section
153(b) of MIPPA and amended by section 3401 of Public Law 111-148,
beginning in 2012, the ESRD bundled payment amounts are required to be
annually increased by an ESRD market basket increase factor that is
reduced by the productivity adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act. The statute further provides that the
market basket increase factor should reflect the changes over time in
the prices of an appropriate mix of goods and services used to furnish
renal dialysis services. Under section 1881(b)(14)(F)(ii) of the Act,
as added by section 153(b) of MIPPA and amended by section 3401(h) of
Public Law 111-148, the ESRD bundled rate market basket increase factor
will also be used to update the composite rate portion of ESRD payments
during the ESRD PPS phase-in period from 2011 through 2013, though
beginning in 2012, such market basket increase factor will be reduced
by the productivity adjustment. We intend to address in future
rulemaking the productivity adjustment that will be applicable
beginning in 2012. With regard to application of the ESRD bundled rate
market basket in CY 2011, we note that as a result of amendments by
section 3401(h) of Public Law 111-148 to section 1881(b)(14)(F) of the
Act, a full market basket will be applied to the composite rate portion
of the blended payment during the first year of the transition (i.e.,
1.0 percentage point will not be subtracted). Therefore, we have
modified Sec. 413.196 by making conforming changes as a result of the
Affordable Care Act.
As required under section 1881(b)(14) of the Act, effective for CY
2012 (and for purposes of the first year of the transition, CY 2011),
CMS has developed an all-inclusive ESRD bundled rate (ESRDB) input
price index. 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.
A market basket has historically been used under the Medicare
program to account for the price increases of the requisite inputs
associated with the services furnished by providers. The percentage
change in the ESRDB market basket reflects the average change in the
price of goods and services purchased by ESRD facilities in providing
renal dialysis services. Since a single payment rate exists for both
operating and capital-related costs, the ESRDB market basket for ESRD
facilities includes both operating and capital-related costs.
In the proposed rule (74 FR 49997 through 50003), we discussed the
development of the proposed cost categories and their respective
weights for the ESRDB market basket using CY 2007 as the base year, the
choices of price proxies, and an explanation of the methodology and
results of the proposed ESRDB market basket. As described in the
proposed rule (74 FR 49997), using a base year of CY 2007 and Medicare
cost report data, we first
[[Page 49152]]
computed cost shares for the following nine major expenditure
categories: (1) Wages and Salaries, (2) Employee Benefits for direct
patient care, (3) Pharmaceuticals, (4) Supplies, (5) Laboratory
Services, (6) Blood Products, (7) Administrative and General and Other
(A&O), (8) Housekeeping and Operations, and (9) Capital-Related costs.
We then supplemented the Medicare Cost Report data with additional data
sources and expanded these cost categories to ultimately derive the 16
proposed ESRDB market basket cost categories and weights (74 FR 49998
through 50001). Also in the proposed rule, we described our selection
of, and the rationale for, the appropriate price proxies to measure the
rate of price change for each category (74 FR 50001 through 50002), as
well as provided the projected annual rates of growth in the ESRDB
market basket for CY 2009 through CY 2019 based on the most recent
forecast available at the time. Additionally, we proposed that the
ESRDB labor-related share equal 38.160 percent, which represented the
sum of the weights for the following cost categories: Wages and
Salaries, Benefits, Housekeeping and Operations, All Other Labor-
related Services, 87 percent of the cost weight for Professional Fees,
and 46 percent of the weight for Capital-related Building and Equipment
expenses (74 FR 50003).
The comments we received on these proposals and the responses are
set forth below.
Comment: A commenter expressed concern that the proposed ESRD
bundled PPS suggests that 42.8 percent of the facility's ESRD treatment
costs are labor-related. The commenter was concerned that staff levels
will be reduced to compensate for the revenue loss realized by the
regressive formula of the proposed payment system.
Response: The labor-related share in the ESRD bundled proposed rule
was 38.160 percent (74 FR 50003). We are uncertain how the commenter
calculated 42.8 percent. To provide clarification for the commenter, we
note that the labor-related share of the ESRDB market basket is defined
as the national average proportion of operating costs that are related
to, influenced by, or vary with the local labor market. This share
represents the proportion of an ESRD facility's payment that is
adjusted for geographic wage differences. As discussed below, we have
made several methodological changes to the ESRDB market basket based on
the public comments received. The new labor-related share is 41.737
percent. We will closely monitor the cost structure of the ESRD
industry and the labor-related share of the ESRDB market basket,
following implementation of the ESRD PPS. If new data show material
shifts in the average cost structure for ESRD providers, including
changes in the labor-related share, we will propose to rebase the ESRDB
market basket, as technically appropriate.
Comment: Several commenters recommended using 2008 or 2009 as the
base year for the ESRDB market basket in order to more accurately
represent the changes in facility operating costs that resulted from
the compliance with the Conditions for Coverage and other trends.
Commenters stated that cost reports from 2008 are available for CMS to
use, and although they are not settled, MedPAC analysis found little
difference between submitted and settled cost reports.
Response: We agree with the commenters with regard to the issue of
using more updated data for the base year for the development of the CY
ESRDB market basket. As we indicated in the proposed rule, we proposed
to use CY 2007 because it was the most recent year that both relatively
complete Medicare cost report data and supplemental data from the
Census' Business Expenditure Survey (BES) were available (74 FR 49997).
That is, the proposed ESRDB market basket was developed over the winter
of 2008 and spring of 2009. At that time, 2007 Medicare cost reports
(MCR) represented the most complete set of data available. Therefore,
the methodology used to finalize the proposed ESRDB market basket
estimates was completed well in advance. The 2007 MCR data are
comprised of financial data for ESRD facilities reporting on different
fiscal years, including but not limited to federal fiscal, calendar,
and ``state'' fiscal year (July 1 to June 30). A facility's MCR data
are typically available between nine months and one year from the end
of the facility's fiscal period. Since publication of the proposed
rule, we have reviewed the 2007 MCR data using a complete sample and
found that the cost weights are not materially different relative to
those found in the proposed 2007 ESRDB market basket.
The agency monitors market basket cost weights regularly to
determine if significant changes have occurred from one year to the
next. To that end, and based on public comment, we have constructed and
analyzed cost weights from the newly available 2008 MCRs and determined
there has been a material shift in the cost structure of ESRDs from
2007 to 2008. Specifically, there was a notable decrease in the
Pharmaceuticals cost weight for 2008 compared to 2007 (as discussed in
more detail below). Therefore, we believe it is appropriate to use the
2008 MCR data for the base year cost weights of the ESRDB market
basket. We will continue to closely monitor the cost report data as the
ESRD PPS is implemented; and should we observe any additional material
changes in the cost structure of the industry, we will propose to
rebase and revise the ESRDB market basket accordingly.
Comment: Several commenters applauded CMS's decision to use the
Producer Price Index (PPI) for prescription drugs as the price proxy
for measuring price growth in ESRD drugs in the proposed ESRDB market
basket.
Response: We appreciate commenters' support for using the PPI for
prescription drugs as the price proxy for measuring price growth for
the ESRD drugs cost category. In this rule, we are finalizing the
selection of this proxy for the following three reasons:
(1) Relevance: This index contains an appropriate level of
aggregation for use in the Medicare market baskets (including former
Part D drugs covered in the ESRD bundle), as well as reflects
competitive pricing observed in efficient markets.
(2) Reliability: This index represents a consistent time series and
allows for projections of future price changes that are based on
technically sound econometric modeling techniques that are widely
accepted.
(3) Timeliness/Public Availability: The Bureau of Labor Statistics
independently publishes this data on a monthly basis with no
significant methodological changes.
Comment: Several commenters believe that a better price proxy for
drugs in ESRD facilities is the National Health Expenditure (NHE)
estimate of prescription drug spending.
Response: We believe the NHE estimate of prescription drug spending
growth is not an appropriate price proxy for use in the ESRDB market
basket. NHE growth rates reflect changes in total spending (that is,
prices and quantities). The ESRDB market basket is intended to only
reflect price changes, holding quantities fixed in a base year. For the
reasons outlined above, we believe the PPI for prescription drugs is
the appropriate price proxy to apply to the drugs cost category in the
ESRDB market basket.
Comment: Several commenters opposed the use of the Employment Cost
Index (ECI) for Health Care and Social Assistance as the price proxy
for Wages and Salaries. These commenters recommended that CMS use the
ECI for Hospitals as the price proxy because
[[Page 49153]]
they claim it more accurately reflects the occupational mix in ESRD
facilities than the ECI for Health Care and Social Assistance.
Response: In the proposed rule, we proposed to use the ECI for
Health Care and Social Assistance to proxy the Wages and Salaries cost
category (74 FR 50001). That selection was largely driven by the ESRD
industry's inclusion in the North American Industry Classification
System's (NAICS) category 621, Ambulatory Health Care Services, which
is one component that makes up the ECI for Health Care and Social
Assistance (NAICS 62).
In response to commenters' concerns, we have reviewed the
occupational mix of ESRD facilities and compared it in detail to that
of hospitals (found in NAICS category 622), nursing and residential
care facilities (found in NAICS category 623), and the compilation of
industries contained in the Health Care and Social Assistance category
(NAICS category 62). To do this, we compared Full Time Equivalent (FTE)
data from the ESRD Medicare cost reports with occupational composition
data found in the Occupational Employment Statistics produced by the
Bureau of Labor Statistics (BLS). We found that ESRD facilities have a
somewhat unique occupational mix that differs, to varying degrees, from
hospitals, nursing and residential care facilities, and the compilation
of industries found in the health care and social assistance
classification. These three comparisons were selected as they represent
the health industries for which ECIs are available.
Based on our analysis, we agree with the commenters that it would
be appropriate to consider the use of the ECI for Hospitals as a price
proxy for this category. In our follow-up analysis, we noted that the
ESRD industry's occupational and skill mix (including physicians,
registered nurses (RN), licensed practical nurses (LPN), and a variety
of technicians) is not fully represented in NAICS category 62 (Health
Care and Social Assistance). In comparing the ESRD occupational mix to
the occupational mix of hospitals, we found that for many of the higher
skilled occupations, the ESRD industry did bear certain similarities to
that of the hospital industry. As a result, we have determined it would
be appropriate to account for the unique occupational mix in ESRD
facilities by utilizing a blended price proxy for the Wages and
Salaries cost category. The blended proxy will incorporate the Wages
and Salaries ECI for Health Care and Social Assistance (representing 50
percent of the blend) and the Wages and Salaries ECI for Hospitals
(representing the other 50 percent of the blend). In addition to using
a blended ECI as the price proxy for Wages and Salaries, we will also
use a blended ECI as the price proxy for the Benefits cost category
using the same 50/50 ratio. Those ECIs include the Benefits ECI for
Health Care and Social Assistance (50 percent) and the Benefits ECI for
Hospitals (50 percent).
Comment: Several commenters requested that CMS provide additional
detail on the ESRDB market basket, stating that there were holes in
documenting the methodology for its development. Particularly, the
commenters stated that CMS omitted a significant amount of detail on
the price proxies and did not provide the prospective reference data
from which the price proxies are extracted. These commenters requested
that CMS put the detailed forecast of the price proxies on the CMS Web
site for public view. They noted that the information provided should
be available to replicate the results of the ESRDB market basket, as
proposed.
Response: We agree that the public should be able to replicate the
methodology used to construct the ESRDB market basket. We disagree,
however, with the commenters' claim that the proposed rule lacked
significant documentation regarding the methodology used to construct
the ESRDB market basket. The proposed rule provided a detailed
description of the data sources used to develop the ESRDB market basket
cost weights (74 FR 50001). Likewise, as indicated in the proposed
rule, the price proxies used in the ESRDB market basket were listed for
each cost category and are based on data maintained and published by
the BLS (74 FR 50001 through 50002). We would refer the commenter to
BLS regarding any specific information on the detailed price proxies.
To assist the commenter and other interested stakeholders in
locating these price proxies on the BLS Web site, we have provided the
individual BLS series codes for the indexes in the price proxy
discussion of this final rule (below). The price proxies can be
obtained by entering these codes at the BLS Web site (http://data.bls.gov/cgi-bin/srgate). Regarding the individual forecasts of the
price proxies used to develop the CY 2011 ESRDB market basket update
factor, these forecasts are developed by IHS Global Insight,
Incorporated (IGI), a nationally recognized economic and financial
forecasting firm. We purchase IGI's detailed price proxy projections
for use in the Medicare market baskets. As a matter of practice, we
publish all of the underlying detail for each price proxy for the
historical period. However, because the projections of each individual
price proxy are proprietary, we typically aggregate those projections
into higher level categories and then publish the results with usually
a one-quarter lag. Since the ESRDB market basket is a new market basket
that is still progressing through the rule-making process, we have not
published additional detail other than what has been published in the
proposed rule. Following implementation of this PPS, we will begin
publishing the ESRDB market basket, including the detail as described
above, on the CMS Web site (http://www.cms.hhs.gov/MedicareProgramRatesStats/04_MarketBasketData.asp#TopOfPage).
Comment: Several commenters stated that CMS did not specify a plan
for the frequency of rebasing and revisions of the ESRDB market basket.
Commenters stated that CMS usually rebases on a 4-year cycle in other
provider indexes. They noted that this is an appropriate timeframe for
the rebasing of the ESRDB market basket.
Response: We monitor the market basket cost weights regularly to
determine if significant changes have occurred from one year to the
next. In general, we have typically proposed to rebase and revise the
market baskets roughly every five years; although we have proposed
alternatives to that rate when technically appropriate or when mandated
by law (for example, the Inpatient Hospital Prospective Payment System
(IPPS) market basket is required to be rebased more frequently than
every five years, in accordance with Section 404 of Pub. L.108-173). We
are unable to provide a specific rebasing schedule for the ESRDB market
basket, in part, because this is a new payment system that is being
implemented making it particularly difficult to say with certainty how
frequently rebasings would be technically appropriate. In general, we
do not explicitly state how often any market basket will be rebased or
revised, unless there is a mandated rebasing schedule. As is the
agency's practice, we will continuously monitor the composition of the
new ESRDB market basket to determine the next technically appropriate
time to rebase and revise the index. At that time, the agency will go
through the notice and comment rulemaking process including proposing
and finalizing any changes after consideration of public comments.
Comment: One commenter believes that the ESRDB market basket update
will not address the low margins for small dialysis organizations
(SDOs), especially in the context of a two
[[Page 49154]]
percent reduction in payments under the ESRD PPS. The commenter stated
that ESRDB market basket updates to payments in the following years
should reflect increases in costs, and that it will likely not be
enough to increase the SDO margins even to current levels.
Response: The impact on SDOs is addressed in section IV.B of this
final rule. The ESRDB market basket calculations produced by the Office
of the Actuary in CMS are constructed entirely independent from any
margins analysis. The ESRDB market basket updates represent the net
result of combining price projections for each individual cost category
with that category's respective cost weight.
Notably, the CMS market baskets are not intended to update payments
based on projected costs, which are equal to prices multiplied by
quantities. The purpose of the ESRDB market basket, rather, is to
update the base payment rate to account for the projected input price
inflation associated with the goods and services required to provide
ESRD bundled services while holding that market basket of goods and
services constant.
As a result of public comments, we have made several methodological
changes to the proposed ESRDB market basket. First, as discussed above,
we are using a 2008 base year rather than a 2007 base year for the
ESRDB market basket. This year represents the latest year for which
appropriately complete data are available. Second, we have changed the
price proxies for the Wages and Salaries and the Benefits cost
categories from ECIs for Health Care and Social Assistance (NAICS
category 62) to blended indexes of the ECIs for Hospitals and the ECIs
for Health Care and Social Assistance (as detailed above). Third, we
are no longer including blood and blood products in the ESRDB market
basket.
In the proposed rule, blood and blood products were included in the
proposed ESRDB market basket (74 FR 49999) since these products were
included in the proposed ESRD bundled payment. However, as explained in
section II.A.4. of this final rule, we have decided to remove blood and
blood products from the bundled payment in response to public comment.
Therefore, since blood and blood products are no longer included in the
ESRD bundled payment, it is no longer appropriate to include that
category in the ESRDB market basket.
Lastly, we are delaying the inclusion of costs associated with
oral-only drugs and biologicals formerly covered under Part D that have
no injectable equivalents (or other form of administration) in the
ESRDB market basket. Similar to blood and blood products, these costs
were included in the ESRDB market basket in the proposed rule (74 FR
49999) due to these products being included in the proposed ESRD
bundled payment. However, in response to public comment, CMS has
decided to delay implementation of including ESRD-related oral-only
Part D drugs (without injectable equivalents or other forms of
administration) in the bundled payment, as stated in section II.A.3. of
this final rule. Therefore, it is no longer appropriate to include the
costs associated with these products in the ESRDB market basket for
this final rule.
Below we discuss the ESRDB market basket we are finalizing,
including the changes noted above. Additionally, in response to public
comments, where relevant, we include the applicable BLS series code for
the various price proxies. We believe this provides added transparency
for the new ESRDB market basket.
Cost Category Weights
The ESRDB market basket cost weights in this final rule are based
on the CY 2008 cost report data for independent ESRD facilities. We
refer to the ESRDB market basket as a CY market basket because the base
period for all price proxies and weights are set to CY 2008 = 100.
Source data included CY 2008 Medicare cost reports (Form CMS-265-94),
supplemented with 2002 data from the U.S. Department of Commerce,
Bureau of the Census' Business Expenditure Survey (BES). The BES data
were aged to 2008 using appropriate price proxies to estimate price
growth. The price proxies used for the aging of the BES data come from
publicly available price indexes such as various producer price indexes
(PPI), consumer price indexes (CPI), or employment cost indexes (ECI).
All of these price proxies are based on data published by the U.S.
Department of Labor, Bureau of Labor Statistics (BLS).
Using Worksheets A, A2, and B from the CY 2008 Medicare cost
reports, we first computed cost shares for eight major expenditure
categories: Wages and Salaries, Employee Benefits for direct patient
care, Pharmaceuticals, Supplies, Laboratory Services, Administrative
and General and Other (A&O), Housekeeping and Operations, and Capital-
Related costs. In the proposed rule, we had initially computed cost
shares for nine major expenditure categories (74 FR 49997); however, as
stated earlier, we are now removing blood and blood products from the
ESRDB market basket for this final rule, and therefore, we now yield
one less major expenditure category than stated in the proposed rule.
Edits were applied to include only cost reports that had total costs
greater than zero. In order to reduce potential distortions from
outliers in the calculation of the cost weights for the major
expenditure categories, cost values for each category less than the 5th
percentile or greater than the 95th percentile were excluded from the
computations. The resulting data set included information from
approximately 3,869 independent ESRD facilities' cost reports from an
available pool of 4,299 cost reports. Expenditures for the eight cost
categories as a proportion of total expenditures are shown in Table 30
below. We note that the values calculated for the cost weights in this
table differ from those that were published in the proposed rule (74 FR
49998). This is a result of several factors including: The use of 2008
Medicare cost report data rather than 2007 Medicare cost report data,
the removal of blood and blood products costs from the ESRDB market
basket, and the removal of costs associated with ESRD-related oral Part
D drugs without injectable equivalents from the ESRDB market basket.
While some of these changes in the cost weights are minor, we discuss
the more notable differences in the CY 2007 and CY 2008 cost weights in
the text below.
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Some costs that are required to be included in the ESRD bundled
payment are not reported on the Medicare cost report. As a result, we
supplemented Medicare cost report data with expenditure estimates for
various ESRD-related oral drugs with injectable equivalents that are
currently covered by Medicare Part D, as well as with additional lab
expenses. The estimates for both of the aforementioned expenditures
were provided by Kidney Epidemiology and Cost Center of the University
of Michigan (UM-KECC). There are also costs that are reported on the
Medicare cost report that are not included in the ESRD bundled payment.
For instance, expenses related to vaccine costs were removed from total
expenditures since these are excluded from the ESRD bundled payment.
We expanded the expenditure categories developed from the Medicare
cost reports to allow for a more detailed expenditure decomposition. To
expand these cost categories, BES data were used as the Medicare cost
reports do not collect detailed information on the items in question.
Those categories include: Benefits for all employees, professional
fees, telephone, utilities, and all other services. We chose to
separate these categories to more accurately reflect changes in ESRD
facility costs. We describe below how the initially computed categories
and weights were modified to yield the final ESRDB market basket
expenditure categories and weights presented in this final rule.
Wages and Salaries
The weight for Wages and Salaries that was initially computed was
derived from Worksheet B of the Medicare cost report. However, because
Worksheet B only includes direct patient care salaries, it was
necessary to derive a methodology to include all salaries, not just
direct patient care salaries, in order to calculate the appropriate
ESRDB market basket cost weight. This was accomplished in four steps,
as follows:
(1) From the trial balance of the cost report (Worksheet A), we
computed the ratio of salaries to total costs in each cost center. The
cost centers for which we calculated this ratio were drugs,
housekeeping and operations, A&O, supplies, laboratories, capital-
related machinery, and EPO.
(2) We then multiplied the ratios computed in step 1 by the total
costs for each corresponding cost center from Worksheet B. This
provided us with an estimate of non-direct patient care salaries for
each cost center.
(3) The estimated non-direct patient care salaries for each of the
cost centers on Worksheet B estimated in step 2 were subsequently
summed and added to the direct patient care salary figure (resulting in
a new total salaries figure).
(4) The estimated non-direct patient care salaries (see step 2)
were then subtracted from their respective cost categories to avoid
double-counting their values in the total costs.
As a result of this process, we moved from an estimated Wages and
Salaries cost weight of 22.297 percent (as estimated using only direct
patient care salaries as a percent of total costs found on the Medicare
cost report) to a weight of 26.338 percent (capturing both direct and
non-direct patient care salaries and, again, dividing that by total
costs found on the Medicare cost report), as seen in Table 30. For
comparison purposes, we note that the Wages and Salaries cost weight in
the proposed rule was 25.106 percent (74 FR 49998).
When we add the expenditures related to laboratory expenses that
were previously paid for under the Medicare fee schedule, and are not
included in the Medicare cost report, the expenditures for ESRD-related
oral drugs with injectable equivalents that are currently covered under
Part D that are not included in the Medicare cost report, and remove
the estimated vaccine costs that are to be paid outside of the bundle,
then the cost weight for the Wages and Salaries category falls to
24.965 percent.
The final adjustment made to this category is to include contract
labor costs. These costs appear on the Medicare cost report; however,
they are embedded in the Administrative and General and Other category
and cannot be disentangled using the Medicare cost reports alone. To
move the appropriate expenses from the A&O category to Wages and
Salaries, we used data from the BES. We first summed total contract
labor costs in the survey. We then took 80 percent of that figure and
added it to Wages and Salaries. At the same time, we subtracted that
same amount from A&O. The 80-percent figure that was used was
determined by taking salaries as a percentage of total compensation
(excluding contract labor). The resulting cost weight for Wages and
Salaries increases to 26.755 percent.
Benefits
The Benefits weight was derived from the 2002 BES data aged forward
to 2008 as a benefit share for all employees is not available from the
ESRD Medicare cost report. Due to the change in the base year from CY
2007 (used in the proposed rule (74 FR 49998)) to CY 2008 (used in this
final rule), the 2002 BES data for each of the appropriate cost
categories were aged to 2008 as opposed to 2007. The cost report only
reflects benefits associated with direct patient care. In order to
include the benefits related to non-direct patient care, we estimated
this marginal increase from
[[Page 49156]]
the BES Benefits weight. This resulted in a Benefits weight that was
1.143 percentage point larger (6.306 vs. 5.163) than the Benefits
weight for direct patient care calculated directly from the cost
reports. To avoid double-counting and to ensure all of the market
basket weights still totaled 100 percent, we removed this additional
1.143 percentage point for Benefits from Pharmaceuticals,
Administrative and General and Other, Supplies, Laboratory Services,
Housekeeping and Operations, and the Capital-related Machinery
components. This calculation reapportions the benefits expense for each
of these categories using a method similar to the method used for
distributing non-direct patient care salaries as described above.
The final adjustment made to this category is to include contract
labor costs. Once again, these costs appear on the Medicare cost
report; however, they are embedded in the Administrative and General
and Other category and cannot be disentangled using the Medicare cost
report alone. To move the appropriate expenses from the A&O category to
Benefits, we followed the same methodology used to apportion contract
labor wages and salaries noted immediately above. For Benefits, we
applied the remaining 20 percent of total contract labor costs, as
estimated using the BES, and included that in the Benefits cost weight.
At the same time, we subtracted that same amount from A&O. The 20-
percent figure that was used was determined by summing direct patient
care benefits (as estimated using the Medicare cost report) and non-
direct patient care benefits (as estimated using the BES) and taking
that sum as a percentage of total compensation (excluding contract
labor). The resulting cost weight for Benefits increases to 6.754
percent.
Utilities
We developed a weight for Utility expenses using the 2002 BES data,
as utilities are not separately identified on the Medicare cost report.
We aged these 2002 BES-based utility expenditures to 2008. We then
disaggregated the Utilities category to reflect three subcategories:
Electricity, Fuel (Natural Gas), and Water and Sewerage. We computed
the ratio of each BES category to the total BES operating expenses. We
then applied each ratio to the total operating expense percentage share
as calculated from the cost reports, including the additions of ESRD-
related oral drugs with injectable equivalents that are currently
covered under Part D and additional lab expenses, to estimate the ESRD
facility weight for each utility expenditure category. These amounts
were then deducted from the share of the combined Operation &
Maintenance of Plant and Housekeeping cost category, where the expenses
are included on the Medicare cost report (but cannot be separately
identified). The resulting Electricity, Fuel (Natural Gas), and Water
and Sewerage ESRDB market basket weights are 0.621, 0.127, and 0.516
percent, respectively, yielding a combined Utilities cost weight of
1.264 percent.
Pharmaceuticals
The ESRDB market basket includes expenditures for all drugs
included in the ESRD bundled payment, including separately billable
drugs and ESRD-related oral drugs with injectable equivalents that are
currently covered under Medicare Part D. We were able to calculate an
expenditure weight for pharmaceuticals directly from the Drugs cost
center on Worksheet B plus the expenditures of EPO which are reported
on worksheet A2 of the Medicare cost reports. Vaccine expenditures,
which are mandated as separately reimbursable, were excluded when
calculating this cost weight. Section 1842(o)(1)(A)(iv) of the Act
requires that influenza, pneumococcal, and hepatitis B vaccines
described in subparagraph (A) or (B) of section 1861(s)(10) of the Act
be paid based on 95 percent of average wholesale price (AWP) of the
drug. Since these drugs are excluded from other prospective payment
systems, we exclude them from the ESRDB market basket, as well. We
estimate that expenditures for these three vaccines are approximately 1
percent of the total Medicare-allowable payments for separately
billable drugs. The resulting cost weight determined from the Medicare
cost report for Pharmaceuticals is 26.358 percent, as seen in Table 30.
For comparison purposes, we note that this cost weight in the proposed
rule was 28.775 percent (74 FR 49998).
Expenditures in 2008 for ESRD-related oral drugs with injectable
equivalents that are currently covered under Part D were added to cost
report totals. The estimate we used for these ESRD-related Part D drugs
with injectable equivalents, provided by UM-KECC, is approximately $15
million for 2008. Finally, to avoid double-counting, the weight for the
Pharmaceuticals category was reduced to exclude the estimated share of
non-direct patient care salaries and benefits associated with the Drugs
and Epoetin cost centers. This resulted in an ESRDB market basket
weight for Pharmaceuticals of 25.52 percent. EPO expenditures accounted
for 17.359 percentage points of the Pharmaceuticals weight, ESRD-
related oral drugs with injectable equivalents that are currently
covered under Part D accounted for 0.153 percentage point of the
Pharmaceuticals weight, and all other drugs accounted for the remaining
7.541 percentage points of the Pharmaceuticals weight.
Supplies
We calculated the weight for Supplies included in the bundled rate
using the reimbursable and separately billable expenditure amounts for
the Supplies cost center on Worksheet B of the Medicare cost report.
Supplies that are separately billable are reported as a separate line
item on the cost reports and were also included. This total was divided
by total expenses to derive a weight for the Supplies component in the
ESRDB market basket. The computed weight for this category was reduced
by the non-direct patient care salaries and benefits associated with
the Supplies cost center. The resulting ESRDB market basket weight for
Supplies is 9.216 percent.
Laboratory Services
We calculated the weight for Laboratory Services included in the
bundled rate using the reimbursable and separately billable expenditure
amounts for the Laboratory cost center on Worksheet B of the Medicare
cost report. The cost report expenditures do not include laboratory
services paid for under the Medicare fee schedule, only facility-
furnished laboratory tests. Since a large majority of laboratory tests
are paid via the fee schedule, we adjusted the laboratory fees upward.
The inflation factor was computed from the ratio of ESRD facility
Medicare laboratory payment data to the other facility Medicare
laboratory payment data. This provides a measure of the extent to which
laboratory services fall under the Medicare fee schedule. The weight
for this category was similarly reduced by the non-direct patient care
salaries and benefits associated with the Laboratory cost center. The
resulting ESRDB market basket weight for Laboratory Services is 5.497
percent.
Housekeeping and Operations
We developed a market basket cost weight for this category using
data from Worksheet A of the Medicare cost reports. Worksheet B
combines the capital-related costs for buildings and fixtures with the
Operation and Maintenance of Plant (Operations) and Housekeeping cost
centers, so we were unable to calculate a weight directly from
Worksheet B. We separated these
[[Page 49157]]
expenses from capital-related costs because we believe housekeeping and
operations expenditures, such as janitorial and building services
costs, are largely service-related and would be more appropriately
proxied by a service-related price index. To avoid double-counting, we
subtracted from the Housekeeping and Operations weight the utilities
proportion described above, as well as the non-direct patient care
salaries and benefits share associated with the Operations and
Housekeeping cost center. The resulting ESRDB market basket cost weight
for Housekeeping and Operations is 2.029 percent.
Administrative and General and Other (A&O)
We computed the proportion of total A&O expenditures using the A&O
cost center data from Worksheet B of the Medicare cost reports minus
the A&O expenditures related to the Blood Products and Vaccine
categories. As described above, we exclude contract labor from this
cost category and apportion these costs to the salary and benefits cost
weights. Similar to other expenditure category adjustments, we then
reduced the computed weight to exclude salaries and benefits associated
with the A&O cost center. The resulting A&O cost weight is 13.899
percent. This A&O cost weight is then fully apportioned to derive
detailed cost weights for Professional Fees, Telephone, All Other
Labor-Related Services, and All Other Nonlabor-related Services.
Professional Fees
A separate weight for Professional Fees was developed using the
2002 BES data aged to 2008. Professional fees include fees associated
with the following: advertising, accounting, bookkeeping, legal,
management, consulting, administrative, and other professional services
fees. To estimate professional fees, we first calculated the ratio of
BES professional fees to a total of administrative and other expenses
from BES. We applied this ratio to the A&O total cost weight to
estimate the proportion of ESRD facility professional fees. The
resulting weight is 1.773 percent. This cost weight is then separated
into Labor-related Professional Fees (1.549 percent) and Nonlabor-
related Professional Fees (0.224 percent), which is described in more
detail below.
Telephone
Because telephone service expenses are not separately identified on
the Medicare cost report, we developed a Telephone Services weight
using the 2002 BES expenses aged to 2008. We estimated a ratio of
telephone services expenses to total administrative and other expenses
from BES. We applied this ratio to the total A&O cost weight to
estimate the proportion of ESRD facility telephone expenses. The
resulting ESRDB market basket cost weight for Telephone Services is
0.597 percent.
All Other Labor-Related Services
A separate weight for All Other Labor-related Services was
developed using the 2002 BES data aged to 2008. All other labor-related
services include repair and maintenance fees. We estimated a ratio of
all other labor-related services expenses to total administrative and
other expenses from BES. We applied this ratio to the total A&O cost
weight to estimate the cost weight for ESRD facility All Other Labor-
related Services. The resulting ESRDB market basket cost weight is
1.219 percent.
All Other Nonlabor-Related Services
A separate weight for All Other Nonlabor-related Services was
developed using the 2002 BES data aged to 2008. Non labor-related
services include insurance, transportation, shipping, warehousing,
printing, data processing services, and all other operating expenses
not otherwise classified. We estimated a ratio of all other nonlabor-
related services expenses to total administrative and other expenses
from BES. We applied this ratio to the total A&O cost weight to
estimate the cost weight for ESRD facility All Other Nonlabor-related
Services. The resulting ESRDB market basket cost weight is 10.311
percent.
Capital
We developed an ESRDB market basket cost weight for the Capital
category using data from Worksheet B of the Medicare cost reports.
Capital-related costs include depreciation and lease expense for
buildings, fixtures, movable equipment, property taxes, insurance, the
costs of capital improvements, and maintenance expense for buildings,
fixtures, and machinery. Because housekeeping and operations costs are
included in the Worksheet B cost center for Buildings and Fixtures
capital-related expense, we excluded these costs and developed a
separate expenditure category as noted above. Similar to the
methodology used for other ESRDB market basket cost categories with a
salaries component, we computed a share for non-direct patient care
salaries and benefits associated with the Capital-related Machinery
cost center. We used Worksheet B to develop two capital-related cost
categories, one for Buildings and Fixtures, and one for Machinery. We
reasoned this was particularly important given the critical role played
by dialysis machines. Likewise, because price changes associated with
Buildings and Fixtures could move differently than those associated
with Machinery, we believe that separate price proxies would be more
appropriate to track price changes for the different capital-related
categories over time. The resulting ESRDB market basket cost weights
for Capital-related Buildings and Equipment and Capital-related
Machinery are 7.459 and 2.074 percent, respectively.
Table 31 lists all of the expenditure categories in the ESRDB
market basket and their corresponding CY 2008 cost weights and proxies,
as developed in accordance with the methodology described above. For
comparison purposes, we have added the corresponding CY 2007 cost
weights as published in the proposed rule (74 FR 50010).
BILLING CODE P
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[GRAPHIC] [TIFF OMITTED] TR12AU10.038
BILLING CODE C
Price Proxies
Once we determined the CY 2008 ESRDB market basket expenditure
categories and weights, appropriate wage and price series or proxies
were selected to measure the rate of price change for each category.
All of the proxies are based on BLS data, and are grouped into one of
the following three BLS categories:
(1) PPIs: PPIs measure changes in the prices producers receive for
their outputs. PPIs are the preferable price proxies for goods and
services that ESRD facilities purchase as inputs in producing dialysis
services, since these facilities generally make purchases in the
wholesale market. The PPIs that we use measure price change at the
final stage of production.
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[GRAPHIC] [TIFF OMITTED] TR12AU10.039
(2) CPIs: CPIs measure changes in the prices of final goods and
services purchased by the typical consumer. Because these indexes may
not reflect the prices faced by a producer, we used CPIs only if an
appropriate PPI was not available, or if the expenditure more closely
resembled a retail rather than wholesale purchase. For example, we used
the CPI for telephone services as a proxy for the Telephone cost
category because there is no corresponding PPI, and we reasoned that
commercial and residential rates change similarly.
(3) ECIs: ECIs measure the rate of change in employee wage rates
and employer costs for employee benefits per hour worked. They are
fixed-weight indexes that strictly measure changes in wages and
benefits per hour, and are not affected by shifts in employment mix.
We evaluated the price proxies using the criteria of reliability,
timeliness, availability, and relevance. Reliability indicates that the
index is based on valid statistical methods and has low sampling
variability. Timeliness implies that the proxy is published regularly,
preferably at least once a quarter. Availability means that the proxy
is publicly available. Finally, relevance means that the proxy is
applicable and representative of the cost category weight to which it
is applied. The CPIs, PPIs, and ECIs we use meet these criteria.
Wages and Salaries
As discussed above, we use a blend of the Wages and Salaries ECI
for Hospitals (Civilian) (50 percent)(series code CIU1026220000000I)
and the Wages and Salaries ECI for Health Care and Social Assistance
(Civilian) (50 percent) (series code CIU1026200000000I) as the measure
of price growth for Wages and Salaries in ESRD facilities. This
particular blend was chosen to--(1) account for the presence of ESRDs
in NAICS 62 (Health Care and Social Assistance), and (2) reflect the
similarities observed in the occupational mixes between the ESRD
industry and the hospital industry. We believe this approach results in
an appropriate price index that reflects changes in the price of wages
and salaries in the ESRD industry.
Benefits
As discussed above, we use a blend of the Benefits ECI for
Hospitals (Civilian) (50 percent) and the Benefits ECI for Health Care
and Social Assistance (Civilian) (50 percent) as the measure of price
growth for Benefits in ESRD facilities. We believe this approach
results in an appropriate price index that reflects changes in the
price of benefits in the ESRD industry.
Professional Fees
We use the Compensation ECI for Professional and Related
Occupations (Private) (series code CIU2010000120000I) as the proxy for
professional fees. We selected this price proxy because it includes
occupations such as lawyers, accountants, and bookkeepers that are
represented in this cost category.
Utilities
We use the PPI for Commercial Electric Power (series code WPU0542)
and the PPI for Commercial Natural Gas (series code WPU0552) as the
proxies for the Electricity and Natural Gas cost categories,
respectively. We use the CPI for Water and Sewerage Maintenance (series
code CUUR0000SEHG01) as the price proxy for the Water and Sewerage cost
category.
Capital-Related--Building and Equipment
We use the CPI for Owner's Equivalent Rent of Residences (series
code CUUR0000SEHC) as the price proxy for the Capital-related Building
and Equipment cost category. We refer to this price proxy generally as
the CPI for Residential Rent. As described earlier, this cost category
includes building and fixtures, leased buildings, fixed equipment, and
moveable equipment. Because machine equipment, particularly dialysis
machines, is reflected in a separate cost category, the bulk of the
expenditures captured here are for building and fixed equipment.
Therefore, we would prefer to have a proxy that captures the price
change associated with this type of capital expense. While there can
sometimes be differences in the price levels for residential and
commercial rent, we believe the CPI for Residential Rent approximates
the change in the underlying costs associated with ESRD facilities'
capital costs such as depreciation, interest, taxes, and other capital
costs. Given the lack of an ESRD-specific proxy for capital costs, we
believe that the CPI for Residential Rent represents the best available
proxy for the changes in capital costs facing ESRD facilities.
Capital-Related--Machinery
We use the PPI for Electrical Machinery and Equipment (series code
[[Page 49160]]
WPU117) as the price proxy for the capital-related machinery cost
category. This PPI includes dialysis machines, which are a significant
component of machine equipment costs reported by ESRD facilities.
Therefore, we believe that this price proxy is the best measure of the
price growth of this cost category.
Pharmaceuticals
ESRD facilities use a variety of drugs during dialysis treatment
including EPO which is currently a separately billable drug and
accounts for the majority of ESRD facility drug expenses. We pay for
erythropoietic agents to treat chronic anemia in ESRD patients. At
present, Epogen(copyright) and ARANSP(copyright)
(both manufactured by a single supplier) are two of the prevailing
erythropoietic drugs available to treat anemia in ESRD patients.
Medicare is the dominant purchaser of EPO since it is mainly used to
treat kidney dialysis patients. For the ESRDB market basket, we use the
PPI for Pharmaceuticals for Human Use (Prescription) (series code
WPUSI07003) as the price proxy for the Pharmaceuticals category. We
refer to this price proxy generally as the PPI for Prescription Drugs.
We use this proxy for a variety of reasons. First, all of the market
baskets that we produce include price proxies that are intended to
reflect the efficient average price increase associated with the
purchase of the particular input category. Accordingly, we have chosen
to proxy the Pharmaceuticals cost category in the ESRDB market basket,
which includes the mix of all prescription drugs purchased by dialysis
facilities, by the PPI for Prescription Drugs because it reflects price
changes associated with the average mix of all pharmaceuticals in the
overall economy. Second, we anticipate the price changes associated
with the assortment of drugs administered in ESRD facilities should,
over time, be similar to the average prescription drug price changes
observed across the entire economy. Finally, this price series was
chosen as it is both publicly available and regularly published.
Supplies
We use the commodity-based PPI for Medical, Surgical, and Personal
Aid Devices (series code WPU156) as a proxy for changes in ESRD supply
prices. Many of the supplies used in dialysis are included in this PPI,
such as dialyzers, catheters, I.V. equipment, syringes, and other
general medical supplies used in dialysis treatment.
Laboratory Services
We use the PPI for Medical and Diagnostic Laboratories (series code
PCU6215--6215--) as the price proxy for the ESRD Laboratory Services
cost category. Most of the laboratory tests used in dialysis are blood
chemistry tests (a covered component of the PPI for Medical and
Diagnostic Laboratories). Additionally, some ESRD facilities are using
diagnostic imaging services to monitor patient site access, and the
points where waste exchange takes place (also a covered component of
this price proxy).
Telephone
We use the CPI for Telephone Services (series code CUUR0000SEED) as
the price proxy for the Telephone cost category. This index is used as
the price proxy for Telephone Services in other market baskets produced
by CMS.
Housekeeping and Operations
We use the PPI for Janitorial Services (series code
PCU561720561720) as the price proxy for the Housekeeping and Operations
cost category. This is the same price proxy that was used in the
proposed rule; however, we referred to this proxy as the PPI for
Building, Cleaning and Maintenance in the proposed rule (74 FR 50002).
This PPI includes housekeeping, janitorial, and maintenance (excluding
repairs) services, and is representative of the types of costs included
in this cost category.
All Other Labor-Related Services
We use the Compensation ECI for Service Occupations (Private)
(series code CIU2010000300000I) as the price proxy for the All Other
Labor-Related Services cost category. This category includes expenses
related to repair services. We feel that the service occupations most
accurately reflect the costs for these types of repair and maintenance
services purchased by ESRD facilities.
All Other Nonlabor-Related Services
We use the CPI for All Items Less Food and Energy (series code
CUUR0000SA0L1E) as the price proxy for the All Other Nonlabor-Related
Services cost category. This category includes costs such as data
processing, purchasing, taxes, home office costs, and malpractice
costs. The costs represented in this category are diverse and are
primarily associated with the purchase of services. These costs are
best represented by a general measure of inflation such as the CPI for
All Items Less Food and Energy. Food and energy are excluded from the
index to remove the volatility associated with those items.
Additionally, energy prices are already captured in the utility price
proxies.
ESRDB Market Basket Increases
The final ESRDB market basket reflects the combination of cost
weights and price proxies discussed above. As explained above, under
section 1881(b)(14)(F) of the Act, as added by section 153(b) of MIPPA
and amended by section 3401(h) of Public Law 111-148, for 2012 and each
subsequent year, the Secretary shall reduce the market basket increase
factor by the productivity adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act, which is equal to ``the 10-year
moving average of changes in annual economy-wide private nonfarm
business multi-factor productivity (as projected by the Secretary for
the 10-year period ending with the applicable fiscal year, year, cost
reporting period, or other annual period)''. For purposes of providing
a forecast, Table 32 contains the projected rate of growth for CY 2011
through CY 2020 for the ESRDB market basket (adjusted, where
applicable, based on the estimated productivity adjustment for a given
year). Although we provide a forecast here, we will address in future
rulemaking the implementation and application of the productivity
adjustment to the ESRDB market basket increase factor that will be
required beginning in 2012. Also, as we indicated above, in CY 2011, we
note that as a result of amendments by section 3401(h) of Public Law
111-148 to section 1881(b)(14)(F) of the Act, a full market basket will
be applied to the composite rate portion of the blended payment during
the first year of the transition.
[[Page 49161]]
[GRAPHIC] [TIFF OMITTED] TR12AU10.040
ESRD Labor-Related Share
The labor-related share of a market basket is determined by
identifying the national average proportion of operating costs that are
related to, influenced by, or vary with the local labor market. The
labor-related share is typically the sum of Wages and Salaries,
Benefits, Professional Fees, Labor-related Services, and a portion of
the Capital share from a given market basket. We used the 2008-based
ESRDB market basket cost weights to determine the labor-related share
for ESRD facilities under a bundled system. Under the ESRDB market
basket, the labor-related share for ESRD facilities is 41.737 percent;
as shown in Table 33 below. These figures represent the sum of Wages
and Salaries, Benefits, Housekeeping and Operations, All Other Labor-
related Services, 87 percent of the weight for Professional Fees
(details discussed below), and 46 percent of the weight for Capital-
related Building and Equipment expenses (details discussed below).
[GRAPHIC] [TIFF OMITTED] TR12AU10.041
The labor-related share for Professional Fees (87 percent) reflects
the proportion of ESRD facilities' professional fees expenses that we
believe varies with local labor market. As stated in the proposed rule
(74 FR 50003), we recently conducted a survey of ESRD facilities to
better understand the proportion of contracted professional services
that ESRD facilities typically purchase outside of their local labor
market. These purchased professional services include functions such as
accounting and auditing, management consulting, engineering, and legal
services. Based on the survey results, we determined that, on average,
87 percent of professional services are purchased from local firms and
13 percent are purchased from businesses located outside of the ESRD's
local labor market. Therefore, we are including 87 percent of the cost
weight for
[[Page 49162]]
Professional Fees in the labor-related share.
The labor-related share for capital-related expenses (46 percent of
ESRD facilities' adjusted Capital-related Building and Equipment
expenses) reflects the proportion of ESRD facilities' capital-related
expenses that we believe varies with local labor market wages. Capital-
related expenses are affected in some proportion by variations in local
labor market costs (such as construction worker wages) that are
reflected in the price of the capital asset. However, many other inputs
that determine capital costs are not related to local labor market
costs, such as interest rates. The 46-percent figure is based on
regressions run for the inpatient hospital capital PPS in 1991 (56 FR
43375). We use a similar methodology to calculate capital-related
expenses for the labor-related shares for rehabilitation facilities (70
FR 30233), psychiatric facilities, long-term care facilities, and
skilled nursing facilities (66 FR 39585).
K. Implementation
1. Transition Period
Section 1881(b)(14) of the Act replaces the current basic case-mix
adjusted composite payment system with a case-mix adjusted bundled ESRD
PPS, for Medicare outpatient ESRD facilities beginning January 1, 2011.
Section 1881(b)(14)(E)(i) of the Act requires the Secretary to provide
``a four-year phase-in'' of the payments under the ESRD PPS for renal
dialysis services furnished on or after January 1, 2011. Although the
statute uses the term ``phase-in'', other Medicare payment systems use
the term ``transition'' to describe the timeframe during which payments
are based on a blend of the payment rates under the prior payment
system and the new payment system. For purposes of this ESRD PPS final
rule, we use the term ``transition'' to describe this timeframe.
Section 1881(b)(14)(E)(i) of the Act further requires that the
transition occur ``in equal increments,'' with payments under the ESRD
PPS ``fully implemented for renal dialysis services furnished on or
after January 1, 2014.'' In addition, section 1881(b)(14)(E)(ii) of the
Act permits an ESRD facility to make a one-time election to be excluded
from the transition from the current basic case-mix adjusted composite
payment system, with its payment amount for renal dialysis services
based entirely on the payment amount under the ESRD PPS. This election
must be made prior to January 1, 2011. Lastly, section
1881(b)(14)(E)(iii) of the Act requires that we make an adjustment
during the transition so that payments during the transition equal the
estimated total amount of payments that would otherwise occur under the
ESRD PPS without such a transition. The transition budget-neutrality
adjustment policy is set forth at Sec. 413.239 and is discussed
further in section II.E.5. of this final rule.
In accordance with section 1881(b)(14)(E) of the Act, we proposed
to implement the transition from the current basic case-mix adjusted
composite payment system in equal increments, so that renal dialysis
services furnished on or after January 1, 2014, would be paid entirely
based on the payment amount under the ESRD PPS. Specifically, we
proposed that for renal dialysis services provided during the
transition period beginning January 1, 2011 and ending December 31,
2013, ESRD facilities would receive a blended payment for each dialysis
treatment consisting of the payment amount under the basic-case mix
adjusted composite system and the payment amount under the ESRD PPS (74
FR 50003). We noted that, because ESRD facilities would receive an all-
inclusive payment during the transition period for all renal dialysis
services, other entities, such as Method II DME suppliers and
laboratories would no longer bill Medicare beginning January 1, 2011
for renal dialysis services furnished to ESRD patients. These entities
would need to seek payment from the patient's ESRD facility (74 FR
50003).
The comments we received and our responses are set forth as
follows:
Comment: Many commenters suggested that we consider implementing
Part D drugs in the bundled payment during the last year of the
transition and, indicated that the inclusion of these drugs would
impact an ESRD facility's decision of whether to elect to go into the
transition period or to receive full payment under the ESRD PPS. The
commenters believed that we should collect accurate data on the costs
of Part D drugs before they are implemented as part of the ESRD PPS
bundle.
Response: In this final rule and in response to public comment, we
are delaying implementation of payment under the ESRD PPS of ESRD-
related oral-only drugs that are currently separately paid under Part D
until January 1, 2014. The decision to delay implementation of oral-
only drugs is discussed in section II.A.3.a. of this final rule. The
implementation of ESRD-related drugs and biologicals under the ESRD PPS
is discussed in section II.A.3. of this final rule. Because we are
implementing all other ESRD-related former part D drugs and biologicals
effective January 1, 2011, we included a $0.49 adjustment to the
portion of the blended payment amount related to the basic case-mix
adjusted composite payment system to account for those drugs. To derive
the $0.49 adjustment, we used the 2011 price inflated payment amounts
divided by the Part D HD-equivalent treatments for Part D enrollees as
discussed in section II.F.5. of this final rule. We will continue to
analyze the prices paid under Part D for oral-only ESRD-related drugs
so that we are able to appropriately price these drugs in the ESRD PPS
base rate.
Comment: Many commenters suggested that we consider implementing
laboratory tests in the bundled payment during the last year of the
transition. The commenters explained that there will be administrative
burden in contracting for laboratory services during the transition
period. The commenters indicated that even if laboratories are willing
to enter into a contract, they are concerned about their ability to
negotiate reasonable prices given the low volume of services that they
would request from the laboratories.
Response: Section 1881(b)(14)(A)(i) of the Act requires CMS to
include all renal dialysis services, which include ESRD-related
diagnostic laboratory tests, into one single payment effective January
1, 2011. Section 1862(a)(24) of the Act prohibits unbundling of
expenses for renal dialysis services (as defined in section
1881(b)(14)(B) of the Act). Therefore, we do not have the authority to
pay laboratories directly for ESRD-related diagnostic laboratory tests.
We note, under the current basic case-mix adjusted composite payment
system, certain ESRD-related laboratory tests are included in the
composite rate. ESRD facilities would have been required under the
current basic case-mix adjusted composite payment system to establish
arrangements with laboratories to perform these laboratory tests and
receive payment from the ESRD facility. Therefore, we do not agree that
bundling all ESRD-related laboratory tests under the ESRD PPS will pose
a significant burden.
For CY 2011, we proposed to make payments based on 75 percent of
the payment rate under the basic case-mix adjusted composite payment
system and 25 percent of the payment rate under the ESRD PPS. For CY
2012, we proposed to make payment based on 50 percent of the payment
rate under the basic case-mix adjusted composite payment system and 50
percent of the payment rate under the ESRD PPS. For
[[Page 49163]]
CY 2013, we proposed to make payment based on 25 percent of the payment
rate under the basic case-mix adjusted composite payment system and 75
percent of the payment rate under the ESRD PPS. For renal dialysis
services furnished on or after January 1, 2014, we proposed that
payment to ESRD facilities would be based on 100 percent of the payment
amount under the ESRD PPS (74 FR 50003).
We did not receive public comments on the proposed blending
methodology for the transition from the basic case-mix composite
payment system to the ESRD PPS bundled payment system and, therefore,
we are finalizing the blending methodology as proposed in Sec.
413.239(a).
We proposed that the portion of the blended rate based on the
payment amount with regard to the basic case-mix adjusted composite
payment system would be comprised of the composite payment rate (which
is adjusted by the basic case-mix adjustments and a wage index), the
drug add-on amount, and payment amounts for items and services
furnished to dialysis patients that are currently separately paid under
Part B by Medicare to entities other than the ESRD facility. We also
proposed to include a $14 adjustment to the portion of the blended
payment amount related to the basic case-mix adjusted composite payment
system during the transition to account for the ESRD-related drugs and
biologicals that are currently separately paid under Part D and were
proposed to be included in the ESRD PPS base rate (74 FR 50004).
Because we are delaying payment under the ESRD PPS for former Part D
oral-only drugs, the proposed $14 adjustment will be $0.49 for this
final rule, as discussed in section II.E.5. of this final rule.
We did not receive comments on the composition of the portion of
the blended rate based on the basic case-mix adjusted composite payment
system. Therefore, we are finalizing our proposal that the portion of
the blended rate based on the basic case-mix adjusted composite payment
system will be comprised of the composite payment rate (which is
adjusted by the basic case-mix adjustments and a wage index), the drug
add-on amount, and payment amounts for items and services furnished to
dialysis patients that are currently separately paid under Part B. We
will include a $0.49 adjustment to the portion of the blended payment
amount related to the basic case-mix adjusted composite payment system
during the transition to account for the ESRD-related drugs and
biologicals (currently separately paid under Part D), but effective
January 1, 2011, will be bundled under the ESRD PPS, (as discussed in
section II.E.5. of this final rule).
In the proposed rule, we discussed that for the years during which
the transition is applicable, section 1881(b)(14)(F)(ii) of the Act
requires the Secretary to annually increase the portion of the ESRD PPS
that is based on the composite rate that would otherwise apply if the
ESRD PPS had not been enacted (74 FR 50004). In particular, at the time
the ESRD PPS proposed rule was published, section
1881(b)(14)(F)(ii)(II) of the Act required the composite rate portion
of the blended payment to be updated annually by the ESRDB market
basket update minus 1.0 percentage point. Therefore, for each year of
the transition, to maintain the 98 percent budget-neutrality amount, we
proposed that the composite payment rate portion of the blended amount
would be updated by the applicable case-mix adjustments, the drug add-
on adjustment, the current wage index, and the ESRDB market basket
update minus 1.0 percentage point.
We also proposed that payments for items and services furnished to
dialysis patients that are paid separately under Part B under the
current composite payment rate methodology, that is, ESRD-related
laboratory tests, ESRD-related drugs, and ESRD-related supplies, blood,
and blood products would no longer be paid separately. Instead, those
items and services would be priced to reflect how they are currently
paid (for example, using a fee schedule or ASP amount) (74 FR 50004).
We address comments related to the market basket in section II.J.
of this final rule; laboratory tests in section II.A.4; ESRD-related
drugs in sections II.A.2. and II.A.3.; ESRD supplies in section II.A.4;
and, blood and blood products in section II.A.6. of this final rule. As
discussed in these respective sections, for this final rule, ESRD-
related blood and blood products will not be included in the ESRD PPS
bundle and ESRD-related laboratory tests and ESRD-related drugs will no
longer be separately paid. In addition, in accordance with section
3401(h) of the Affordable Care Act, which revised section
1881(b)(14)(F) of the Act, for CY 2011, the full ESRDB market basket
update will apply and, for CY 2012, the ESRDB market basket update
reduced by a productivity adjustment would apply as discussed in
section II.J. of this final rule.
In the proposed rule, we noted that there are ESRD facilities that
have existing exception amounts that are used for payment in lieu of
the composite rate, drug add-on payment, and basic case-mix
adjustments. Any existing exception amounts would not be updated by the
ESRDB market basket throughout the transition (74 FR 50004). Finally,
in the proposed rule, we discussed that the portion of the blended rate
based on the ESRD PPS would include the base rate and all applicable
patient-level, facility-level adjustments, and outlier payments as set
forth in proposed Sec. 413.231, Sec. 413.232, Sec. 413.235 and Sec.
413.237. We respond to comments regarding exceptions in section II.L.1;
the ESRD PPS base-rate in section II.E; patient-level adjusters in
section II.F.3; and, facility-level adjusters in section II.F.4. of
this final rule.
As noted in the proposed rule, section 1881(b)(14)(E)(ii) of the
Act gives an ESRD facility the option to make a one-time election to be
excluded from the four-year transition from the current basic case-mix
adjusted composite payment system in the form and manner specified by
the Secretary (74 FR 50004). Once made, this election may not be
rescinded. ESRD facilities may choose to be paid the blended rate under
the transition period in order to give them time to determine the
impact of the ESRD PPS on their operations and to make necessary
adjustments. We indicated in the ESRD PPS proposed rule that we
believed ESRD facilities would choose to be excluded from the
transition if they concluded that they would benefit financially from
the payment amount under the ESRD PPS (74 FR 50004).
Section 1881(b)(14)(E)(ii) of the Act requires that ESRD facilities
wishing to be excluded from the transition must make an election to be
excluded and their election must be made prior to January 1, 2011, in
the form and manner specified by the Secretary. We proposed that ESRD
facilities notify their FI/MAC of their election choice in a manner
established by the FI/MAC no later than November 1, 2010, regardless of
any postmarks or anticipated delivery dates. We proposed that ESRD
facilities that become certified for Medicare participation and begin
to provide renal dialysis services between November 1, 2010 and
December 31, 2010, would notify their FI/MAC of their election choice
at the time of enrollment. Once an ESRD facility notifies its
respective FI/MAC of their election choice, on or before November 1,
2010 (or at the time of enrollment for newly-certified ESRD facilities
that begin to provide renal dialysis services between November 1, 2010
and December 31, 2010), the ESRD
[[Page 49164]]
facility's election cannot be rescinded (74 FR 50004).
We also proposed that ESRD facilities that fail to affirmatively
make an election by November 1, 2010, would be paid based on the
blended amount during the transition. We proposed that elections
submitted by ESRD facilities that wish to be excluded from the
transition that are received, postmarked, or delivered by other means
after November 1, 2010, would not be accepted. Thus, we proposed that
all ESRD facilities wishing to be excluded from the transition should
submit their election choice by the proposed deadline. ESRD facilities
electing to be excluded from the transition will receive full payment
under the ESRD PPS for renal dialysis services furnished on or after
January 1, 2011 (74 FR 50004).
We did not receive any comments regarding the proposed one-time
election process and, therefore, in this final rule we are finalizing
Sec. 413.239 with modifications to indicate that the FI/MAC will
establish the manner in which an ESRD facility will indicate its
intention to be excluded from the transition, consistent with our
proposal.
We received the following general comments regarding the transition
period.
Comment: Most of the commenters appreciated the transition period
and agreed that the time from 2011 through 2014 allows them time to
make adjustments to their operations. One commenter requested that we
allow the SDOs the time to consider the final rule so that they can
make informed decisions regarding transitioning. Another commenter
suggested that we eliminate the transition period, continue to pay ESRD
facilities based on the current composite rate system, and then
implement the ESRD PPS fully in 2014. The commenter explained that this
approach would simplify the implementation and remove the need for a
complex dual payment system during the transition period.
Response: The statute requires a 4-year transition period for ESRD
facilities that do not opt to be excluded from the transition. In
addition, after January 1, 2011, the statute requires that a single
payment for renal dialysis services be made to ESRD facilities for
renal dialysis services furnished to ESRD beneficiaries.
a. New ESRD Facilities
Section 1881(b)(14)(E)(i) of the Act permits a provider of services
or a renal dialysis facility to make a one-time election to be excluded
from the transition, it also provides that this election must be made
prior to January 1, 2011. As a result, we proposed that ESRD facilities
that are certified for Medicare participation and begin providing renal
dialysis services or home dialysis services on or after January 1,
2011, would not have the option to choose whether to be paid a blended
rate under the transition or the payment amount under the ESRD PPS.
Rather, we proposed in Sec. 413.239(c) that new ESRD facilities would
be paid based on 100 percent of the payment amount under the ESRD PPS
(74 FR 50004). As we did not receive any public comments regarding this
proposal, we are finalizing Sec. 413.239(c) as proposed.
We proposed to define a new ESRD facility as an ESRD facility that
is certified for Medicare participation on or after January 1, 2011 in
Sec. 413.171. We did not receive any public comments regarding this
proposal. Accordingly, for the reasons we set forth in the proposed
rule, we are finalizing Sec. 413.171 as proposed.
b. Limitation on Beneficiary Charges Under the ESRD PPS and Beneficiary
Deductible and Co-Insurance Obligations
Section 1833 of the Act governs payments of benefits for Part B
services and the cost sharing amounts for services that are considered
medical and other health services. In general, many Part B services are
subject to a payment structure that requires beneficiaries to be
responsible for a 20 percent co-insurance after the deductible (and
Medicare pays 80 percent). With respect to dialysis services furnished
by ESRD facilities to individuals with ESRD, under section
1881(b)(2)(a) of the Act, payment amounts are 80 percent (and 20
percent by the individual) (74 FR 50005).
We proposed the items and services that would be considered renal
dialysis services included in the ESRD PPS payment, such as composite
rate services, certain separately billable ESRD-related injectable
drugs, ESRD-related drugs and biologicals currently covered under Part
D, laboratory testing, etc. We acknowledged that certain items and
services such as laboratory tests and Part D drugs currently have
different beneficiary co-insurance structures. However, we indicated
that these items and services would be considered renal dialysis
services after the ESRD PPS is implemented when furnished by an ESRD
dialysis facility to an ESRD beneficiary. Therefore, we proposed that a
20 percent beneficiary co-insurance would be applicable to the ESRD PPS
payment for these services including any adjustments to the ESRD PPS
payment such as adjustments for case-mix, wage index, outlier, etc. (74
FR 50005).
We proposed that an ESRD facility receiving an ESRD PPS payment
could charge the Medicare beneficiary or other person only for the
applicable deductible and co-insurance amounts as specified in proposed
Sec. 413.176. Therefore, the beneficiary co-insurance amount under the
ESRD PPS would be 20 percent of the total ESRD PPS payment (including
payments made under the transition). We noted that the amount of co-
insurance is based on the proposed ESRD PPS payment for renal dialysis
services and home dialysis in 42 CFR Part 413. We explained that, in
general, ESRD facilities are paid monthly by Medicare for the ESRD
services they furnish to a beneficiary even though payment is on a per
treatment basis. We proposed to continue this practice to pay ESRD
facilities monthly for services furnished to a beneficiary beginning
January 1, 2011 (74 FR 50005).
During the transition period before January 1, 2014, ESRD
facilities that do not elect to go 100 percent into the ESRD PPS in
2011 would receive a blended payment amount. We proposed that the
blended monthly payment amount would be subject to a 20 percent
beneficiary co-insurance (74 FR 50005).
Additionally, in accordance with section 1881(b)(1) of the Act, we
proposed in Sec. 413.172(b) that an ESRD facility may not charge a
beneficiary for any service for which payment is made by Medicare. This
policy would apply, even if the ESRD facility's costs of furnishing
services to that beneficiary are greater than the amount the ESRD
facility would be paid under the proposed ESRD PPS (74 FR 50005).
We received about 230 comments on beneficiary co-insurance
obligations which are summarized below.
Comment: A number of commenters believed dialysis facilities would
be burdened by collecting the beneficiary coinsurance, especially co-
insurance associated with the Part D oral drugs. The commenters stated
that ESRD facilities are caregivers and not pharmacies and, therefore,
their staff does not currently collect co-insurance and that if staff
had to collect co-insurance, it would interrupt patient care. Other
commenters expressed concern about the burden associated with
collecting co-insurance liabilities because they would have to develop
new systems.
Response: We do not agree with the commenters that collecting co-
insurance would be a new requirement for ESRD
[[Page 49165]]
facilities because there has been a beneficiary co-insurance liability
on the composite payment system as well as the basic case-mix adjusted
composite rate payment. As discussed in section II.A.3. of this final
rule, implementation of oral-only drugs will be delayed until January
1, 2014. Therefore, we do not believe that ESRD facilities will
experience additional burden as a result of the implementation of the
ESRD PPS effective January 1, 2011.
Comment: A number of commenters were concerned about the financial
affects on beneficiaries with ESRD due to the copays that would result
from the new bundled PPS. The commenters believed the new bundled PPS
would increase beneficiary co-insurance and, therefore, would be a
financial burden on patients, many who have limited income. Some
commenters believed CMS should do an analysis of the impact of the
increased beneficiary co-insurance on patients since there is no data
available. A number of commenters with ESRD were worried about being
able to pay for their dialysis treatment.
Response: Under the current basic case-mix adjusted composite
system, there has been an incentive for excess use of separately
billable items and services and patients have been responsible for a 20
percent co-insurance liability on most of these separately billable.
For this reason, in addressing co-insurance obligations under the
current composite payment methodology, it is important to consider not
only the co-insurance associated with the composite rate itself, but
also the 20 percent co-insurance obligation for most separately billed
drugs and biologicals.
Under the ESRD PPS, the base rate (which includes composite rate
services as well as items and services that are currently separately
billable) reflects the average cost for furnishing dialysis services to
patients. For this reason, if patients use less than the average of
separately billable items and services (that is, items and services
that were separately paid under the current basic case-mix adjusted
composite payment system), they can expect an increase in their co-
insurance obligation. However, if patients use more than the average of
separately billable items and services, they should pay less in co-
insurance under the ESRD PPS. The amount of the difference in co-
insurance under the current basic case-mix adjusted composite payment
system and the ESRD PPS for an individual patient is directly related
to how their use of separately billable services compares to the
average amount. We acknowledge that this comparison does not reflect
that under the ESRD PPS, beneficiaries will assume a 20 percent co-
insurance liability for non-routine laboratory tests that was not
assumed under the current basic case-mix adjusted composite payment
system. However, we note that under the current basic case-mix
composite rate system, certain routine laboratory tests are included in
the composite rate. Therefore, beneficiaries have been responsible for
co-insurance associated with ESRD-related laboratory tests that are
included in the composite rate.
A bundled PPS allows patients to pay co-insurance based upon the
bundled rate for all items and services needed for their treatment
without additional co-insurance costs if more separately billed items
or services are needed.
Comment: Many commenters raised concerns about the financial burden
for patients under the ESRD PPS because patients would have to pay co-
insurance for oral drugs and laboratory tests. The commenters stated
that shifting the oral drugs from Part D to Part B could result in
significant increases in out-of-pocket costs for beneficiaries. Other
commenters indicated that some ESRD patients currently have high out-
of-pockets costs for their oral drugs and believed bundling the oral
drugs would cause this cost to be even higher. Some commenters
indicated that beneficiaries would not have the option to use generics
or less expensive drugs in order to save money. Other commenters
indicated that some ESRD patients would not reach catastrophic coverage
under Part D with the new bundled system because they will be in the
coverage gap for a longer time.
Some commenters were concerned that beneficiaries who have the low-
income subsidy under Part D will have to pay higher co-pays for these
drugs. Some commenters stated that data presented at the recent
American Society of Nephrology meeting, showed that 68 percent of
dialysis patients are enrolled in Medicare Part D and 76 percent of
these patients have the low-income subsidy. A few commenters were
concerned that States' Medicaid programs may not cover the 20 percent
co-insurance for oral drugs for dual-eligibles, which they would have
received under Part D. One commenter stated that including Part D drugs
in the bundle could eliminate access to financial programs that assist
patients with co-pays, such as Medicare Low Income Assistance programs
as well as program such as the American Kidney Fund's Part D Program
for Prescription Bone Medication. Some commenters suggested that CMS
should delay the inclusion of the oral drugs specifically the ones with
no injectable equivalent because of the lack of data available on the
use of these drugs so that CMS can obtain data to assess the financial
impact on beneficiaries and facilities. A few commenters requested that
CMS assess the possible negative effects on beneficiaries who would now
be responsible for co-insurance payments for both oral drugs and
laboratory tests.
Response: As discussed in section II.A.3.a. of this final rule, we
are delaying the implementation of oral-only drugs currently covered
under Part D under the ESRD PPS until January 1, 2014. In section
II.A.3. of this final rule, we discuss the inclusion of a limited
number of ESRD-related oral drugs and biologicals with other forms of
administration. Therefore, the oral-only drugs will continue to be
covered under Medicare Part D until January 1, 2014. At that time, when
oral-only drugs are paid under the ESRD PPS, the same co-insurance
structure described in this section will apply for oral-only drugs. We
plan to collect data on the oral-only ESRD-related drugs to assess the
impact on beneficiaries and ESRD facilities. We will address the
implementation of the oral-only drugs in the ESRD bundle in future
notice of proposed rulemaking.
Comment: A few commenters were concerned about the negative impact
the additional co-insurance would place on beneficiaries which may
contribute to decisions to discontinue treatment, medications, etc. The
commenters stated that many patients have difficulty in meeting the co-
pays under the current system. The comments believe that if there is an
increase in beneficiaries' payments, there is the possibility of
beneficiaries missing treatments that would affect their quality of
care. A few commenters were specifically concerned about patient
noncompliance with taking their medications due to higher out-of-pocket
costs. One commenter expressed concern that facilities would be held
responsible for the drop in the compliance rates under the QIP.
Response: We appreciate the commenters' concerns about the affects
of the co-insurance liability on patients. However, as we discussed in
the proposed rule (74 FR 50005), section 1833 of the Act governs
payments of benefits for Part B services and the cost sharing amounts
for services that are considered medical and other health services. We
also explained that with respect to dialysis services furnished by ESRD
facilities to individuals with ESRD, under section 1881(b)(2)(a) of the
Act, payment amounts are 80 percent (and 20 percent by the individual).
Therefore, we do not have the authority
[[Page 49166]]
to eliminate the beneficiary co-insurance liability.
As we have discussed in previous responses, beneficiaries have been
responsible for co-insurance under the current basic case-mix adjusted
composite payment system. Under the ESRD PPS, beneficiaries will
continue to assume the co-insurance liability for the renal dialysis
services provided by ESRD facilities. However, rather than a co-
insurance for each separately billable item and for the basic case-mix
adjusted composite rate under the current system, beneficiaries will
pay co-insurance on the ESRD PPS payment amount which includes the ESRD
PPS base rate and all applicable payment adjustments under the ESRD
PPS.
We discuss the applicable adjustments which would be applied to the
ESRD PPS base rate and subject to the beneficiary co-insurance
liability in sections II.F.3. of this final rule. As discussed in
section II.A.3.a. of this final rule, oral-only ESRD-related drugs will
not be implemented under the ESRD PPS until January 1, 2014. Therefore,
we do not believe that implementation of the ESRD PPS effective January
1, 2011, will cause patients to make decisions to discontinue any
medications or treatment because of their co-insurance liability.
Comment: Many commenters expressed concern that ESRD facilities
would need to develop systems for collecting medication co-payments.
Other commenters expressed concern for the safety of ESRD facility
staff stating that ESRD facilities maintaining cash on hand from
patients' medication co-payments would place their staff and patients
at risk for crime and theft. The commenters also stated they would need
to hire additional security to protect against crime and theft. Another
commenter stated that there is currently no billing mechanism in place
between ESRD facilities and pharmaceutical companies nor is there a
mechanism by which the pharmaceutical company could collect the
patient's co-payment obligation for drugs included in the ESRD PPS
bundle.
Response: Because ESRD-related drugs are included in the ESRD PPS
bundle and, therefore, are in the ESRD base rate, the ESRD facility is
responsible for obtaining any applicable co-insurance from their
beneficiaries. A beneficiary would not have a co-insurance liability on
each prescription, but rather on the bundled ESRD PPS payment amount.
Beneficiaries have a co-insurance liability under the current basic
case-mix adjusted composite rate. Therefore, we do not understand the
concerns being raised about the need to collect co-insurance payments
under the ESRD PPS, as this responsibility exists under the current
payment system. We expect that ESRD facilities will employ any
necessary measures that they require to ensure their staff's safety. We
believe that because collection of co-insurance payments exist under
the current ESRD payment system, the same safety concerns exist and the
same measures to address these concerns are in place.
Comment: A number of commenters expressed concern that under the
ESRD PPS, beneficiaries will have to pay co-insurance on laboratory
tests. The commenters noted that beneficiaries currently have no
financial responsibility to pay for their laboratory tests because
Medicare pays 100 percent. The commenters believed the inclusion of
laboratory tests in the ESRD PPS bundle would lower Medicare's
obligation to only 80 percent of the payment and require beneficiaries
to pay the 20 percent co-insurance for associated costs, resulting in
increased out-of-pocket costs for beneficiaries. The commenters
indicated that both beneficiaries and dialysis facilities would be
penalized financially for laboratory services.
A few commenters complained about the burden and cost of collecting
co-insurance for laboratory tests because most facilities do not have
their own laboratories. One commenter indicated that according to the
proposed rule, Medicare beneficiaries with ESRD who require dialysis
will not have access to needed laboratory tests, which will be
discriminatory. The commenter further believed patients who currently
do not have a co-insurance obligation for laboratory tests, will now be
responsible for 20 percent which might result in financial burden for
many patients who already might be on limited or fixed incomes. Another
commenter noted that those with limited or fixed incomes may be subject
to an additional $300 to $400 per year for co-insurance on laboratory
tests. One commenter believed the additional co-insurance would
presumably be covered by Medicare Supplemental plans but could not
predict the effects of the bundle for the costs of Medicare
supplemental insurance. One commenter noted that Congress in MIPPA did
not indicate that the longstanding policy that Medicare paying 100
percent for laboratory tests would change under the ESRD bundled
system. Another commenter stated that historically CMS recognized the
difficulty of placing a co-insurance on laboratory tests on facilities
and patients and excluded diagnostic testing from beneficiary co-
insurance obligations.
Response: As we discussed in section II.A.4. of this final rule,
ESRD-related laboratory tests are considered renal dialysis services
and are included in the ESRD PPS bundled base rate, and therefore, as
part of the ESRD base rate after applicable adjustments are applied,
would be subject to the 20 percent co-insurance (that is, individual
laboratory services would not be subject to a separate beneficiary co-
insurance liability). In other words, under the ESRD PPS, beneficiaries
will not have a co-insurance liability for each laboratory test, but
rather beneficiaries will have a co-insurance liability on the total
payment that Medicare makes to an ESRD facility on their behalf. This
is analogous to the beneficiary co-insurance liability under the
current basic case-mix adjusted composite rate where beneficiaries have
a co-insurance liability for the composite payment made to ESRD
facilities on their behalf and not co-insurance liability on each
composite rate service they receive.
We note that most routine laboratory tests for ESRD-related
purposes are currently included in the basic case-mix adjusted
composite rate. This means that currently, beneficiaries with ESRD have
a co-insurance liability for the composite rate, which includes
laboratory tests. We do not see the inclusion of ESRD laboratory tests
in the ESRD PPS as being any different than what occurs currently under
the basic case-mix adjusted composite rate system.
Comment: One commenter expressed concern that the implementation of
the bundled ESRD PPS presents a substantial risk to ESRD facilities
because of the potential for non-recovery of co-insurance payments for
patients who are dually eligible under Medicare and Medicaid. The
commenter recommended that CMS should create a new billing code for the
bundle of services under the ESRD PPS and require States to recognize
the new Medicare payment system. The commenter stated that CMS could
work through the National Association of State Medicaid Directors to
educate the States well in advance of the implementation of the PPS to
provide ample time for them to adjust their co-insurance amounts, as
required.
Response: We have already begun outreach efforts with the States to
ensure that State Medicaid Agencies understand their responsibilities
to adjust their systems so that co-insurance amounts are properly
determined and paid appropriately for dually-eligible
[[Page 49167]]
beneficiaries upon implementation of the ESRD PPS.
Although an ESRD PPS billing code may make it easier for States to
determine whether they have an obligation to pay co-insurance on behalf
of a patient with ESRD, line item billing by date of service (where
each renal dialysis service is itemized on the claim) will continue to
be necessary in order for blended payments to be made during the
transition and for identification of outlier services.
Comment: Several commenters were concerned about dialysis
beneficiaries who have Medigap supplemental plans because oral drugs
and laboratory tests have not previously been covered under Medigap.
The commenters were specifically concerned about how Medigap plans will
adjust to the inclusion of oral drugs in the ESRD PPS. A commenter
questioned if Medigap plans would consider drugs as renal dialysis
services. Several commenters stated that Medigap insurers may deny
payment of the beneficiary co-insurance because statute prevents them
from coordinating benefits for oral drugs. Several commenters believed
that Medigap premiums would increase significantly and would
financially burden patients.
One commenter stated that CMS should take into consideration that
Medicare is the only insurance available to stage 5 chronic kidney
disease patients (that is, ESRD patients). Another commenter believed
that the ESRD PPS will target patients with private insurance and their
co-insurance for additional revenue which would be an unfair burden on
those that pay their insurance and co-insurance out-of-pocket. A
commenter with private drug insurance was concerned about the costs and
processes to pay two sets of premiums and co-insurance. Another
commenter stated that the copayment under Medicare could significantly
exceed the current copayments for those with private insurance.
Response: We believe that generally, Medigap and other private
insurance plans cover co-insurance and copayment obligations for
Medicare Part B services after the beneficiary meets the Part B
deductible amount. We do not expect this to change under the ESRD PPS
bundle. We are unable to address if these plans will continue to cover
the co-insurance under the ESRD PPS. As we discussed in a previous
response, ESRD-related oral drugs and laboratory tests included in the
ESRD PPS bundle are considered renal dialysis services under the Part B
benefit. Therefore, we do not believe there should be issues with
Medigap plans because such oral drugs are renal dialysis services. We
reiterate that payment under the ESRD PPS for oral-only drugs currently
covered under Part D will be delayed until January 1, 2014.
We do not agree with the comments that Medicare will target
patients with private insurance and their copays for additional
revenue. The ESRD PPS, as a Medicare Part B payment system for
outpatient maintenance dialysis, provides payment on behalf of Medicare
beneficiaries to ESRD facilities that provide home dialysis and renal
dialysis services. Therefore, beneficiary's co-insurance liability is
not based on the absence or presence of private insurance.
We also do not anticipate any change with regard to beneficiaries
with private drug insurance and the costs and processes to pay two sets
of premiums and co-insurance under the ESRD PPS. As we discussed in
previous responses, under the current basic case-mix adjusted composite
payment, beneficiaries are subject to co-insurance liability for
composite and separately billable payments made to ESRD facilities. We
acknowledge that this co-insurance obligation changes under the ESRD
PPS because the Medicare payment made to ESRD facilities will include
items and services that are separately billable under the current basic
case-mix adjusted composite payment system.
Comment: A few commenters expressed concern that the wide array of
case-mix adjusters would create an inequity for patients, especially
the sicker patients, because their bundled payment rate will be higher
due to the adjustments with sicker patients having higher co-insurance.
Other commenters stated that the proposed adjusters like age, health
history, and clinic size would add extra work and complexity to
reimbursement and would increase the co-payment. Another commenter was
concerned that patients would not withstand the additional out-of-
pocket costs associated with the ESRD bundle and the case-mix
adjusters. One commenter opposed the application of beneficiary co-
payment amounts to outlier payments asserting that this would set a
dangerous precedent for discrimination on the basis of patient
characteristics. The commenter recommended that CMS limit all patients'
co-payment responsibility to 20 percent of the base rate payment
amount.
Response: We do not have the authority to determine how the
beneficiary co-insurance liability is applied. Section 1881(b)(2)(A) of
the Act requires payments for dialysis services furnished by ESRD
facilities to individuals with ESRD for which payments may be made
under Part B to be equal to 80 percent of the amounts determined. The
statute further requires that payments from individuals are to be 20
percent of the amount for such services after the deductible.
Therefore, Medicare is required by statute to pay 80 percent and the
beneficiary's responsibility is 20 percent of the amounts established
for ESRD PPS renal dialysis services. This would include applying the
beneficiary co-insurance liability to the ESRD PPS base rate and all
applicable adjustments, including the outliers.
We do not agree that applying the beneficiary co-insurance
liability based on characteristics is discriminatory. We discuss the
patient characteristics that have demonstrated higher usage of
separately billable items in section II.F.3. of this final rule.
Because these characteristics (such as age, BSA and BMI) result in
higher resource utilization and therefore higher costs, ESRD facilities
will receive a payment adjustment to the ESRD PPS base rate and
beneficiaries will be required to assume 20 percent of the costs. We
note that under the current basic case-mix adjusted composite payment
system, many of the same patient characteristics have been applied to
the composite rate (age, BMI and BSA) and beneficiaries have been
required to assume 20 percent of those payments.
Payments under the ESRD PPS reflect the extent to which additional
resources are utilized. In situations where a patient with ESRD is
sicker and, therefore, utilizes more resources, the payment to the ESRD
facility providing renal dialysis services to that patient would
reflect the higher resource use. Under the current basic case-mix
adjusted composite payment system, greater resource utilization is
reflected by greater use of separately billable items that are subject
to a beneficiary co-insurance liability. In other words, patients have
been subject to paying co-insurance under the current payment system
based on the use of resources.
Therefore, based on the comments and the reasons discussed above,
we are finalizing the beneficiary co-insurance liability of 20 percent
applied to the ESRD PPS payment inclusive of all applicable payment
adjustments.
2. Claims Processing
Section 1881(b)(14)(A)(i) of the Act requires the Secretary to
implement a payment system under which a single payment is made for
renal dialysis services and other items and services (for example,
supplies and equipment
[[Page 49168]]
used to administer dialysis, drugs, biologicals, laboratory tests, and
support services) related to home dialysis. In the proposed rule, we
noted that implementation of the ESRD PPS will require changes to the
way we process claims. Some of the changes we proposed may involve
establishing consolidated billing rules and edits and changes to the
data elements reported on claims (74 FR 50005).
The consolidated billing approach essentially confers to the ESRD
facility the Medicare billing responsibility for all of the renal
dialysis services that its patients receive. The consolidated billing
rules and edits that are being set forth in this final rule are
described further below.
a. Consolidated Billing Rules and Edits
In the proposed rule (74 FR 50005), we explained that since the
ESRD PPS payment model represents an all-inclusive payment for renal
dialysis services and home dialysis items and services, the ESRD
facility is responsible for all of the ESRD-related services that its
patients receive. Items and services that are paid separately under the
current basic case-mix adjusted composite rate (such as laboratory
tests), would no longer be billed for by entities (such as laboratories
and DME suppliers), and therefore, payment for these services would be
made only to the ESRD facility so that duplicate payment is not made by
Medicare. Although DME suppliers and laboratories may not bill Medicare
for ESRD-related services paid under the ESRD PPS beginning January 1,
2011, in the event an erroneous bill is submitted, consolidated billing
edits will prevent payment for those services under the ESRD PPS.
In the proposed rule, we also discussed the difficulty in
differentiating between a renal dialysis service and a service
furnished for other non-ESRD conditions (74 FR 50005). In order to
ensure proper payment in all settings, we explored the use of modifiers
to identify those services furnished that are not ESRD-related (74 FR
50005).
We received one comment regarding consolidated billing.
Comment: One commenter expressed concern that consolidated billing
would require entirely new billing and payment arrangements for
dialysis facilities and for the suppliers under arrangement. The
commenter explained that building these relationships may be
particularly challenging for SDOs. Further, the commenter stated that
the proposed consolidated billing arrangement is similar to the
provisions applicable to skilled nursing facilities (SNF). However
there is a large difference in volume of administrative employees that
can implement the new set of business practices necessitated by
consolidated billing.
Response: We do not expect that the billing requirements under the
ESRD PPS will require substantial changes in billing. Under the current
basic case-mix adjusted composite payment system ESRD facilities that
do not provide laboratory testing services, drugs, DME and supply
services directly, would have to provide these items and services under
arrangements. However, under the ESRD PPS there may be more services
furnished than those under existing arrangements.
With respect to changes to the claims, under the ESRD PPS, there
are requirements for ESRD facilities to provide additional information
in existing fields. For example, ESRD facilities will be required to
(1) itemize all drugs and biologicals provided to each individual
patient; (2) itemize all laboratory tests provided to each individual
patient; (3) place a modifier for non-ESRD related laboratory tests,
drugs and biologicals, and supplies and equipment for the purpose of
receiving separate payment; and (4) enter a co-morbidity ICD-9-CM
diagnostic code (as described in section II.A.3. of this final rule)
recognized for purposes of the co-morbidity payment adjustment. Because
ESRD facilities have been required to line itemize under the current
basic case-mix adjusted composite payment system and as ESRD facilities
had been encouraged to enter co-morbidities on ESRD claims, we do not
consider any of these reporting requirements to be an additional
burden.
We are not requiring ESRD facilities to itemize supplies and
equipment that are ESRD-related and are therefore paid through the
bundle. However, in the event that supplies or equipment are not ESRD-
related, ESRD facilities will 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.
Comment: One commenter suggested that we consider deferring the
consolidated billing edits for laboratory tests, drugs, and DME
equipment and supplies until the full implementation of the ESRD PPS.
The commenter also requested that we ensure that all interested parties
receive adequate provider education regarding the changes implemented
with the final rule.
Response: We are unable to delay implementation of the consolidated
billing rules and edits because, as mentioned above, the ESRD PPS is an
all-inclusive payment for home dialysis and renal dialysis services and
ESRD facilities are responsible for all ESRD-related services furnished
to their patients. Because it is a bundled payment system for which a
single payment is made the ESRD facility, we are required to ensure
that payment for these services is made only to the ESRD facility so
that duplicate payment is not made by Medicare. We intend to issue
educational materials regarding the implementation of the ESRD PPS to
all interested parties in the near future.
i. Laboratory Tests
Section 1881(b)(14)(B)(iv) of the Act requires that ESRD-related
diagnostic laboratory tests not included under the current basic case-
mix composite payment system must be included as part of the ESRD PPS
payment bundle. In the proposed rule, we explained that patients with
ESRD often have co-morbid conditions which would require many of the
same laboratory tests as those required to monitor the patients' ESRD
(74 FR 50005). Therefore, we acknowledged that it may be difficult to
differentiate between an ESRD-related laboratory test and tests ordered
for non-ESRD-related conditions. We indicated that to ensure proper
payment in all settings, we were exploring the use of modifiers to
identify laboratory tests furnished for ESRD-related conditions from
those furnished for non-ESRD-related conditions.
We received numerous comments regarding the proposed inclusion of
laboratory tests in the ESRD PPS bundled payment which are set forth
below.
Comment: Many commenters expressed concern that it is common for a
patient's nephrologist to act as their primary care physician (PCP) and
monitor all of the patient's medical conditions. The commenters
expressed concern that there would be unintended consequences if the
non-ESRD-related laboratory tests ordered by the nephrologists are
included in the ESRD PPS bundle. Commenters were concerned that
patients would be referred to medical specialists which would fragment
care and require additional travel for medical appointments. Commenters
were also concerned that patients would require more needle sticks if
non-ESRD-related laboratory tests were included in the ESRD PPS bundle.
Some commenters indicated that it is common for physicians other
than the
[[Page 49169]]
nephrologist to order laboratory tests from the ESRD facility. The
commenters explained that the ESRD facility draws the specimen and then
either furnishes the testing, if they are qualified to do so, or sends
the specimen to a laboratory. The commenters believed that it is
helpful for the patient and their continuity of care, if other
physicians have this type of service (courtesy draws) available to
them. Several patients requested that CMS continue to allow courtesy
draws because it protects patients' vascular access site and saves
patients from making multiple trips.
Response: As we discussed in a previous response, ESRD facilities
will be able to identify laboratory tests, drugs, biologicals, and
other items that are not ESRD-related by utilizing a modifier on
claims. Therefore, in this final rule, we are finalizing a consolidated
billing approach that gives the ESRD facilities and laboratories the
ability to identify non-ESRD-related laboratory tests, by using a
modifier, which allows for separate payment.
With regard to the commenters who indicated that providers other
than the patient's nephrologist may order non-ESRD-related laboratory
tests in order to preserve patient's vascular access and to mitigate
multiple medical visits, physicians or other practitioners that
directly submit orders to the ESRD facility to furnish a laboratory
test or draw a specimen to send to an independent laboratory will be
able to continue to do so. However, we remind ESRD facilities that they
would still be subject to the following rules: (1) ESRD facilities are
expected to furnish such services in accordance with the conditions
that all laboratories must meet to be certified to perform testing on
human specimens under the Clinical Laboratory Improvement Amendments of
1988 provided at Sec. 493; and (2) physicians are required to order
the diagnostic tests in accordance with the conditions provided at
Sec. 410.32.
Comment: We received numerous comments requesting that we implement
a specific listing of routine ESRD-related laboratory tests that are
included in the ESRD PPS bundle. Many commenters identified laboratory
tests they believed belong in the listing. Some of the commenters
referred to the laboratory tests that are currently paid under the
composite payment system, while other commenters referred to a list
that State and Federal surveyors use as guidance while conducting
audits of the ESRD facilities. Two LDOs and two other dialysis advocacy
associations provided a listing of approximately 50 laboratory tests.
Another commenter suggested that we use a listing of laboratory tests
that were developed through the Kidney Disease Outcomes Quality
Initiative. We also received requests to omit diagnostic tests used for
kidney transplants, bacteriology tests, and tests furnished
specifically for travelling patients.
Response: We agree with the commenters that there should be a
specific list indentifying laboratory tests that are furnished for ESRD
patients. We believe that a listing of laboratory tests can be used as
part of a consolidated billings strategy to mitigate duplicate payment.
We also believe that ESRD facilities can use this list in developing
contractual relationships with laboratories. However, in developing a
listing of laboratory tests that are considered to be ESRD-related, we
found that there are some laboratory tests that are specifically
necessary for monitoring a patient's ESRD condition. We also found that
there are numerous laboratory tests that are used by physicians not
only for ESRD-related conditions, but also for other reasons.
Therefore, a clinical review of the laboratory tests suggested by the
commenters was performed by CMS physicians and other medical
professionals.
As a result of this review, we have compiled a listing of
laboratory tests that are used to diagnosis or monitor ESRD-related
conditions which is presented in Table F of the Appendix. The
laboratory tests listed, if furnished to ESRD patients by the ESRD
facility directly or under arrangement, will be considered renal
dialysis services (unless otherwise specified as being performed for
non-ESRD-related conditions) and will be covered under the ESRD PPS
bundled payment. If a laboratory test is furnished by the ESRD facility
or by an independent laboratory for reasons that are not ESRD-related,
then that laboratory tests can be billed with a modifier which would
allow for separate payment. We acknowledge that the list of ESRD-
related laboratory tests displayed in Table E of the Appendix is not an
all-inclusive list and we recognize that there are other laboratory
tests that may be ESRD-related. We will monitor claims to see if
additional laboratory tests should be added.
Comment: Commenters expressed concern that there are many ESRD
facilities that do not own their own laboratories and those ESRD
facilities would experience high costs implementing new billing
systems. The commenters further explained that the laboratories will
need to bill the ESRD facilities making the ESRD facilities responsible
for additional documentation and claims processing. One commenter
argued that the proposed effective date of January 1, 2011, does not
allow time to implement the contract changes that will be required.
Response: We do not understand the commenters' concerns. Currently,
ESRD facilities that do not own their own laboratories must have
contracting arrangements with a laboratory for the laboratory tests
included in the current basic case-mix adjusted composite payment
system. Section 494.130 provides that, ``ESRD facilities must provide,
or make available, laboratory services (other than pathology and
histocompatibility) to meet the needs of the ESRD patients. Any
laboratory services, including tissue pathology and histocompatibility
must be furnished by or obtained from, a facility that meets the
requirements for laboratory services specified in part 493 of this
chapter.'' Therefore, we do not see the implementation of the ESRD PPS
as requiring any changes from existing practices, with the exception of
the inclusion of additional laboratory tests under the ESRD PPS.
ii. Drugs and Biologicals
As we discussed in the proposed rule, section 1881(b)(14)(B) of the
Act defines renal dialysis services to include, among other things,
certain drugs and biologicals, including drugs and biologicals that
were separately payable under Part B and Part D. Under the current ESRD
basic case-mix adjusted composite payment system, ESRD facilities
generally do not furnish oral drugs to their ESRD patients. ESRD
patients currently acquire these drugs and biologicals either through
Medicare Part D, private insurance, or independently.
We proposed to include renal dialysis service drugs formerly
covered under Part D under the ESRD PPS. We further proposed that ESRD
facilities furnish these and any other self-administered ESRD-related
drugs to beneficiaries either directly or under arrangement. We
explained that regardless of the mechanism by which these drugs would
be furnished (directly or under arrangement), we believed that some of
the Part D provisions set forth in the 42 CFR Part 423, would become
relevant for ESRD facilities. We requested public comments on the
extent to which Part D requirements should apply to ESRD-related oral
drugs (74 FR 50006).
We also stated in the proposed rule that we expected ESRD
facilities to update their grievance processes to account for all self-
administered ESRD-related drugs (74 FR 50006). Patients would continue
to have access to both
[[Page 49170]]
internal and external grievance processes including the ESRD Network
and the State survey agency.
We indicated in the proposed rule that in the case of any ESRD
facility that would seek to furnish drugs directly, those facilities
would have to comply with state pharmacy licensure requirements. We
noted that, as an alternative, many ESRD facilities would forego the
process of becoming licensed as a pharmacy and instead, furnish renal
dialysis service drugs formerly covered under Part D under arrangement
with a licensed pharmacy. We indicated that the ESRD facility would
provide their patients with a listing of pharmacies with which it would
have arrangements with to dispense the renal dialysis service drugs (74
FR 50006).
As indicated in proposed Sec. 413.241, we further expected that
the ESRD facilities would establish arrangements with pharmacies in a
manner that would facilitate beneficiary access to renal dialysis
service drugs. That is to say, at a minimum, we expected that the
arrangement would take into account variables like the terrain, whether
the patient's home is located in an urban or rural area, the
availability of transportation, the usual distances traveled by
patients in the area to obtain health care services, and the pharmacy's
capability to provide all classes of renal dialysis service drugs to
patients in a timely manner. In addition, we expected that ESRD
facilities would coordinate the provision of renal dialysis service
drugs on behalf of traveling patients to facilitate ongoing compliance
with the plan of care during periods of travel (74 FR 50006-50007).
To prevent duplicate payment under both Part D and Part B for
bundled drugs and biologicals formerly covered under Part D, we
indicated in the proposed rule that we were considering the
incorporation of an ESRD indicator on the Part D eligibility
information that would prevent Part D drug payments for bundled ESRD
drugs and biologicals at the pharmacy. We proposed that the pharmacy
would bill the ESRD facility for all renal dialysis service drugs and
biologicals included in the proposed ESRD PPS that were dispensed, but
would not be permitted to bill the patient for the usual Part B co-
insurance amount, nor treat these drugs in accordance with the Part D
rules. The ESRD facility would collect applicable beneficiary co-
insurance based on the ESRD PPS per treatment payment amount (74 FR
50007).
In the proposed rule, we noted that the cost of the drugs and
biologicals currently separately payable under Part D that we proposed
to be designated as Part B renal dialysis services for purposes of the
proposed ESRD PPS, would be reflected in the ESRD PPS portion of the
blended payment (74 FR 50007).
The comments we received on these proposals and our responses are
set forth below.
Comment: Many commenters requested that oral medications not be
bundled but rather, should continue to be obtained through Part D. The
commenters believed that bundling the oral drugs into the ESRD PPS
would eliminate patient protections that are currently in place under
Medicare Part D such as drug utilization review, medication therapy
management, beneficiary choice in drugs within each drug class,
geographic access standards and reduced co-insurance levels for low-
income subsidy eligible patients.
To the extent oral medications are bundled, some commenters
believed that we should implement similar Part D protections into the
ESRD PPS. Other commenters asserted that bundling oral medications into
the ESRD PPS would result in a duplication of the Medicare Part D
system, questioning CMS for considering the imposition of a system
similar to Part D asserted that doing so would increase inefficiencies
and cost.
Response: We appreciate the commenters interest in maintaining
patient protections that ensure access to drugs. As discussed in
section II.A.3. of this final rule, although ESRD-related oral drugs
and biologicals are included in the ESRD PPS bundle as of January 1,
2011, we are delaying payment under the ESRD PPS of ESRD-related oral-
only medications until January 1, 2014. Therefore, because the majority
of the oral drugs currently paid under Part D are oral-only drugs and
payment under the ESRD PPS for oral-only drugs has been delayed until
January 1, 2014, we intend to further evaluate beneficiary protections
under the ESRD PPS related to oral drugs. We note that we are
developing monitoring procedures that we will discuss in the future.
We acknowledge that as discussed in section II.A.3. of this final
rule, there are a limited number of ESRD-related oral drugs and
biologicals with other forms of administration which will be
implemented January 1, 2011 and therefore, ESRD facilities will be
required to ensure that patients have access to these drugs.
Consequently, ESRD facilities will need to address their concerns in
order to be able to furnish ESRD-related oral drugs and biologicals
with other forms of administration, prior to January 1, 2011. With
regard to the oral drugs that are being bundled in 2011, we believe
these concerns can be alleviated and/or gradually addressed because
such drugs have some other forms of administration.
Comment: Many commenters opposed the bundling of oral medications
citing logistical and operational concerns associated with furnishing
drugs either directly or under arrangement. The commenters believed
that activities associated with furnishing these drugs directly would
necessitate infrastructure and staffing changes that would drive up
costs. These commenters stated that developing expertise in meeting
pharmacy requirements and in hiring additional personnel, adopting
technology and creating space for the storage and distribution of self
administered drugs would require a great deal of effort and resources.
The commenters stated that pharmacists would need to be hired to comply
with dispensing requirements under State and Federal law. Other
commenters believed that nursing and social work staff would be
expected to distribute the self-administered drugs and that this task
would detract from their nursing and social work duties.
Other commenters believed that clinical care staff such as
registered nurses and personal care attendants would be cut to fund the
additional cost of bringing pharmacy staff on board. Several commenters
indicated that ESRD facilities currently in operation will be
constrained in their ability to create in-house pharmacies or to store
additional bundled drugs in instances where they have already maximized
their square footage.
Similarly, commenters were also concerned about the additional
burden ESRD facilities that elect to furnish these drugs under
arrangement would experience such as establishing and maintaining
pharmacy contracts. Commenters identified pros and cons of contracting
with a large number of pharmacies versus contracting with a few
pharmacies. The commenters believe that large numbers of contracts
would promote convenient patient access but ESRD facilities'
administrative costs would increase proportionally according to the
number of pharmacies with which they contract. Overall, commenters
asserted that payment under the ESRD PPS would not cover the additional
costs of administrative burdens and increased staffing needs that will
result from the bundling of oral drugs.
One commenter supported the option to allow facilities to choose
between furnishing oral drugs directly or under arrangement. This
commenter further noted that by allowing this choice, CMS
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did not directly impose a requirement that a facility become a licensed
pharmacy or have a pharmacist on staff. This commenter believed that
beneficiary access to drugs would be preserved through facility
arrangements with contracted pharmacies much like facilities currently
contract with clinical laboratories.
Response: As we discussed in detail in section II.A.3.a. of this
final rule, we are delaying payment for oral-only drugs under the ESRD
PPS until after the ESRD PPS transition. We agree with the comment that
ESRD facilities will have choices regarding whether and how to furnish
ESRD-related oral drugs and biologicals that have other forms of
administration. For example, an ESRD facility may continue to furnish
the injectable and other forms of iron or may elect to furnish the oral
forms of these drugs (and biologicals), as determined by the patients'
plans of care. ESRD facilities will need to determine how they will
obtain and furnish these drugs and biologicals (for example under
arrangement or mail order). We note that ESRD facilities currently
furnish drugs and biologicals to patients and, therefore, would have
experience and arrangements under the current basic case-mix adjusted
composite payment system. We acknowledge that these experiences and
arrangements may only address the injectable drugs and biologicals and,
that given the inclusion of the other ESRD-related drugs and
biologicals under the ESRD PPS beginning January 1, 2011, additional
arrangements may be needed.
Comment: One commenter was concerned that the bundling of oral
drugs would result in an automatic shift of patients' drug coverage to
Medicare. The commenter believed that patients who currently rely on
drug coverage from private retiree or employer health plans with little
or no cost sharing will be disadvantaged under the ESRD PPS. Another
commenter believed that the ESRD PPS may benefit uninsured patients who
currently either cannot receive these drugs or have difficulty getting
to a pharmacy.
Response: We do not agree with the commenter that bundling oral
drugs will shift patients' drug coverage to Medicare. Under the ESRD
PPS, Medicare coverage for some ESRD-related drugs and biologicals will
shift from Medicare Part D to Part B and, therefore, would be included
in the ESRD PPS. The statute does not govern private insurance or
require that drug coverage shift from private insurance to Medicare
Part B. Furthermore, the statute does not change private insurance or
incorporate coverage of services paid for by private insurers.
We do not believe that the ESRD PPS will have any effect with
regard to benefiting patients who are currently having difficulty
getting to a pharmacy. Under the ESRD PPS, patients may still need
access to a pharmacy for their ESRD-related oral drugs and biologicals
if the ESRD facility provides drugs and biologicals under arrangement.
With regard to the comment that uninsured patients will benefit
under the ESRD PPS, we agree that patients who currently do not have
drug coverage (either privately or through Part D) will benefit from
the inclusion of ESRD-related oral drugs and biologicals under the ESRD
PPS. However, as these drugs and biologicals have been included in the
ESRD PPS base rate, patients will have a co-insurance liability.
Comment: Several commenters stated that bundling of oral drugs
provides an unfair advantage to LDOs which the commenters believed
control the market for certain ESRD-related drugs. Commenters also
believed that LDOs have a further advantage because they have developed
in-house pharmacies.
Other commenters stated that small ESRD facilities would not have
the resources to develop in-house pharmacies and would need to contract
for oral medications. One commenter asserted that SDOs that opt to
furnish drugs under arrangement would not reach the volume necessary to
contract with pharmacy benefit managers (PBMs) and would need to
contract with smaller pharmacies at less favorable rates. Another
commenter asserted that small and rural facilities and their local
pharmacy partners will be disadvantaged because they are less capable
of aggressively negotiating drug prices.
Several commenters urged CMS to propose a standard national method
for dialysis facilities to establish prospective contracts with
multiple traditional and mail-order pharmacies for the furnishing of
dialysis-related drugs, regardless of the size of the dialysis
provider. Other commenters suggested that CMS negotiate with
pharmaceutical manufacturers on behalf of ESRD facilities to establish
prices for ESRD-related drugs. Another commenter suggested that as an
alternative to furnishing medications directly, ESRD facilities could
rely on a third party Competitive Acquisition Program (CAP) vendor to
purchase and distribute Part B renal dialysis service drugs to ESRD
patients.
Response: We thank the commenters for expressing their concerns
about the advantages and disadvantages that they believe exist between
large and small dialysis organizations and for providing suggestions
for ways in which ESRD facilities could obtain ESRD-related drugs and
biologicals. However, we are not specifying in this rule how ESRD
facilities are to obtain ESRD-related drugs and biologicals.
Thus, we are not adopting a national method for establishing
contracts with pharmacies, nor will we negotiate with drug
manufacturers on behalf of ESRD facilities to establish ESRD-related
drug prices. We note that CAP participation is limited to Medicare
physicians who administer drugs in their offices. However, we will take
these suggestions into consideration when we implement ESRD-related
oral-only drugs under the ESRD PPS. In the meantime, we encourage ESRD
facilities to pursue group purchasing arrangements with similarly
situated organizations to secure the most favorable drug prices
possible.
Comment: One commenter stated that organizations with demonstrated
pharmacy capabilities can help ESRD facilities minimize potential
operational and administrative burdens of managing pharmacy care. The
commenter further stated that mail order pharmacies provide ESRD
patients with consistency of care and ease of access to their necessary
medications while also saving payers and patients money.
Response: We appreciate the commenter's input and believe that ESRD
facilities that elect to furnish drugs under arrangement will seek
contracts with pharmacies on the basis of competitive pricing and on
the value that contracted pharmacies can offer to the ESRD facilities'
patients in terms of convenient access.
Comment: Several commenters requested clarification as to whether
the ESRD facility will be required to hire a pharmacist or if the
nurses will be required to dispense the oral drugs. An ESRD facility
nurse expressed concern that she would be forced to act as a
pharmacist, performing duties that would be beyond the scope of nursing
practice.
Response: We do not require that ESRD facilities hire a pharmacist
nor do we require that ESRD facilites dispense oral drugs. Rather,
under the ESRD PPS, ESRD facilities will be required to provide ESRD-
related drugs and biologicals (including ESRD-related drugs and
biologicals with other forms of administration). ESRD facilities will
need to determine how they will obtain and dispense drugs and
biologicals (that is, directly or under arrangements). However, ESRD
facilities and the
[[Page 49172]]
professional staff associated with these facilities will continue to be
required to comply with State and Federal laws pertaining to dispensing
of prescription drugs and biologicals.
Comment: One commenter requested clarification as to how oral
medications would be dispensed and charted; on a per treatment, weekly
or monthly basis. Several commenters believed that oral drugs covered
under the ESRD PPS (such as phosphate binders), would only be provided
on the days that the patient is in the facility and during the dialysis
treatment itself. Other commenters stated that phosphate binders should
be given with meals and that administering phosphate binders during
dialysis could result in patients experiencing nausea, vomiting,
choking or altered blood pressure.
Several commenters expressed concern that ESRD facilities may have
difficulty recouping the full payment amount for oral medications that
are taken outside the ESRD facility, particularly in instances where
multiple days, weeks or months-worth of medications are prescribed. The
commenter provided an example in which an ESRD facility provided a
patient with a month's supply of a drug but, as a result of missed
treatments, the facility would only receive payment for a partial month
worth of treatments and would not recoup the full cost of the
medication furnished.
Other commenters were concerned that patients may encounter
additional burden if ESRD facilities do not approve 30 day supplies of
drugs. The commenters stated that smaller prescribed quantities of
drugs would increase the number of trips that patients would need to
make to the pharmacy, which would be particularly burdensome for
patients with limited transportation.
Response: ESRD facilities will be required to record the quantity
of oral medications provided for the monthly billing period. In
addition, ESRD facilities would submit claims for oral drugs only after
having received an invoice of payment. We will address recording of
drugs on an ESRD claim in future guidance.
We appreciate the commenter's concern that ESRD facilities believe
they will be at risk for drug costs incurred but for which payment may
not be recouped as a result of missed treatments. Under the ESRD PPS,
payments are made on a treatment basis. However, some ESRD-related oral
drugs and biologicals may be required to be taken on days that do not
correspond with a treatment. We will be providing instruction on how
these medications are to be entered on the ESRD claim. We believe that
ESRD facilities will need to ensure, to the best of their ability, that
patients do not miss treatments. ESRD facilities will need to determine
the most appropriate way to furnish drugs and biologicals that ensures
that patients receive their required medications, while mitigating the
facilities' risk for drug costs.
Comment: One commenter stated that hospital-based ESRD facilities
meet their patients' medication needs through the use of intravenous
medications prepared by the hospital's on-site pharmacy. One commenter
indicated that state pharmacy licensure requirements do not permit the
hospital pharmacy to dispense outpatient medications. The commenter
further noted that hospital-based ESRD facilities would need to
establish a contract with an outside pharmacy to furnish the necessary
oral medications.
Response: We want to clarify that in bundling ESRD-related
injectable and oral drugs and biologicals with other forms of
administration, we are not mandating that ESRD facilities change from
intravenous to oral or other forms of these drugs. As indicated in the
proposed rule, we would expect that any ESRD facility that provides
outpatient maintenance renal dialysis items and services, would either
establish their own licensed pharmacies or contract with licensed
pharmacies.
Comment: Several commenters asserted that bundling oral medications
into the ESRD PPS would create confusion between Part B and Part D for
patients, ESRD facilities, pharmacies and Part D sponsors. One
commenter supported our proposal to create an ESRD indicator as a way
of preventing duplicate payment of drugs under Part B and Part D. Other
commenters stated that Part D plans would bear much of the burden of
ensuring that ESRD patients do not receive drugs under Part D coverage
that have been bundled into the ESRD PPS as ESRD-related services. The
commenter stated that because Part D already has effective cost control
mechanisms in place, it is not necessary to bundle Part D drugs into
the ESRD PPS for purposes of controlling costs. Another commenter
believed that where an ESRD-related drug is indicated for non-ESRD-
related indications, the ESRD indicator would not provide all the
information necessary to prevent duplicate payment.
Response: We intend to implement an ESRD indicator that will store
a beneficiary's ESRD status in Part D systems. Part D sponsors would be
expected to share the information with their claims processing
contractors for purposes of claims adjudication. This indicator will
allow contracted pharmacies to correctly bill ESRD-related drugs to the
ESRD facility and non-ESRD-related drugs to Part D.
We do not agree with the commenter that it is not necessary to
bundle Part D drugs in the ESRD bundle because Part D has mechanisms to
control costs. We discuss the interpretation of the definition for
renal dialysis services and the inclusion of Part D drugs in the ESRD
bundle in section II.A.3. of this final rule.
With regard to the commenter's concern that an ESRD indicator would
not provide necessary information to prevent duplicate payment, when a
drug is indicated for non-ESRD-related conditions, as we discuss later
in this section, ESRD facilities will be able to identify drugs and
biologicals used to treat non-ESRD conditions with a modifier and will
be paid separately for these items.
Comment: One commenter expressed concern about potential
administrative complexities that may be associated with furnishing
drugs that are on the Drug Enforcement Agency's (DEA) list of
controlled substances. This commenter further specified that the
process of securing and renewing a DEA license would add to the
administrative complexity of implementing the ESRD PPS.
Response: We expect that ESRD facilities are currently complying
with any applicable requirements associated with controlled substance
administration if they provide controlled substances to their patients.
While there is no requirement under the ESRD PPS for ESRD facilities to
administer controlled substances, if an ESRD elects to provide them,
they would be required to comply with State and Federal requirements.
Comment: One commenter requested clarification as to how antitrust
laws would be applied in the context of ESRD facilities that may seek
to contract with one or more pharmacies for the provision of oral
drugs. The commenter suggested that to the extent an ESRD facility were
to contract with one pharmacy but not another, this may violate
antitrust laws.
Response: Antitrust laws are beyond the scope of this final rule.
However, to the extent an ESRD facility opts to furnish drugs under
arrangement, we would expect that the facility would conduct an
independent compliance review of antitrust and any other applicable
Federal or State laws.
Comment: One commenter stated that OIG, MedPAC, or the Institute of
Medicine should conduct studies two
[[Page 49173]]
years after implementation of the ESRD PPS to ensure proper
implementation of oral-only drugs into the ESRD PPS bundle has occurred
and that Medicare beneficiaries have not been adversely impacted.
Response: We thank the commenter for this recommendation and note
that to the extent these entites were to conduct such studies we would
support those efforts. As discussed in this final rule, oral-only drugs
PPS will not be paid under the ESRD PPS until January 1, 2014. We note
that section 10335 of the Affordable Care Act requires the GAO to
conduct a study and submit a report to Congress on Medicare beneficiary
access to high quality dialysis services, including specific oral drugs
(oral-only).
As a result of the public comments and for the reasons discussed
above, we are revising Sec. 413.241. The revised Sec. 413.241 will
read as follows: ``Effective January 1, 2011, an ESRD facility that
enters into an arrangement with a pharmacy to furnish renal dialysis
service drugs and biologicals must ensure that the pharmacy has the
capability to provide all classes of renal dialysis drugs and
biologicals to patients in a timely manner.''
iii. Home Dialysis
In the proposed rule, we discussed that section 1881(b)(14)(A)(i)
of the Act requires the costs of home dialysis supplies and services
furnished under Method I and Method II, regardless of home treatment
modality, be included in the ESRD PPS bundle. We proposed that the
Method II home dialysis approach in its present form would no longer
exist under the ESRD PPS effective January 1, 2011, but our proposal
did not eliminate Method I in its present form (74 FR 50006).
Therefore, a supplier could only furnish, under an arrangement with the
ESRD facility, home dialysis equipment and supplies to a Medicare home
dialysis patient and the supplier would have to go to the ESRD facility
for payment. As discussed in section II.A.4. of this final rule, under
the ESRD PPS, all home dialysis items and services are covered under
the ESRD PPS payment and no separate payment will be made. In the event
supplies or equipment are used for non-ESRD-related purposes, those
supplies or equipment could be billed separately by utilizing a
modifier which indicates that the supply or equipment is not ESRD-
related.
The comments we received regarding Method II can be found in
section II.A.7. of this final rule.
b. Expansion of the Data Elements Reported on Claims
In the proposed rule, we explained that currently the 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 beyond the
treatment itself (74 FR 50006). We did not propose additional reporting
requirements in regards to collecting data for composite rate items and
services, but we noted that collecting additional data at the patient-
level is necessary for refinements to the case-mix adjustments of the
ESRD PPS's payment model. We provided examples of items and services,
such as time on machine, nutritional services, social work services,
and nursing services included in the current basic case-mix adjusted
composite payment system, but are not captured on the claim. We
requested public comment on possible data elements and other claim-
based information that would identify patients who are high cost (74 FR
50006).
We received comments regarding the expansion of the data elements
reported on claims as described below. The comments and our responses
are set forth below.
Comment: All commenters agreed that it is important to expand the
data elements required on ESRD claims in order to effectively make
refinements to the ESRD PPS payment model in the future. Some
commenters agreed with the examples of services in the proposed rule.
Two commenters stated that therapeutic nutritional services are
critical for ESRD patients who cannot swallow or digest and absorb
adequate nutrition from traditional nutrient formulas. One of the
commenters suggested that we specifically collect data from ESRD
facilities to assess the frequency and duration of nutrition services.
Another commenter suggested that we collect drug data with applicable
laboratory results that examine physiological responses to each drug.
Response: We thank the commenters for their suggestions and will
consider them when we initiate changes to the data elements required on
claims. Further direction will be provided in the future.
3. Miscellaneous Comments
We also received general comments related to the ESRD PPS, which
are included below. The comments and our responses are set forth below.
Comment: Several commenters requested that there be a payment
adjustment for nursing home staff providing care to beneficiaries with
ESRD.
Response: The ESRD PPS will provide a bundled payment for renal
dialysis services provided by a Medicare-certified ESRD facility. The
case-mix payment adjustments are provided to account for the additional
costs associated with separately billable items and services, of
providing dialysis related services for patients with certain
characteristics. The facility payment adjustments, including the
outlier payment, are provided to account for the additional composite
costs of providing dialysis related services. A payment adjustment for
nursing home staff services would not be available under the ESRD PPS
because payment for nursing home staff is covered separately outside of
the ESRD PPS and, such services do not meet the definition of renal
dialysis services for which ESRD facilities are paid a single rate.
Comment: One commenter was concerned that the proposed ESRD PPS
would violate State and Federal anti-kickback and physician self-
referral laws. The commenter believed that under the proposed ESRD PPS,
an ESRD facility would be required to bill directly for laboratory
tests that currently, are billed by the laboratory. The commenter
believed that in cases where ESRD facilities have physician ownership,
this arrangement would result in the ESRD facility sharing in profits
of self-ordered laboratory tests. The commenter was concerned that
physician-owned ESRD facilities, may be in violation of physician self-
referral rules, and that these facilities would not be permitted to
submit bills for laboratory charges. The commenter concluded that under
the ESRD PPS, laboratories, as the provider of laboratory services,
should continue to bill Medicare to avoid potential anti-kickback or
Stark violations. Another commenter expressed concern that to the
extent the ESRD facility would omit laboratory services from the ESRD
facility claim in an attempt to adhere to physician self-referral
rules, the services would not count towards the outlier eligibility
calculation rendering the ESRD facility ineligible for potential
outlier payment for laboratory services. Another commenter stated that
to the extent that hospital-based ESRD facilities choose to enter into
arrangements with community pharmacies for self-administered ESRD
drugs, the facility would have to initiate a Stark law compliance
review in the event that the community pharmacy has physician owners.
Response: Because all renal dialysis services, including ESRD-
related laboratory services and drugs (with the exception of oral-only
drugs), will be
[[Page 49174]]
paid under the ESRD PPS beginning January 1, 2011, these services as
described 42 CFR Sec. 411.351, would not be considered designated
health services subject to physician self-referral requirements. If
ESRD facilities have arrangements that they believe may be subject to
the Federal anti-kickback statute, these facilities should contact the
OIG. (Information about the Federal anti-kickback statute is available
on the OIG's Web site at http://oig.hhs.gov.)
Comment: One commenter indicated the importance of monitoring fluid
status and the need to develop strategies and practices for effective
and safe fluid removal.
Response: We agree that fluid management is important; however,
methods for monitoring fluid status are beyond the scope of this final
rule.
Comment: Several commenters offered suggestions for additional
collection of data and analyses which they believed would be helpful in
connection with improving and refining the ESRD PPS. Suggestions were
wide-ranging and included additional analyses showing beneficiary out-
of pocket expenses under the PPS, collection of data to determine how
dialysis practice patterns change under the new system, analyses for
additional performance measures that could be integrated into the QIP,
analysis on changes in the utilization of drugs subsequent to PPS
implementation, refinement of data sources to evaluate race as a
potential case-mix adjuster, collection of data on home dialysis
training services and analysis of the effect on home dialysis, and
collection of data and analysis to incorporate new drugs, technologies,
and advances in clinical protocols into the ESRD PPS.
Response: We appreciate all of the commenters' suggestions on the
collection of data and recommendations for subsequent analyses we could
undertake to monitor and refine the ESRD PPS. As we gain experience
with the new system, certain policy issues may emerge requiring more
immediate attention for data collection and analysis. We recognize that
we must balance the need for additional data and the potential for
improvements and revisions to the ESRD PPS with the administrative
burden that may be created. We will take all of these suggestions and
recommendations under advisement for consideration of future
refinements to the ESRD PPS.
Comment: Commenters expressed concern that we did not include
information on how we intend to identify ESRD-related items and
services after 2011. The commenters requested that we establish a
periodic review process to add or remove items and services in the ESRD
PPS bundle such as laboratory tests and drugs as well as update the
reimbursement allocated to those services as market conditions change.
Other commenters pointed out that we made policy determinations related
to a number of specific items and services under the ESRD PPS based
upon the current clinical practice for ESRD. The commenters requested
that we specify an appropriate process for updating policies under the
ESRD PPS as clinical treatments evolve and new technologies emerge.
Other commenters expressed concern that there will be little
incentive for innovation from the medical products industry for new
therapies and that CMS should encourage investment and innovation to
improve patient outcomes. One commenter stated they believed we have
the flexibility to provide for a separate payment for new and
innovative drugs and technologies for a defined period of time while
determining the appropriate costs of the new therapies for inclusion in
the ESRD PPS bundle.
Response: We do not agree that the ESRD PPS will inhibit the
development of new technologies or treatment. The ESRD PPS does not
dictate, limit or prescribe any treatment or technologies used for ESRD
patients. Rather, the ESRD PPS provides a payment for the average
patient as well as adjustments to that payment rate to account for
increased resource utilization. We have determined that several aspects
of the ESRD PPS will need to be updated annually to keep current with
new renal dialysis services. As we discussed in section II.A.3 of this
final rule, we have not specified drugs and biologicals that would be
renal dialysis services, but rather we specified categories by mode of
action to provide for any new drugs or biologicals that may be
developed or used in the future. For example, for anemia management,
new drugs that constitute renal dialysis services that are approved for
the treatment of anemia and are furnished by an ESRD facility, would be
reported on the ESRD facility claims and paid under the ESRD PPS. We
will use this information to update the list of ESRD-related drugs and
biologicals, including the drug categories each January 1 for purposes
of the outlier policy (see section II.H. of this final rule).
In a similar manner to drugs, we will need to keep the list of
ESRD-related laboratory tests up-to-date for purposes of the outlier
policy. The clinical laboratory fee schedule is updated annually to
reflect updates in Medicare payment as well as to reflect new tests. We
will be reviewing on an annual basis the new tests that are being added
to the clinical laboratory fee schedule so that we can determine
whether any of them are ESRD-related so they can be recognized under
the outlier policy.
With regard to new technology, the payment structure under the ESRD
PPS does not specify the type of modality (and therefore, the type of
technology) that should be used for dialysis. Rather, the per-treatment
payment provides for ESRD facilities to use the modality they believe
is best, as determined by the individual plan of care. We believe that
under the ESRD PPS, ESRD facilities will have the opportunity to
utilize any new technology that arises.
We believe that these mechanisms of updating ESRD-related drugs and
biologicals and laboratory tests, will address any changes that may
arise in the future. However, should the technologies and treatments
for ESRD change significantly at some point in the future, we could
consider whether other mechanisms may need to be incorporated through
future rulemaking to ensure that Medicare ESRD patients continue to
have access to important advances in care.
Comment: One commenter suggested that we update the ESRD PPS base
rate, patient-specific adjusters, co-morbidity case-mix adjusters and
facility-level adjusters no later than CY 2013 because by that time we
should have adequate data. The commenter expressed concern that if the
ESRD PPS is not updated annually, the adjusters could remain unchanged
over an extended period of time and would not reflect changes in the
costs of provided ESRD care.
Response: We plan to implement payment for oral-only ESRD-related
drugs under the ESRD PPS base rate after the ESRD PPS transition in
2014. In order to do so, we anticipate that the rulemaking to implement
oral-only drugs under the ESRD PPS in 2014 would take place during
2013.
After that refinement, we expect to update periodically the
regression analysis using the most recent claims and cost report data
to determine if changes to the type and amount of payment adjustments
are warranted. In addition, we will update the ESRD PPS annually to
reflect the latest market basket forecast with adjustments for
productivity, geographical variations in wages to reflect the most
current hospital wage data and CBSA definitions, and appropriate
changes to the fixed-dollar loss threshold amounts to maintain the 1
percent outlier policy.
As we proposed, we have codified these annual updates in Sec.
413.196
[[Page 49175]]
(Notification of changes in rate-setting methodologies and payment
rates). However, we have revised the language to reflect that the
market basket update could result in a negative update. Therefore, we
replaced reference to the market basket percentage increase with the
market basket update factors.
Comment: Some commenters expressed concern about the role of the
ESRD Networks. The commenters stated that there is a need to implement
an ESRD Network Program that will effectively protect and support
patients. The commenter suggested that the Network Program include
mandatory best practice quality standards for all Networks to ensure
that the quality of ESRD care is being judged consistently throughout
the country. Other commenters expressed concern that the ESRD Networks
are not accessible or attentive to patient concerns. Another commenter
stated that the ESRD Networks should be tasked with monitoring and
reporting involuntary discharges. Several commenters asked what role
the ESRD Networks will have in implementing the ESRD PPS.
Response: We promote high value quality healthcare for
beneficiaries and utilizes a variety of approaches to meet this goal.
Examples of these approaches include contemporary quality improvement,
coverage and payment policy, public reporting, and regulatory
enforcement. The 18 ESRD Networks are contracted by us to oversee and
facilitate high quality ESRD care, promote quality improvement,
evaluate and resolve patient grievances, and assist ESRD facilities in
meeting Network goals. The Networks monitor and report information
related to complaints and grievances and involuntary discharges. We are
currently assessing the role of the ESRD Network Program as it relates
to the ESRD PPS and the QIP and how to optimize the expertise of the
Networks to accelerate improvements in dialysis care.
Comment: Several commenters suggested a patient representative
panel to monitor how the ESRD PPS will affect dialysis treatment and
patient care. One commenter stated that there is little mentioned in
the proposed rule with regards to patient satisfaction and that patient
satisfaction is an important qualifier for future refinements to the
system. Other commenters suggested that we establish a review process
for evaluating the impact of the new PPS on patients and providers to
ensure that the changes in payment do not result in clinical practice
changes that adversely affect patients.
Response: We are concerned about how the ESRD PPS affects
beneficiaries and has aimed to identify and mitigate potential negative
effects. The way beneficiaries experience dialysis care is important to
us. The QIP provides a method to ensure quality dialysis care and
refers to patient satisfaction (information regarding the QIP is found
in section II.M. of this final rule). Because the statute indicates
that the quality measures should include patient satisfaction measures
to the extent feasible, we are assessing the dialysis facility Consumer
Assessment of Healthcare Providers and Systems (CAHPS tool), to
determine the feasibility and readiness of use within the QIP in future
years. In addition, as an integral part of the QIP, a program
monitoring plan is in development to identify indicators useful in
determining adverse effects on vulnerable (high risk) populations.
Patient input is an important component of our monitoring plan
development activities.
Comment: Some commenters expressed concern about non-compliant
patients and gave suggestions for initiatives for incentivizing them to
comply with their care plans. One example provided by the commenters
was a ``pay less for performance'' incentive under which patients would
be rewarded with a deduction in premiums if they follow their care
plan. The commenters indicated that non-compliant behavior is very
expensive in terms of furnishing healthcare.
Response: We encourage a patient-centered care approach in which
the patient is included as a multidisciplinary team member (see Sec.
494.80 of the ESRD Conditions for Coverage). We also encourage sharing
of best practices among ESRD facilities including best practices
regarding patients compliance with their care plans. While we recognize
the role a dialysis patient plays into the success of their own care,
Medicare is paying dialysis facilities to provide dialysis services and
as such, the dialysis facility is ultimately responsible for ensuring
that patients participate in their plan of care. We note that we do not
have the authority to reduce patient premiums (Part B premium or co-
insurance liability) to reflect patient compliance with their care
plans.
Comment: One commenter noted that the proposed ESRD PPS did not
inform patients adequately about effects on their costs and indicated
that patients need to be informed in a clearly understood manner about
how the ESRD PPS will affect their costs.
Response: We appreciate the commenter's concern about informing
patients about the changes of the new ESRD PPS. We plan to outreach and
educate facilities, providers and beneficiaries after this final rule
is released.
Comment: One commenter supported including drugs in the bundle and
believed that having drugs covered by ESRD facilities will be helpful
for many patients. This commenter noted that her drug use decreased
since going on home hemodialysis and she was able to stop some
medications which helped lower her copayments for drugs.
Response: We thank the commenter for supporting our proposal to
include drugs in the bundle.
Comment: We received several comments regarding the need for
updating the Medicare cost report for ESRD facilities. Commenters
stated that in order to accurately determine how facilities will fare
over time under the new payment system and in order to evaluate cost
trends, cost report reform is required. The commenters further
explained that all of the changes that will occur under the ESRD PPS
will not be properly captured in the cost report in its current form.
Some commenters argued that Medicare cost reports for ESRD facilities
do not offer a resource for an accurate estimation of costs associated
with home hemodialysis or other home modalities. One commenter stated
that if payment adequacy and other benchmarking of costs associated
with current and new ESRD modalities are to be possible, cost report
instructions at the modality level will need substantial revision.
Response: We agree that changes to the cost report are necessary to
reflect the ESRD PPS and to improve the accounting of ESRD facility
costs. Any changes in cost reporting will be addressed in the future.
Comment: Commenters indicated that the proposed ESRD PPS will give
dialysis facilities an incentive not to support their dialysis
patients' efforts to travel. These commenters indicated that dialysis
providers often require transient patients to submit Hepatitis B,
Surface Antigen and Surface Antibody results which are more recent than
required by the Centers for Disease Control and Prevention (CDC)
guidelines. Under current practice, the patient is generally
responsible for the cost of the testing; the proposed rule will shift
the cost to the home dialysis facility.
Response: Hepatitis B testing is included in the basic case-mix
adjusted composite payment rate, and therefore, payments for these
tests were included
[[Page 49176]]
in the ESRD PPS base rate. As a result, we expect that ESRD facilities
will require Hepatitis B testing only when appropriate to meet CDC
guidelines. The patient will have a 20 percent co-insurance liability
on the ESRD PPS per treatment payment amount and does not have a
financial liability specifically for Hepatitis B testing. As a result,
we do not believe that the treatment of Hepatitis B under the ESRD PPS
will affect or prohibit patients from traveling.
Comment: Commenters indicated that patients who travel represent an
administrative burden and economic loss to the patient's home facility
and bundling will make traveling patients less attractive. A few
commenters had concerns about how payment will be made for the
administration of medications to traveling dialysis patients.
Commenters believed that dialysis facilities will be cautious of
arranging transient treatment if there is no established means of
reimbursement between the patient's home facility and the transient
facility. One commenter indicated that transient facilities will have
no incentive to administer injectable medications or higher dosages of
ESAs to traveling patients. The commenter also questioned which
dialysis facility would be responsible for administering necessary
medications to the traveling patient under the bundled ESRD PPS. Other
commenters indicated that laboratory tests required by traveling
patients should be specifically excluded from the bundled ESRD PPS. If
the laboratory testing required by a destination unit are not
separately billable, it will complicate and perhaps, compromise the
ability of beneficiaries to travel for work, family and pleasure.
Response: ESRD facilities that accept responsibility for a
transient ESRD patient must furnish all necessary ESRD-related care. We
expect the home dialysis facility and the transient dialysis facility
to work together and exchange patient information regarding co-morbid
medical conditions and drug dosing to accommodate dialysis patients who
travel because of work, family or for pleasure. Given that beginning
January 1, 2011, the bundled ESRD PPS base rate and adjustments include
payments for laboratory tests, ESAs and other ESRD-related drugs and
biologicals (other than oral-only ESRD-related drugs), dialysis
facilities furnishing these services to the traveling patients will
receive payment for these services through their bundled ESRD PPS
payment.
Comment: Several commenters offered views regarding the imprudence
of not having an ESRD PPS demonstration project or pilot testing of the
proposed ESRD payment approach before going forward with national
implementation.
Response: The MMA included a provision for a demonstration project
to test the ESRD PPS prior to full implementation. However, that
provision was repealed.
4. Comments Regarding Monitoring
We received many comments, primarily from patients and health care
practitioners expressing concerns about monitoring the effects of the
ESRD PPS. Comments that pertain to the QIP are addressed in section
II.M. of this final rule. Other comments and our responses are
discussed below.
Comment: Many commenters expressed concern about the need to
monitor the impact of bundling ESRD drugs based on patient outcomes.
Others questioned if there will be tracking mechanisms to see how
payment changes will affect patient health. Some commenters cited
particular areas of concern such as an increase in the number of
parathyroidectomies being performed; iron use; bone mineral metabolism;
hospitalization and vascular access.
Response: We understand the concerns raised and have indicated
throughout this final rule that we will be monitoring the outcomes and
effects of the ESRD PPS. While virtually all commenters expressed
concerns about the potential negative effects of the PPS, we believe
that the ESRD PPS provides opportunities for positive outcomes as well.
Therefore, we plan to look at positive effects as well as areas of
vulnerabilities. We are in the process of identifying those areas
including those expressed by commenters. For example, as we discussed
in section II.A.3. of this final rule, we have identified ESRD-related
categories of drugs rather than specific drugs that will allow us to
identify trends or changes in the drugs utilized by outcome such as
anemia management. Also, as discussed earlier in this section, ESRD
facilities will be required to indicate ESRD-related drugs and
biologicals with other forms of administration on their claims. Because
we have information on Part B on the ESRD claims and Part D separately
payable drugs and biologicals, we will have a baseline from which to
compare future drug usage and can monitor for changes in drug
substitutions and dosing. We are also able to monitor for changes in
inpatient hospital admissions and outpatient services for ESRD patients
to determine if there are increases in ESRD-related procedures such as
parathyroidectomies.
Comment: Some commenters questioned how changes from the ESRD PPS
will be monitored for errors or fraud attempts.
Response: We have identified a number of measures in this final
rule that address potential errors or fraud attempts. For example, in
section II.K.2.a. of this final rule, we have described how ESRD
facilities and MCPs will be required to utilize a modifier to identify
items and services that they attest are not renal dialysis services. In
the low-volume facility discussion in section II.F.4. of this final
rule, we identified criteria that ESRD facilities will be required to
meet in order to be eligible for the low-volume payment adjustment. In
section II.A.3. of this final rule, we indicated that specific criteria
will be required to be documented for the co-morbidity categories
eligible for a payment adjustment. These can be monitored or verified.
In addition, as discussed in the previous response to comments, we are
in the process of identifying areas of concern (for example, drug
utilization). We will be issuing specific instructions and
corresponding manual changes in the future.
Comment: Some commenters indicated that oversight is needed to
prevent ESRD facilities from ``cherry picking'' patients. One commenter
expressed concern that the ESRD facility conditions for coverage allows
patients to be involuntarily discharged for non-payment.
Response: We appreciate the concerns expressed that there may be
ESRD facilities that will select patients based on higher payments. We
will require information on the ESRD claims that will allow us to
identify patient characteristics that result in eligibility for payment
adjustments. For example, in the discussion under the onset of dialysis
found in section II.F.3. of this final rule, we indicated that we would
be looking at the number of beneficiaries who become eligible for
Medicare due to a shortened coordination of benefit period. We will
monitor very closely, potential access concerns and could make
adjustments to the PPS in future years. We expect that ESRD facilities
and providers will not ``cherry Pick'' patients.
We appreciate the commenters' concerns about patients being
involuntarily discharged from an ESRD facility and note that, we intend
to monitor for changes in the number and characteristics of patients
who have been involuntarily discharged from their ESRD facility.
[[Page 49177]]
Comment: Several commenters indicated that there could be an
increase in negative outcomes because the ESRD PPS does not apply
limits on payment for preventable errors or outcomes. One commenter
recommended that ESRD facilities not receive payment for preventable
negative outcomes.
Response: We agree that other than the QIP discussed in section
II.M. of this final rule, there is no payment reduction for negative
outcomes. However, as we discuss in section II.F.3. of this final rule,
we did not include certain co-morbidities, such as septicemia, as being
eligible for a payment adjustment because we believe that it could be
an incentive for poor outcomes. By not providing an opportunity to
receive additional payment, we believe that we have mitigated payment
incentives for poor outcomes.
Comment: A few commenters expressed concern that CMS should be able
to determine if patients are not receiving adequate amounts of
Epogen[supreg]. One commenter recommended that CMS also monitor blood
transfusions administered to beneficiaries with ESRD.
Response: The commenters are correct that we collect hemoglobin
information on ESRD claims. As we noted earlier, we will require ESRD
facilities to indicate all renal dialysis-related drugs such as
Epogen[supreg], including dosages on the ESRD claim. We will explain
this in more detail in the future. We are also planning to monitor
blood transfusions for ESRD patients in our monitoring plans. We note,
as discussed in section II.M. of this final rule, hemoglobin is a
measure under the QIP.
Comment: One commenter recommended the establishment of an
independent panel of stakeholders and experts to evaluate tracking of
drugs. Another commenter suggested establishing an external oversight
board comprised of dialysis community stakeholders including patients,
physicians, nurses and providers to review monitoring reports to ensure
transparency of data. The commenter believes the oversight board should
have the authority to influence CMS policy to remediate any negative
changes in availability or quality of patient care.
Response: We thank the commenters for these suggestions and will
take them into consideration as we develop our monitoring plan for the
ESRD PPS.
Comment: One commenter believed that it is extremely important to
set up a monitoring system that ensures that under the ESRD PPS,
patients and physicians maintain access to a wide range of available
drugs. The commenter also stated that a process to monitor medication
use in real-time using clearly delineated metrics more inclusive than
quality measures, to ``ensure that no adverse effects of the bundle on
patient care and outcomes.''
Response: We have discussed that we are requiring ESRD facilities
to identify on the ESRD claims, renal dialysis related drugs. We
discussed in section II.A.3. of this final rule that we identified
categories of renal dialysis related drugs using claims data for drugs
which received separate payment. We expect that ESRD facilities will,
therefore, ensure that their patients receive the drugs (and
biologicals) that they require. At the current time, we are unable to
monitor medication use in real time as we are dependent on information
on ESRD claims submitted by the ESRD facilities.
Comment: A few commenters were in favor of retaining the ESA Claims
Monitoring Policy. These commenters suggested that similar monitoring
policies be created for dosage administration and physiological
response, for other drug classes (such as antibiotics, thrombolytics,
vitamins and minerals).
Response: We thank the commenters and will take the suggestions
into consideration as we develop our monitoring policies.
5. Comments Beyond the Scope of This Final Rule
We also received many comments that were beyond the scope of the
ESRD PPS final rule, including comments the following topics: Educating
patients on the importance of compliance with their prescribed
treatment plan and expanding funding for educating people on strategies
for the prevention of kidney disease; end of life care for dialysis
patients; cost containment or price ceilings on pharmaceuticals and
equipment; the need for financial planning for death and financial
assistance to bereaved families in need, to deal with outstanding
funeral and medical bills; consideration for studying the potential
future of stem cell treatments; the need to be more progressive in
offering cutting-edge options to beneficiaries; the need to establish
criteria such as morbidity, prognosis, age and family support to
determine a beneficiary's appropriateness for dialysis; consideration
for a payment adjustment for beneficiaries with ESRD who are employed
or attending school; concern that the surveyors from the Department of
Health are not encouraging best practices and no longer pursue the goal
of identifying ways to improve care for patients; and the need for
disaster planning for the provision of dialysis treatments.
Other commenters raised issues related to post-transplant coverage
of immunosuppressive drugs, stating that coverage of post-transplant
immunosuppressive drugs should be extended for the life of the
transplant because oftentimes patients have difficulty affording these
medications when Medicare coverage runs out. One commenter requested
that Medicare preserve access to brand name post-transplant
medications. A patient commenter requested help paying for a transplant
and for post-transplant medical care. Another patient commenter wanted
to know whether they could get a kidney. One commenter stated that it
is unfortunate that nephrologists spend minimal time in training on
home dialysis modalities. Another commenter stated that greater
emphasis should be placed on long-term rehabilitation such that ESRD
patients can enjoy active lifestyles, employment and community
involvement. Another commenter believed that CMS should develop a plan
to encourage and track employment status among patients with ESRD.
Because the above issues are beyond the scope of this final rule,
we have not addressed them in this final rule.
L. Evaluation of Existing ESRD Policies and Other Issues
In the proposed rule, we reviewed existing ESRD policies to
determine their applicability to the ESRD PPS. We proposed to eliminate
the exceptions for isolated essential facilities, self dialysis
training costs, atypical service intensity (patient mix) and pediatric
facilities that exist under the basic case-mix adjusted composite
payment system (74 FR 50007). We proposed to evaluate the current ESA
monitoring policy (EMP) and the operational issues for circumstances in
which Medicare is the secondary payer (MSP). We also proposed to
maintain the bad debt policy and the 50-cent per treatment deduction to
fund the ESRD Networks (74 FR 50007). We also proposed to set forth in
Sec. 413.195 the limitation on review with regard to the ESRD PPS (74
FR 50007). In addition, we explained that we were considering the
extent to which the laboratory services 50 percent rule would continue
to apply under the ESRD PPS (74 FR 50008).
1. Exceptions Under the Case-Mix Adjusted Composite Payment System
Section 1881(b)(7) of the Act and Sec. 413.182 generally address
exceptions to the composite payment rates. Section
[[Page 49178]]
422(a)(2) of BIPA prohibited the granting of new exceptions to the
composite payment rates after December 31, 2000. Section 623(b) of the
MMA amended section 422(a)(2) of BIPA to restore composite rate
exceptions for pediatric facilities that did not have an exception rate
in effect as of October 1, 2002. Section 422(a)(2)(D) of BIPA defined a
pediatric facility as a renal dialysis facility at least 50 percent of
whose patients are under 18 years of age.
In the proposed rule (74 FR 50007), we noted that in the CY 2005
PFS proposed rule (69 FR 47535), we explained that section 422(a)(2)(C)
of BIPA provided that any ESRD composite rate exception in effect on
December 31, 2000, would continue as long as the exception rate exceeds
the applicable composite payment rate. We further explained the
methodology that would be employed to compute the exception amount, and
that we were proposing to allow each dialysis facility the option of
continuing to be paid at its exception rate or at the basic case-mix
adjusted composite rate. On April 1, 2004, we opened the exception
window for pediatric facilities and noted that the window would close
in September 27, 2004. We further explained that in the CY 2005 PFS
final rule with comment period (69 FR 66332), we stated that the
exception process was opened each time there is a legislative change in
the composite payment rate or when we open the exception window,
including our intent to open the pediatric exception windows on an
annual basis. We also noted that we would provide for the continuation
of the home training exception, to allow for facilities with home
training exceptions to retain their current training exception rates as
well as take advantage of the case-mix adjusted rates for non-training
dialysis (74 FR 50007).
In the proposed rule, we indicated that while section 153 of MIPPA
does not directly address exceptions, section 1881(b)(14) of the Act
creates an ESRD bundled prospective payment in lieu of payment under
previous ESRD payment systems, and given that the ESRD PPS no longer
directly addresses changes in the ESRD composite rate, we believe that
the exceptions currently in place would no longer apply (74 FR 50007).
We also noted we addressed the higher costs relating to case-mix
through the patient characteristic adjustments and outlier payments (74
FR 49949 and 49987). We proposed the elimination of the isolated
essential facility, self dialysis training costs, atypical service
intensity (patient mix) and pediatric facility exceptions, effective
for ESRD renal dialysis services furnished on or after January 1, 2014
(at the conclusion of the phase-in). In other words, any existing
exceptions would terminate effective for ESRD treatment on or after
January 1, 2014. Additionally, no further exception windows would be
open effective for ESRD treatment furnished on or after January 1,
2011, the effective date of the ESRD PPS. In the event that an ESRD
facility elected to receive full payment under the ESRD PPS for renal
dialysis services on or after January 1, 2011, any existing exceptions
would no longer be recognized. In the event that an ESRD facility
elected to receive payment under the transition period, any existing
exceptions would be recognized for purposes of the basic case-mix
adjusted composite payment system portion of the blended payment
through the transition. We proposed to include the periods of
exceptions and the elimination of the exceptions to the composite
payment rates in Sec. 413.180 of the regulations. With respect to
appeals under Sec. 413.194(b), we pointed out that such appeals apply
only to exceptions to the composite rate granted before January 1, 2011
(74 FR 50007).
We received comments from three children's hospitals and one from
the American Academy of Pediatrics concerning pediatric exceptions and
these comments are described below. We did not receive any comments on
our proposal to eliminate the isolated essential facility, self-
dialysis training costs, and atypical service intensity (patient mix)
exceptions.
Comment: One commenter indicated that the proposed pediatric case-
mix adjusters and elimination of the pediatric facility exceptions
would reduce the costs adjustments needed by many pediatric facilities
to remain operational. The commenter believed that the proposed
pediatric case-mix adjusters and the elimination of the pediatric
exceptions would result in children and adolescents with ESRD not
having access to specialized dialysis care. Other commenters believed
that these proposals fail to recognize the uniqueness of pediatric
facilities that have State mandated higher staff ratios, additional
staff required such as teachers and child life specialists, and higher
supply costs associated with treating pediatric ESRD patients.
Response: We believe that the changes we have made in this final
rule with regard to the pediatric model address the specific needs of
pediatric patients and the care that they require. We discuss these
changes in detail in section II.G. of this final rule. With regard to
the pediatric exceptions, as we discuss in greater detail below, we
believe that our proposal to eliminate such exceptions is appropriate
and warranted under the statute.
Comment: One commenter indicated that the MIPPA legislation did not
specifically eliminate the existing pediatric exceptions to the
composite rate and believes that our interpretation of the MIPPA ``is a
stretch.''
Response: We do not agree with the commenter with regard to our
interpretation of the MIPPA legislation and section 1881 of the Act. As
we discussed in the proposed rule, we continue to believe that the ESRD
PPS under section 1881(b)(14) of the Act creates an ESRD prospective
payment system in lieu of payments under previous ESRD payment systems.
Given that these exceptions pertain to the prior composite rate payment
systems under section 1881(b) of the Act, we do not believe that such
exceptions would carry forward or be appropriate under the ESRD PPS.
After the ESRD PPS transition, no portion of the ESRD PPS payments will
be based on the composite rate. As a result, we do not believe it would
be appropriate to continue composite rate exception payments after
January 1, 2014. We also believe that we have addressed the higher
costs of pediatric patients in the final pediatric model discussed in
detail in section II.G. of this final rule.
We are finalizing the elimination of the isolated essential
facility, self-dialysis training costs, atypical service intensity
(patient mix)and pediatric facility exceptions effective for ESRD renal
dialysis services furnished on or after January 1, 2014 (at the
conclusion of the phase-in). We are also finalizing our proposal that
no further exception windows would be open after January 1, 2011, the
effective date of the ESRD PPS. In the event that an ESRD facility
elects to receive full payment under the ESRD PPS for renal dialysis
services furnished on or after January 1, 2011, existing exceptions
would no longer be recognized. In the event that an ESRD facility
elects to receive payment under the transition existing exceptions
would be recognized for the purpose of the basic case-mix adjusted
composite payment system portion of the blended payment. We are
finalizing the inclusion of the periods of exception and the
elimination of the exceptions to the composite payment rates in Sec.
413.180 of the regulations. We note that appeals under Sec. 413.194(b)
apply only to exceptions to the composite rate granted before January
1, 2011.
[[Page 49179]]
2. Erythropoiesis Stimulating Agent (ESA) Claims Monitoring Policy
In the proposed rule, we discussed the historic development of the
ESA Claims Monitoring Policy. We noted that we were evaluating the
extent to which we could continue the ESA Claims Monitoring Policy for
renal dialysis services furnished on or after January 1, 2011.
Specifically, at that time it was not known how the reduction in
payment that is currently applied to the separately billed ESAs would
be applied under the proposed ESRD PPS (74 FR 50008).
In the proposed rule, we noted that we would continue to evaluate
how to establish eligibility for outlier payments in instances where
the ESA Claims Monitoring Policy is implicated. CMS is adopting the EMP
under the ESRD PPS in computing basic case-mix adjusted composite
payments amounts during the transition and it will be taken into
account when determining eligibility for outlier payments. We have
included the comments and responses pertaining to this policy in
section II.H. of this final rule.
3. ESRD Facility Network Deduction
In the proposed rule, we indicated that pursuant to section
1881(b)(7) of the Act, to fund the ESRD Networks, 50 cents is deducted
from the amount of each payment for each treatment (subject to such
adjustments as may be required to reflect modes of dialysis other than
hemodialysis). The reduction amount applies to all treatment
modalities. We sited the Medicare Claims Processing Manual, Public Law
100-04, Ch. 8, section 110 for information on the methodology for
calculating the reduction.
We proposed to continue this deduction under the ESRD PPS with a
50-cent reduction per treatment from the payment made to ESRD
facilities under the ESRD PPS for facilities that elect to receive
payment under the ESRD PPS. For facilities that elect the ESRD PPS
transition, we would apply the 50-cent reduction the blended payment
amount (74 FR 50008).
We did not receive any comments opposing the continuation of the
ESRD network deduction. Therefore, we are finalizing that we will
continue the 50-cent deduction under the ESRD PPS.
4. Bad Debt
In the proposed rule, we explained that Sec. 413.89 and Chapter 3
of the Provider Reimbursement Manual, Part 1 (PRM)(CMS Pub. 15-1) set
forth the general requirements and policies for payment of bad debts
attributable to unpaid Medicare deductibles and coinsurance amounts.
Additional requirements for ESRD facilities are set forth at Sec.
413.178. We further explained that under the basic case-mix adjusted
composite payment system Medicare pays ESRD facilities 80 percent of a
prospectively set composite rate for outpatient dialysis services. The
Medicare beneficiary is responsible for the remaining 20 percent as co-
insurance, as well as any applicable deductible amounts as set forth in
Sec. 413.176 of the regulations. If the ESRD facility makes reasonable
collection efforts, as described in section 310 of the PRM, but is
unable to collect the deductible or coinsurance amounts for items or
services associated with the composite rate, we consider the
uncollected amount to be a ``bad debt'', if the facility meets the
requirements at proposed Sec. 413.178 and proposed Sec. 413.89 of the
regulations. We also explained that at the end of the ESRD facility
cost reporting period, Medicare recognizes a facility's Medicare bad
debts. However, Sec. 413.178(a) requires CMS to reimburse ESRD
facilities for its allowable bad debt up to the facility's costs as
determined under Medicare principles (74 FR 50008).
We explained in the proposed rule that in developing the proposed
changes to the ESRD payment system, section 153(a)(4) of MIPPA states,
as a Rule of Construction, that, ``nothing in this subsection or the
amendments made by this subsection shall be construed as authorizing or
requiring the Secretary of Health and Human Services to make payments
under the payment system implemented under paragraph (14)(A)(i) of
section 1881(b) of the Social Security Act (42 U.S.C. 1395rr(b)), as
added by paragraph (1), for any unrecovered amount for any bad debt
attributable to deductible and coinsurance on items and services not
included in the basic case-mix adjusted composite rate under paragraph
(12) of such section as in effect before the date of the enactment of
this Act.'' Therefore, we stated that bad debt payments would continue
to be made for the unpaid Medicare deductibles and coinsurance amounts
for only those items and services associated with the basic case-mix
adjusted composite rate. However, since the proposed single ESRD
payment rate is for items and services included in the composite rate
and for drugs and laboratory tests, we proposed to use only the
composite rate portion of the proposed single ESRD payment rate to
determine bad debt payments. We also proposed that bad debt payments
for ESRD facilities would continue to be capped as required under Sec.
413.178(a). We also indicated that the Medicare cost report and
instructions in the PRM, Part 2 (CMS Pub. 15-2) might be revised to
report the case mix adjusted composite rate payment and associated cost
data necessary to compute the ESRD facility bad debt payments.
In addition, we proposed to make a conforming change to regulation
text at Sec. 413.178(d) regarding ESRD bad debt payment under the
proposed ESRD payment system and include a cross-reference to Sec.
413.178 in Sec. 413.89(h) and (i).
We received several comments on bad debt. The comments and our
responses are set forth below.
Comment: One commenter questioned how dialysis-related bad debts
would be determined under the ESRD PPS. The commenter also questioned
if unreimbursed co-payments for laboratory services and Part D drugs
would be reimbursed. The same commenter believes that if these services
are in the bundle, then they should be included in the bad debt
reimbursement and if they are not, then this would result in a
financial burden for providers.
Response: As we discussed above, section 153(a)(4) of MIPPA states,
as a Rule of Construction, that, ``nothing in this subsection or the
amendments made by this subsection shall be construed as authorizing or
requiring the Secretary of Health and Human Services to make payments
under the payment system implemented under paragraph (14)(A)(i) of
section 1881(b) of the Social Security Act (42 U.S.C. 1395rr(b)), as
added by paragraph (1), for any unrecovered amount for any bad debt
attributable to deductible and co-insurance on items and services not
included in the basic case-mix adjusted composite rate under paragraph
(12) of such section as in effect before the date of the enactment of
this Act.'' Therefore, we stated that bad debt payments would continue
to be made for the unpaid Medicare deductibles and co-insurance amounts
for only those items and services associated with the basic case-mix
adjusted composite rate. However, since the single ESRD payment rate is
for items and services included in the composite rate and for drugs and
laboratory tests, we would use only the composite rate portion of the
single ESRD payment rate to determine bad debt payments. As oral drugs
were not included in basic case-mix adjusted composite rate, they would
not be subject to bad debt reimbursement.
In order to determine bad debt amounts for only the basic case-mix
adjusted composite rate portion of the
[[Page 49180]]
bundled ESRD PPS payment, we will utilize data from the Medicare ESRD
cost report to determine the percentage of basic composite rate costs
to total costs on a facility-specific basis. The current ESRD cost
report Form CMS 265-94 for freestanding facilities and Form CMS 2552-96
for hospital-based facilities, contain data that can be used to compute
a facility's percentage of composite costs to total costs. We will
apply that facility-specific composite rate percentage to the
facility's total bad debt amount associated with the bundled ESRD PPS
payment. The resulting bad debt amount will be used to determine the
allowable Medicare bad debt payment in accordance with Sec. 413.89 and
Sec. 413.178. During the transition period, a facility will apply the
facility-specific composite cost percentage to the bad debt amounts
associated with only the transition composite rate portion of the
bundled ESRD PPS payment. The resulting bad debt amount will be added
to the bad debt amount associated with the transition portion of the
facility's ESRD reasonable costs to determine the total allowable
Medicare bad debt payment in accordance with Sec. 413.89 and Sec.
413.178.
Comment: One commenter believed that section 153(a)(4) of MIPPA is
silent with regard to bad debt reimbursement for ESRD services and that
the statute does not imply that bad debts for non-composite rate
related services should or should not be covered. The commenter further
believed that under the ESRD PPS, ESRD bad debts should be reported in
the same manner as bad debts for other outpatient PPS services.
Response: We believe that the Rule of Construction included in
section 153(a)(4) of MIPPA, as stated above, would allow for the
payment of bad debt amounts that are only associated with the basic
case-mix adjusted composite rate. Thus, any bad debt amounts associated
with drug and laboratory tests or with any non-composite rate amounts
will not be allowed. We also note that under Sec. 413.89(i) and Sec.
413.178(d), bad debts arising from covered services paid under a
reasonable charge-based methodology, or a fee schedule are not
reimbursable under Medicare. Thus, if a Medicare PPS or a portion of a
Medicare PPS has its basis in reasonable charges or a fee schedule
then, any associated bad debt amounts are not reimbursable.
Comment: One commenter believed that certain proposals,
specifically the inclusion of laboratory services in the co-insurance
calculation, contravenes the MIPPA statute which, prohibits opening the
bad debt issue and increases bad debt costs for ESRD facilities. The
commenter further suggested that until oral drugs are accurately
accounted for, they should not be in the bundle, to ensure that
additional bad debt is not imposed on facilities. The commenter
recommended that CMS use caution until meaningful tracking and
compliance tools for States, secondary insurers, and beneficiaries be
in place. The commenter also recommended that ESRD facilities not be
left with additional bad debt resulting from a new payment system.
Response: We believe that the method described above of applying a
facility-specific composite rate percentage to the bad debt amounts
associated with the ESRD PPS allows us to compute a facility's
allowable bad debt payments in accordance with the Rule of Construction
included in section 153(a)(4) of MIPPA.
Comment: One commenter noted that it was burdensome to require
hospitals to calculate bad debt under a composite rate definition that
will no longer exist. The commenter urged CMS to have this policy
modified to relate bad debt payments to the new payment system.
Response: We believe that utilizing data that are already reported
on the facility's current Medicare cost report to compute the allowable
bad debt payment under the ESRD PPS, will mitigate the reporting burden
to the provider. ESRD facilities will be required to continue to
complete the appropriate cost report worksheets with the data necessary
to compute the composite cost percentage and compute the allowable bad
debt payment under the ESRD PPS.
Based on the comments received, we are finalizing that bad debt
payments will continue to be made for the unpaid Medicare deductibles
and coinsurance amounts for only those items and services associated
with the basic case-mix adjusted composite rate. However, since the
single ESRD payment rate is for items and services included in the
composite rate and for drugs and laboratory tests, we will use only the
bad debt amounts associated with the composite rate portion of the
single ESRD payment rate to determine a facility's allowable bad debt
payments. We will use the methodology described above to apply a
facility-specific composite cost percentage to the total bad debt
amount associated with the bundled ESRD PPS payment to compute the bad
debt amount for only the basic case-mix adjusted composite rate. Bad
debt payments for ESRD facilities will continue to be made in
accordance with Sec. 413.89 and Sec. 413.178 of the regulations,
including the requirement to cap ESRD bad debt payments under Sec.
413.178(a). We will revise and publish the appropriate cost reporting
worksheets and instructions in the PRM, Part 2 (CMS Pub. 15-2) along
with any other necessary administrative issuances, to implement the
computation of Medicare ESRD bad debt payments through to the cost
report, as described above, for services rendered on or after January
1, 2011.
In addition, we are finalizing the conforming change to regulation
text at Sec. 413.178(d) regarding ESRD bad debt payment made under the
ESRD payment system described in this final rule. We are also including
a cross-reference to Sec. 413.178 in Sec. 413.89(h). In the proposed
rule, we erroneously indicated that we were proposing to add a cross-
reference in Sec. 413.89(i). However, we did not make any proposed
revisions to Sec. 413.89(i). Therefore, for this final rule, we are
not revising Sec. 413.89(i).
5. Limitation on Review
As discussed in the proposed rule, section 153(b) of MIPPA amends
section 1881(b) of the Act to provide for a limitation on review.
Specifically, section 1881(b)(14)(G) of the Act provides the following:
``There shall be no administrative or judicial review under section
1869 of the Act, section 1878 of the Act or otherwise of the
determination of payment amounts under [section 1881(b)(14)(A)], the
establishment of an appropriate unit of payment under [section
1881(b)(14)(C)], the identification of renal dialysis services included
in the bundled payment, the adjustments under [section 1881(B)(14)(D)],
the application of the phase-in under [section 1881(b)(14)(E)], and the
establishment of the market basket percentage increase factors under
[section 1881(b)(14)(F)].'' We proposed to codify this limitation on
review in Sec. 413.195 of the regulations (74 FR 50008).
We received several comments concerning the limitation on review.
The comments and responses are set forth below.
Comment: Given the limitation of review clause, one commenter was
concerned that it would impose a limit on payment for dialysis services
of three treatments per week. The commenter believed that payment
should be given for any treatments beyond the three treatments per week
without requiring medical justification.
Response: The limitation of review clause would prohibit review of
our determination of the number of treatments that would be eligible
for payment. We explain how the number of ESRD treatments eligible for
Medicare
[[Page 49181]]
payment (that is, three treatments per week), was derived in section
II.E. of this final rule. We do not agree that we should abolish the
medical justification requirement for treatments that exceed the
threshold because this process provides a mechanism to allow additional
payment beyond the established treatment threshold.
Comment: Several commenters requested we issue an ESRD PPS interim
final rule to allow for additional comments or to challenge payments
for Part D drugs, because the limitation on review would not allow for
administrative or judicial review of the final rule.
Response: Given that we have issued a proposed rule containing a
detailed proposal for an ESRD PPS, allowed for an extended 90-day
public comment period, and carefully considered the comments received,
we believe that a final rule is appropriate. The ESRD PPS bundle is
discussed in section II.A. of this final rule and we note that oral-
only drugs currently covered under Part D will not be paid under the
ESRD PPS until January 1, 2014.
As we proposed, we are codifying the limitation on review in Sec.
413.195 of the regulations. However, we have revised the language to
reflect that the market basket update could result in a negative
update. Therefore, we replaced reference to the market basket
percentage increase with the market basket update factors.
6. 50 Percent Rule Utilized in Laboratory Payments
In the proposed rule (74 FR 50008), we discussed that as specified
in CMS Pub 100-04, Chapter 16, Sect. 40.6, for a particular date of
service to a beneficiary, if 50 percent or more of the covered
laboratory tests within an Automated Multi-Channel Chemistry (AMCC)
test are included under the composite rate payment, then all submitted
tests are included within the composite payment and no separate payment
is made for any of the AMCC tests. If less than 50 percent of the
covered laboratory tests within the AMCC are composite rate tests, then
all AMCC tests submitted are separately payable. We also described how
ESRD facilities were to identify each test that is included in the
composite rate and each test that is not included. We further explained
that during the transition period, the 50 percent rule would continue
to apply to the basic case mix adjusted composite payment system
portion of the blended payment. We also stated that under the proposed
consolidated billing provisions, the ESRD facility would assume the
responsibility for all of the renal dialysis services that its patients
receive, including laboratory tests. As a result, the ESRD facilities
would apply the 50 percent rule billing procedures including
application of the relevant modifiers. Medicare would not make separate
payment for laboratory tests, rendering the 50 percent rule irrelevant
for payment purposes. The 50 percent rule's relevance would be limited
to its use in determining eligibility for outlier payment (74 FR
50008).
In the proposed rule, we noted that preliminary analyses revealed a
small impact upon removing from eligibility for outlier services the
AMCC tests to which the 50 percent rule applies. As a result, we
considered excluding AAMC tests from the definition of outlier
services, thus negating the need to apply the 50 percent rule under the
proposed ESRD PPS (74 FR 50009). We also noted that we planned to
continue to evaluate the impact of this approach and include further
discussion in the final rule. We requested public comments on whether
or not to include the AMCC tests in the definition of outlier services
and retain the 50 percent rule under the proposed ESRD PPS.
Because we are finalizing the use of the 50 percent rule with
regard to determining eligibility for outlier payments, we have
included our discussion of this issue, along with the comments and
responses that we received pertaining to the 50 percent rule, in
section II.H. of this final rule.
7. Medicare as a Secondary Payer
In the proposed rule, we stated that Medicare may be a secondary
payer (MSP) when the primary payer is a group health plan for ESRD
items and services furnished to Medicare beneficiaries during the 30-
month Medicare coordination of benefit period (74 FR 50009). We further
stated that at that time, we were unable to identify the systems
operations and billing procedures impact of this relationship under the
current basic case-mix adjusted composite payment system, and we were
exploring how it would be utilized and managed under the proposed ESRD
PPS. We stated that we believed that while there may need to be system
changes in order to process MSP claims under the proposed ESRD PPS,
there should be no impact on ESRD providers and on primary payers. We
stated our intent to issue through administrative issuance, any changes
in the manner of reporting information, should that be required. We
solicited public comments on the operational issues of MSP under the
proposed ESRD PPS.
We received a few comments on MSP. The comments and our responses
are set forth below.
Comment: One commenter questioned what would prevent his secondary
payer from dropping him or increasing his premiums. Another commenter
suggested changing the MSP period for employed, child-rearing, in-
school, or under 25 years of age dialysis patients from 30 months to a
continuous period.
Response: Questions concerning premiums or other issues pertaining
to secondary insurers are beyond the scope of this final rule. In
addition, recommendations concerning changes to the coordination of
benefits period are beyond the scope of this final rule.
We believe that the implementation of the ESRD PPS will have no
effect on MSP rules. We will continue to evaluate the need for changes
to MSP systems, operations and billing procedures under the ESRD PPS
and we will issue through administrative issuance any changes in the
manner of reporting information should that be required.
8. Conforming Regulation Changes
We proposed to amend 42 CFR Chapter IV. Specifically, we proposed
conforming changes to existing regulations to reflect the current basic
case-mix adjusted composite payment system and the ESRD PPS. We did not
receive any public comment on these changes. Therefore, we are
finalizing these conforming changes, along with the technical changes
noted in the final rule, as follows:
Section 413.170(a)--setting forth the principles and
authorities under which CMS is authorized to establish a prospective
payment system;
Section 413.170(b)--providing procedures and criteria
under which a facility may receive a pediatric exception;
Section 413.171--defining base rate, composite payment
system, basic case-mix adjusted composite payment system, ESRD
facility;
Section 413.172(a)--setting forth that payment for renal
dialysis services and home dialysis services are based on prospective
payment rates:
Section 413.172(b)--requiring that all prospective
payments to approved ESRD facilities as payment in full and defines
approved ESRD facility;
Section 413.174(a)--establishing prospective payment rates
for hospital-based and independent ESRD facilities prior to January 1,
2009;
Section 413.174(f)--establishing payment for separately
billable ESRD-related drugs and biological prior to January 1, 2011;
[[Page 49182]]
Section 413.176(a) and (b)--establishing the beneficiary
deductable;
Section 413.178(d)--establishing bad debt under reasonable
charge-based methodology or fee schedule are not reimbursable;
Section 413.180(1),(2), and (3)--establishing the periods
of exceptions to payment rates;
Section 413.231(a)--establishing the adjusted labor
portion of the base rate to account for geographic differences in area
wage levels;
Section 413.231(b)--defining urban and rural areas;
Section 414.330(a)(2)--establishing exception for
equipment and supplies furnished prior to January 1, 2011;
Section 414.330(b)(2)--establishing exception for home
support services furnished prior to January 1, 2011;
Section 414.330(c)--establishing payment limits for
support services, equipment and supplies furnished prior to January 1,
2011; and
Section 414.335(a)--establishing payment home EPO use
prior to January 1, 2011.
M. Anemia Management and Dialysis Adequacy Measures
In the September 29, 2009 proposed rule (74 FR 50009), we proposed
to adopt three measures by which the quality of dialysis services
furnished by ESRD providers participating in Medicare would be
measured.
Section 1881(h)(2)(A) of the Act requires that the measures
specified for the Quality Incentive Program (QIP) include measures on
anemia management that reflect the labeling approved by the Food and
Drug Administration (FDA) for such management, measures on dialysis
adequacy, and such other measures the Secretary specifies. To implement
this section, we proposed (74 FR 50011) that for the first QIP
performance period we would adopt the two anemia management measures
and one hemodialysis adequacy measure that are currently used for
Dialysis Facility Compare (DFC). Data needed to calculate these
measures can be collected from Medicare claims submitted by ESRD
providers/facilities on a patient-specific basis.
The anemia management measures used for DFC assess the percentage
of patients at a facility whose anemia was not controlled at both the
high and low ends of the FDA-recommended hemoglobin levels.
Specifically, these measures are: (1) The percentage of patients
treated at a provider/facility with a Hemoglobin Less Than 10 g/dL and
treated with erythropoiesis stimulating agents (ESAs), and (2) the
percentage of patients at a provider/facility with a Hemoglobin Greater
Than 12 g/dL and treated with erythropoiesis stimulating agents (ESAs).
The current FDA labeling guideline released November 8, 2007 for
the administration of ESAs to patients with chronic kidney disease,
including ESRD patients, states, ``The dosing recommendations for
anemic patients with chronic renal failure have been revised to
recommend maintaining hemoglobin levels within 10 g/dL to 12 g/dL.''
As we stated in the proposed rule (74 FR 50011), we believe that
the proposed anemia management measures reflect the approved FDA
labeling for anemia management because they assess the number of
patients whose hemoglobin levels are at the low and high end of the FDA
label recommendation. In addition, we believe that it is more
appropriate to adopt two measures which together assess the high and
low ends of the FDA recommended hemoglobin level range, rather than a
single measure that reflects the percentage of patients who have
hemoglobin levels within the 10 through 12 g/dL range, because two
measures will provide a richer picture of provider/facility
performance. Additionally, the low and high ends for anemia management
have been of particular concern for the treatment of vulnerable
patients and these measures will allow for monitoring for this
potential outcome. These data will also allow us to calculate the
percentage of patients who have hemoglobin levels within the 10 through
12 g/dL range. Therefore, we proposed to adopt these two anemia
management measures for the QIP (74 FR 50011).
Anemia data have been reported on DFC since January 2001. As we
noted above, we updated the reporting of anemia data for DFC in
November of 2008 to be consistent with the new FDA labeling guideline
released in November 2007; however, the methodology for calculating the
provider/facility, State, and national averages for anemia measures has
not changed since the initial release of DFC. We proposed to use the
same methodology we use to calculate the anemia management measures for
purposes of DFC to calculate the measures for purposes of the QIP
because the methodology is consistent with how we have calculated that
data since 2001 (74 FR 50011). Under this methodology, we will
calculate the measures using hemoglobin data for Medicare patients who
have been diagnosed with ESRD for at least 90 days and whose Medicare
claims submitted by providers/facilities indicated the use of an ESA
during that 90-day period. Data from patients whose first ESRD
maintenance dialysis starts before day 90 or who have hemoglobin values
of less than 5 g/dL or greater than 20 g/dL will be excluded from the
measure calculation. In addition, there must be for the same patient at
least 4 claims meeting this criteria for that data to be included in
the data for a specific provider or facility.
Technical details on the methodology used to calculate the anemia
measures are available on the Arbor Research Collaborative for Health
and University of Michigan Kidney Epidemiology and Cost Center Web
site: http://www.dialysisreports.org/Methodology.aspx.
The Hemodialysis Adequacy Measure (urea reduction ratio (URR)) that
we proposed to adopt (74 FR 50011) is also used for DFC and assesses
the percentage of patients at a provider or facility that get their
blood cleaned adequately (blood urea is removed during in-center
hemodialysis). Specifically, this measure assesses the percentage of
in-center hemodialysis patients at a provider or facility whose urea
reduction ratio (URR) is 65 percent or greater, a standard based on the
National Kidney Foundation's Kidney Disease Quality Initiative Clinical
Practice Guidelines (NKF-KDOQI). These guidelines are widely used and
generally accepted throughout the ESRD community. More information on
the calculation of the URR is available at http://www.dialysisreports.org/Methodology.aspx.
The methodology for calculating the provider/facility, State, and
national averages for the in-center hemodialysis measure has been used
since January 2001 with the initial release of DFC; we proposed to use
the same methodology to calculate the measure for purposes of the QIP
to be consistent with how that data has been calculated since 2001 (74
FR 50012). Under this methodology, we will calculate URR data only for
Medicare patients who have been diagnosed with ESRD and received in-
center maintenance hemodialysis for at least 183 days from the date
that they received their first maintenance dialysis treatment, and
whose Medicare claims submitted by providers/facilities included a
value for the URR. In addition, there must be for the same patient at
least four claims meeting the criteria above for that data to be
included in the data for a specific provider or facility. Technical
details about the methodology we proposed to use to calculate the
hemodialysis adequacy measure are available on the University of
Michigan Kidney Epidemiology and Cost Center Web site
[[Page 49183]]
at: http://www.dialysisreports.org/Methodology.aspx. We note that the
data we need to calculate the proposed anemia management and
hemodialysis adequacy measures described above can be collected through
ESRD claims, which is the only complete provider/facility level data
set available to CMS at this time. For this reason in the September 29,
2009 proposed rule published in the Federal Register (74 FR 50012), we
proposed to adopt only the two anemia management measures and one
dialysis adequacy measure described above.
Although we recognize that section 1881(h)(2)(A)(i)(ii) states that
the measures shall include ``measures on dialysis adequacy,'' only one
dialysis adequacy measure is collected nationally and available to
determine provider/facility-specific values. For this reason, we
proposed to adopt only one dialysis adequacy measure. We also note that
section 1881(h)(2)(A)(iii) of the Act states that the measures shall
include, to the extent feasible, other measures as the Secretary
specifies, including measures on iron management, bone mineral
metabolism, and vascular access (intended to maximize the placement of
arterial venous fistula). CMS did not propose in the September 29, 2009
proposed rule, to adopt any measures in these categories for the QIP
payment consequence year 2012 since we are not currently collecting
data in a manner that would allow determination of provider/facility-
specific performance with respect to these categories of measures (74
FR 50012). We are working to identify appropriate sources from which we
can adequately capture data to support the future adoption of
additional measures. Finally, as we stated in the ESRD PPS proposed
rule (74 FR 50012), it is not feasible to propose a patient
satisfaction measure at this time because the data collection tool has
not been fully validated for the collection of relevant and industry
accepted patient satisfaction data. Therefore, we believe it is not
feasible to propose more than the aforementioned measures for the QIP
payment consequence year 2012 because of the lack of complete and
accurate data. We will address other measures in future rulemaking.
In the September 29, 2009 proposed rule (74 FR 50012 through
50016), we also outlined a conceptual model describing various
components of the QIP under consideration, such as the weighting of
measures and scoring methodology for determining payment reductions.
The purpose of the conceptual model was to notify the public regarding
what we believe to be essential components of the QIP and obtain
detailed comments on those components for purposes of future
rulemaking. Our previous discussion of the measures and the conceptual
model may be found in the ESRD PPS proposed rule (74 FR 50009).
We received approximately 194 comments on the proposed measures.
Many commenters agreed that we should adopt the three proposed
measures, although many also suggested that additional measures be
included in the ESRD QIP to ensure a robust measurement of the quality
of services furnished by dialysis providers/facilities. Commenters also
noted the importance of including measures for pediatric, peritoneal
and home hemodialysis patients to assure that quality care is provided
to these populations.
In response to public comments received about the inclusion of
younger patients, we have decided that patients < 18 years of age will
not be included in the final calculation of the anemia measures because
at this time there is no consensus on the appropriate hemoglobin range
for this age group. Further, using this exception makes these measures
more consistent with the target age used in the clinical performance
measures (CPMs) which have been used by providers/facilities for
several years. Therefore, we will use the same methodology for data
collection and analysis as used for calculation of the anemia measures
reported to the DFC with the exception of not including patients < 18
years of age in the final calculation of provider/facility performance
on the measures.
In response to a number of public comments received on these
measures and in recognition of a number of concerns related to the
exclusion of home hemodialysis patient data from the Hemodialysis
Adequacy measure, we are clarifying that home hemodialysis patient data
will be included in the calculation of the anemia management measures.
Home hemodialysis patients have been included in the anemia management
measures currently reported; however, there are different frequencies
of treatment for the Home Hemodialysis population that makes the
currently accepted measure of Hemodialysis Adequacy of a URR Greater
than 65 percent invalid at this time. CMS is currently working with
stakeholders to establish a measurement of the adequacy of a
hemodialysis treatment that is accurate for this population. This is
CMS' basis for excluding this population from the initial year of the
QIP. Below we provide a brief summary of each measure proposed, a
summary of the public comments received, and our responses to the
comments.
We also received comments on the weighting and scoring of measures
and the setting of the national performance standard described in the
conceptual model. Comments received on components of the conceptual
model not related to these measures will not be addressed in this rule.
As stated in the proposed rule, we intend to use these comments to
inform future rulemaking.
1. Anemia Management Measures: Hemoglobin Less Than 10 g/dL and
Hemoglobin Greater Than 12 g/dL
As stated above, we proposed to use the anemia management measures
as used in the current DFC database since January 2001 and as required
by section 1881(h)(2)(A)(i) of the Act. The anemia management measures
proposed for the QIP include two measures on anemia management that
reflect the labeling approved by the FDA for such management (74 FR
50011). Data for these measures can be collected from Medicare claims
currently submitted by ESRD providers/facilities as required in the
initial year. The anemia measures that were proposed are as follows:
Percentage of Medicare patients at a provider/facility who
have an average hemoglobin value less than 10.0 g/dL (referred to in
this final rule as the ``Hemoglobin Less Than 10 g/dL'').
Percentage of Medicare patients at a provider/facility who
have an average hemoglobin value greater than 12.0 g/dL (referred to in
this final rule as the ``Hemoglobin Greater Than 12 g/dL'').
We proposed to calculate these measures using hemoglobin data for
Medicare patients who have been diagnosed with ESRD for at least 90
days and whose Medicare claims submitted by providers/facilities
indicated the use of an ESA during that 90-day period. Data from
patients whose first ESRD maintenance dialysis starts before day 90 or
who have hemoglobin values of less than 5 g/dL or greater than 20 g/dL
will be excluded from the measure calculation. In addition, there must
be, for the same patient, at least 4 claims meeting this criteria for
that data to be included in the data for a specific provider or
facility. However, as described, ESRD patients less than 18 years of
age will not be included in the measure calculation. (Technical details
on the methodology we proposed to use to calculate the anemia measures
are available on the Arbor Research Collaborative for Health and
University of Michigan Kidney Epidemiology and Cost Center Web site:
http://
[[Page 49184]]
www.dialysisreports.org/Methodology.aspx.)
Comment: A few commenters voiced concern about the lack of measures
specific to home hemodialysis. Because this modality is being advanced
within the ESRD community and Medicare, commenters wished to ensure
that measures for this patient population are incorporated in the QIP.
Response: We agree that inclusion of home dialysis modalities (that
is, home hemodialysis and peritoneal dialysis) data is important to
ensure providers/facilities are incentivized to include these
populations in quality improvement efforts. To that end, home
hemodialysis patient data will be used to calculate provider/facility
scores on the anemia management measures in the QIP payment consequence
year 2012. However, due to the varying frequencies of treatments for
the home hemodialysis population the use of the currently accepted
measure of Hemodialysis Adequacy of a URR greater than 65 percent is
invalid at this time. For this reason we will not include home
hemodialysis patient data in the calculation of the Hemodialysis
Adequacy measure at this time. We are currently working with
stakeholders to establish a measurement of the adequacy of a
hemodialysis treatment that is accurate for this population. Beyond
anemia management and dialysis adequacy, we are continuing to work with
the ESRD stakeholders to develop new quality measures for use in future
years of the QIP that are applicable, relevant, and provide a means to
assess the quality of care that is being delivered to the home
hemodialysis population.
Comment: Some commenters questioned the value of the Hemoglobin
Greater Than 12 g/dL measure because they believe that the bundled
payment should reduce the incidence of overutilization of
erythropoiesis stimulating agents (ESAs). The commenters also stated
that the percentage of patients with hemoglobin in the range of >10 g/
dL and <12 g/dL would be a more effective measure for the QIP.
Response: Hemoglobin values at either end of the spectrum have
adverse consequences for the ESRD patient population. We believe that
focusing on the population that falls within the range of 10-12 g/dL
will not provide the necessary information to evaluate the percentage
of patients whose anemia is either inadequately treated or overtreated.
A Hemoglobin Less Than 10 g/dL may be the result of inadequate
administration of ESAs, inadequate iron stores, blood loss
(gastrointestinal bleeding), an infectious process, or other clinically
significant causes. Hemoglobin Less Than 10 g/dL can result in poor
oxygenation, decreased activity, increased hospitalizations, need for
blood transfusions, and death. We believe that the threat of such
adverse consequences should prompt ESRD facilities to take steps to
increase patients' average Hemoglobin to greater than 10 g/dL.
On the other hand, a Hemoglobin Greater Than 12 g/dL may result
from the overtreatment of anemia with ESAs. A Hemoglobin Greater Than
12 g/dL while a patient is being treated with ESAs has been associated
with an increased incidence of death in the ESRD population.
By focusing solely on the percentage of patients that fall between
10-12 g/dL, we believe that important clinical indicators of inadequate
or overaggressive treatment of anemia would be lost. A summary of
evidence regarding the importance of these measures may be accessed at:
http://www.cms.gov/CPMProject/Downloads/ESRDAnemiaSummary05212008.pdf.
Comment: Two commenters noted that patients who are active or
younger may have higher average hemoglobin levels because higher
hemoglobin supports their energy levels. Using the Hemoglobin Less Than
10 g/dL and Hemoglobin Greater Than 12 g/dL for the first QIP
performance period, according to the commenters, will force dialysis
centers to prescribe less erythropoietin and maintain these patients'
average hemoglobin levels closer to 10 g/dL, thereby reducing these
patients' ability to continue working and greatly affecting their
quality of life. Another commenter stated that patients who live at
high altitudes may have higher average hemoglobin levels which should
be accounted for in the QIP.
Response: Section 1881(h)(2)(A)(i) of the Act requires that the
measures on anemia management specified for the QIP reflect the
labeling approved by the Food and Drug Administration (FDA) for such
management. The current FDA guidance may be found at: http://www.fda.gov/Drugs/DrugSafety/PostmarketDrugSafetyInformationforPatientsandProviders/ucm126481.htm.
We also note that due to the lack of scientific evidence indicating
that anemia management for the pediatric population should be the same
as the adult population, we do not believe it is appropriate to include
the ESRD population under the age of 18 years in the final calculation
of the two anemia management measures (Hemoglobin Less Than 10 g/dL and
Hemoglobin More Than 12 g/dL) that we are finalizing for the QIP
payment consequence year 2012. However, the data collection and measure
calculation will remain consistent with that used for the DFC since
2001 as described in the current methodology at: http://www.dialysisreports.org/Methodology.aspx.
Lastly, guidelines for the administration of ESAs, along with dose
adjustments are included along with the ESA packaging that is approved
by the FDA. Dose adjustments are made at the discretion of the
clinician, based on the needs of the individual patient in order to
achieve the desired hemoglobin. This rationale is equally applicable to
the population that lives at higher altitudes mentioned by the other
commenter and is reported in Brookhard M.A., et al. Journal of American
Society of Nephrology 19(7): 1389. 2008. In considering the commenters
concerns for patients living in high altitude areas, we have
determined, based on clinical studies, that while patients living at
high altitudes may require less or lower doses of ESA to maintain
hemoglobin levels at the appropriate level, they should not be excluded
from the measure.
Comment: One commenter recommended that patients not on ESAs be
excluded from the Hemoglobin Greater Than 12 g/dL.
Response: Patients who are not receiving ESAs are excluded from the
Hemoglobin Greater Than 12 g/dL measure. The purpose of this measure is
to monitor high hemoglobin that may be directly attributed to the use
(possible overutilization) of ESAs and not attributed to other causes.
Therefore, patients not receiving ESAs are excluded from Hemoglobin
Greater Than 12 g/dL. Specifications for this measure may be found at:
http://www.dialysisreports.org/Methodology.aspx.
Comment: Two commenters had a concern about the specifications for
the anemia management measures, particularly the time window for
measurement. One of the commenters had concerns about the proposal to
use the DFC specifications for the Hemoglobin Less Than 10 g/dL
because, under those specifications, we calculate a yearly average for
the hemoglobin level. The commenter recommended that CMS calculate a 3-
month average and then average these 3-month averages over a 12-month
period (for example, create a 12-month average using 4 averaged patient
quarters). The other commenter believed that the use of 12-month
averaging to calculate the anemia management measures would
[[Page 49185]]
decrease the public's ability to separate good performers from poor
performers. According to this commenter, when 12-month averages are
used, clinical performance in most providers/facilities approximates
the national average for performance on the anemia management measures.
The commenter recommended that for purposes of the QIP, we calculate a
3-month average based on a monthly assessment of lab results.
Response: We proposed to calculate the proposed anemia management
measures using the same specifications that we currently use for DFC
because the methodology is consistent with how we have calculated those
measures since 2001. Details and an explanation for the use of and
planned continued use of the existing calculation used for the
calculation of the anemia percentages are available on the following
Web site: http://www.dialysisreports.org/Methodology.aspx.
We believe that using the specifications currently in use for these
measures will create minimal data collection disruptions for providers/
facilities because they are already submitting data in accordance with
these specifications. However, as we review the data from the initial
year of the ESRD QIP, we will use findings from this data review to
determine whether or not specifications for this measure should be
changed. We believe we have the authority to update specifications of
quality measures in appropriate cases, such as when selected
specifications do not result in useful or accurate information in
comparing ESRD providers/facilities. However, we will use the
rulemaking process to adopt any changes to measures or new measures
into the QIP.
After consideration of the comments received on the Anemia
Management Measures and for the reasons stated above, we are finalizing
the two anemia measures (Hemoglobin Less Than 10 g/dL and Hemoglobin
More Than 12 g/dL) as proposed for the QIP payment consequence year
2012 with one change to these measures. As noted above, patients < 18
years of age will not be included in the final measure calculation of
the two anemia measures because of lack of scientific evidence to
support the appropriate hemoglobin range for this population and
concerns voiced through public comment. Further, excluding the
population less than 18 years of age is consistent with the target age
for the Anemia Management CPMs in current use. However, we are
finalizing the data collection process and calculation of the facility
level measures consistent with what has been used for the DFC since
2001. Once testing of data collection for additional measures is
completed and such measures prove to be feasible and reliable measures,
we will consider adding those measures in future years of the QIP.
2. Hemodialysis Adequacy Measure: Urea Reduction Ratio (URR)
The Hemodialysis Adequacy Measure--Urea Reduction Ratio (URR)--is a
nationally reported measure used in the DFC database since January 2001
and can be calculated from claims data currently submitted by ESRD
providers/facilities. The hemodialysis adequacy measure that we
proposed to adopt (74 FR 50011) is the percent of hemodialysis patients
with URR = 65 percent (referred to in this final rule as the
``Hemodialysis Adequacy Measure''). We proposed to calculate URR data
only for Medicare patients who have been diagnosed with ESRD and
received maintenance dialysis for at least 183 days from the date that
they received their first maintenance dialysis treatment, and whose
Medicare claims submitted by providers/facilities included a value for
the URR. In addition, there must be for the same patient at least 4
claims meeting the criteria above for that data to be included in the
data for a specific provider or facility. In the proposed rule (74 FR
50013), we proposed that this measure would only apply to facility-
based hemodialysis and patients > 18 years of age. As we explain in
detail below, peritoneal and home hemodialysis patients will not be
included in this measure because, based on the clinical evidence, we
have determined that the existing Hemodialysis Adequacy Measure of
(URR) > 65 percent is not applicable to these patients.
Comment: Several commenters stated that the Hemodialysis Adequacy
Measure is not an accurate measure of dialysis adequacy and that the
measure Kt/V is the more accurate and better measure. Additionally, one
commenter stated that URR specifications should be adjusted for
patients receiving short, daily dialysis (that is, dialysis received 5
or more times per week for 2 to 3.5 hours as required to ensure
adequate dialysis).
Response: We currently use ESRD claims for quality data and the URR
is one of the measures on the claims. However, the collected URR is
only reported for patients receiving in-center hemodialysis and those
above the age of 18 years (approximately 96 percent of hemodialysis
patients). Accordingly, we believe it is appropriate to use this
measure initially for the QIP. The use of URR >= 65 percent for the
measurement of adequacy with peritoneal dialysis, home hemodialysis,
and pediatric dialysis is not a valid measurement of dialysis adequacy
because of the unique variations that exist with each different type of
dialytic modality and patient population (that is, pediatric patients
or adults). Starting July 2010, however, providers are required to
submit both URR (in-center hemodialysis patients) and Kt/V (all
modalities) on all ESRD claims as reported through CMS Change Request
(CR 6782). Given that Kt/V will soon be submitted on claims and that it
has become a more widely accepted measurement of the adequacy of
dialysis and the National Quality Forum has endorsed quality measures
using Kt/V for hemodialysis and peritoneal dialysis, we anticipate that
the URR may be replaced by Kt/V in future program years.
Comment: One commenter expressed concern about the Hemodialysis
Adequacy Measure proposed for the QIP payment consequence year 2012 as
a valid measure of quality. The claims data used for this measure
reports the Hemodialysis Adequacy Measure as a range and does not
require the number of treatment sessions. The commenter recommended
that CMS require that providers/facilities report the specific URR
value and the number of treatments to ensure that the measure captures
only those patients receiving three treatments per week. Additionally,
a commenter recommended that we calculate the measure using patient
quarters rather than a 12-month average.
Response: ESRD providers/facilities are required to submit the
number of treatments and the specific URR value on each claim submitted
for payment. The measure is currently calculated for purposes of DFC
using data from patients that have three treatment sessions per week.
Patients included in the measures are those receiving in-center
hemodialysis. As noted previously, peritoneal and home hemodialysis
patients are excluded as well as pediatrics because clinical evidence
demonstrates that this is not a valid measure for these patients;
however it is an accepted measure for in-center hemodialysis patients.
Patients included in this measure must be greater than 18 years of age,
have at least 4 claims and have been on dialysis for at least 183 days.
Full details and technical specifications for this measure can be
accessed at: http://www.dialysisreports.org/Methodology.aspx. It is
important to note that initially for the QIP all
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measures will be claims-based since that is the only complete facility
level source of data available for this population. URR is being used
in the QIP payment consequence year 2012 because it is a standard
measure used in ESRD practice for in-center hemodialysis and has been
publicly reported in the DFC since January 2001. We believe this will
avoid confusion in the data collection process. We have analyzed the
existing claims data to see if there was a significant variance in
calculating the URR based on patient quarters rather than a 12-month
average and found that there is no difference that would warrant a
change in the current methodology that uses a 12-month average.
Comment: A few commenters agreed that the proposed Hemodialysis
Adequacy Measure should continue to exclude patients on peritoneal
dialysis or home hemodialysis because this measure is not an accurate
reflection of the effectiveness of these two modalities. Additionally,
some of the commenters recommended that Kt/V be implemented to include
peritoneal dialysis and home hemodialysis. Other commenters expressed
concerns about the timing of laboratory testing for dialysis adequacy.
Another commenter recommended that both the number of treatments prior
to measurement of URR and when tests should be taken should be made
clear. Lastly, there was concern among the commenters about the impact
of residual renal function, which contributes to overall renal
clearance and thus, would increase the measure score.
Response: We agree with the commenters that the existing
Hemodialysis Adequacy Measure of URR >65 percent should be excluded for
home hemodialysis, pediatric dialysis and peritoneal dialysis patients,
since it is not a valid measurement of the adequacy of treatment for
those modalities based on treatment characteristics. We are in the
process of working with the stakeholder community to develop consensus
based measurements of adequacy for these modalities.
With regard to the URR measure and number of treatments per week,
the specifications state that the measure is based on thrice-weekly
hemodialysis treatments. Those receiving more than three treatments per
week are excluded from the current measure. Measure specifications may
be accessed at: http://www.dialysisreports.org/Methodology.aspx.
Additionally, we anticipate dialysis providers/facilities to use
recommended KDOQI guidelines for laboratory testing for the calculation
of Dialysis Adequacy. Guidelines can be accessed at: http://www.kidney.org/professionals/kdoqi/pdf/12-50-0210_JAG_DCP_Guidelines-HD_Oct06_SectionA_ofC.pdf.
In terms of patients with residual renal function, residual renal
function usually drops off after about 6 months on hemodialysis
therefore, dialysis adequacy (URR) for patients are excluded until
patients have been on hemodialysis for 6 months. As we indicated,
starting July 2010, providers/facilities are required to submit both
URR (hemodialysis patients) and Kt/V (all modalities) on all ESRD
claims. Given that Kt/V will be submitted on all ESRD claims, and that
Kt/V has become a more widely accepted measurement of the adequacy of
dialysis and the National Quality Forum has endorsed quality measures
using Kt/V for hemodialysis and peritoneal dialysis, we anticipate that
the URR may be replaced by Kt/V in future program years which will
allow for inclusion of these modalities as well as pediatric patients.
Comment: One commenter noted that the use of 12-month averaging for
the Hemodialysis Adequacy Measure diminishes the public's ability to
discern performance differences between providers/facilities because,
when 12-month averages are used, clinical performance in most
providers/facilities approximates the average. The commenter
recommended that we calculate the measure by using a three-month
average based on a monthly assessment of lab results.
Response: We appreciate the comment. To avoid any confusion in data
collection, in the initial year of the QIP we will use the technical
specifications used for the DFC. To date, the current specifications
and data publicly reported on DFC have been viewed as accurate.
However, if data in the initial year of the QIP demonstrate that
specifications should be changed, we will take this recommendation
under consideration.
After consideration of the comments received on the Hemodialysis
Adequacy measure (URR) and for the reasons discussed above, we are
finalizing the Hemodialysis Adequacy measure for the QIP payment
consequence year 2012. Once testing of data collection for Kt/V is
completed and if Kt/V proves to be a feasible and reliable measure, we
will consider replacing the URR measure with Kt/V in the future.
3. Additional Comments
In the September 29, 2009 proposed rule (74 FR 50009), we did not
propose to include any additional measures beyond the two anemia
management measures (Hemoglobin Less Than 10 g/dL and Hemoglobin More
Than 12 g/dL) and the Hemodialysis Adequacy Measure (URR) both of which
will exclude ESRD patients less than 18 years of age for the QIP
payment consequence year 2012. Section 1881(h)(2)(A)(iii)of the Act
states that the measures shall include, to the extent feasible, such
other measures as the Secretary specifies, including measures on iron
management, bone mineral metabolism, vascular access (intended to
maximize the placement of arterial venous fistula) and patient
satisfaction measures. CMS did not propose to adopt any measures in
these categories since we are not currently collecting data that would
allow determination of provider/facility-specific performance with
respect to these categories of measures. We are working to identify
appropriate sources from which we can adequately capture data to
support the future adoption of additional measures. We anticipate that
measures such as Kt/V, vascular access and vascular access infections
will be included in future program years when data sources prove valid.
Finally, we believe it is not feasible to include a patient
satisfaction measure at this time because there is no fully validated
data collection tool available to collect relevant and industry
accepted patient satisfaction measure data. Additional measures will be
addressed in future rulemaking.
Comment: A significant number of commenters expressed concern about
the lack of mineral metabolism measures in the list of measures
proposed for 2012, with particular concern for the monitoring of
parathyroid hormone levels (PTH), Phosphate (PO4) and calcium levels.
Commenters noted that the inclusion of calcimimetics and phosphate
binders in the bundled payment could result in the underutilization of
these effective medications, and some commenters were also concerned
about the potential for overutilization of parathyroidectomies as a
less expensive option to the medications.
Response: On April 15, 2008, we published in the Federal Register
the Medicare Conditions for Coverage (CfC) for End-Stage Renal Disease
Facilities final rule (73 FR 20370). These Medicare CfCs are enforced
by periodic site visits by state survey agencies and specifically
require the development and execution of Patient Plans of Care to
``provide the necessary care to manage mineral metabolism and prevent
or treat renal bone disease.'' (See 42 CFR Sec. 494.90(a)(3).) In
addition, Sec. 494.110(a)(2)(iii) requires dialysis facilities to
include bone and mineral
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metabolism outcomes as part of their ongoing Quality Assessment and
Performance Improvement Programs. We consider the mineral metabolism
and renal bone disease measure as measures that will be considered for
future years of the QIP; however, for the reasons we discussed above,
these measures will not be included for 2012.
Comment: We received several comments stating that the three
performance measures we proposed for the QIP payment consequence year
2012 were not adequate for evaluating the quality of care offered by
ESRD providers/facilities. Several commenters recommended that we also
adopt outcome measures for the QIP specifically dealing with
hospitalizations, infections, vascular access and iron management. A
few commenters also suggested that measures on transfusion and
transplant rates be included.
Response: We agree that the measure topics suggested by these
commenters would allow us to more fully assess the quality of care
provided to Medicare ESRD beneficiaries. As stated above, we are in the
process of developing additional quality measures that we will consider
for use in future years of the QIP. At this time, ESRD Medicare claims
are the only complete provider/facility-level data set available to us.
The three measures that we are finalizing for the first year of the
QIP--two anemia management measures (Hemoglobin less than 10 g/dL and
Hemoglobin more than 12 g/dL) and one Hemodialysis Adequacy Measure
(URR)--focus on core aspects of the medical management of ESRD Medicare
beneficiaries and have significant implications for their quality of
life, morbidity and mortality. Further, observational studies and
practice pattern analyses have shown that providers/facilities that
perform well on these three measures also experience better patient
outcomes in terms of reduced hospitalizations and reduced risk of heart
attack, stroke and other adverse events.
Comment: Recognizing that CMS is not proposing at this time to
include other measures in the QIP such as iron management, bone mineral
metabolism, and vascular access and that CMS has concluded that it is
not feasible to propose a patient satisfaction measure at this time,
one commenter requested a detailed plan for incorporating these
measures into the ESRD QIP. Additionally, the commenter emphasized the
importance of establishing a tracking system to ensure baseline values
for bone and mineral metabolism markers because these may be
significantly impacted by the incorporation of oral medications in the
bundled payment.
Response: We are dedicated to the ongoing process of developing
additional quality measures, refining existing quality measures and
identifying complete and accurate data sources for use in future years
of QIP including measures addressing the commenter's concerns regarding
bone mineral metabolism and the potential impact with bundled payment.
Currently, ESRD claims provide the only complete set of facility level
quality data to support the existing measures. We will be monitoring
the data to ensure that the ESRD QIP is achieving the desired quality
clinical outcomes. We plan to use the rulemaking process as the way to
propose the incorporation of new measures currently under development
such as hospitalizations, mineral metabolism, vascular access
infections, iron management and fluid volume weight management as well
as pediatric measures. In addition, we will have a comprehensive
monitoring plan in place when the new PPS begins that ensures access
and quality care are furnished to ESRD beneficiaries.
Comment: Several commenters expressed support for inclusion of
patient-centered measures in the QIP, such as patient quality of life,
ability to return to work or whether patients are in rehabilitation.
One commenter supported the implementation of a measure of patient
awareness of ESRD treatment options (such as transplant and different
dialysis modalities). The commenter also noted that for patients, these
types of measures may often be more useful to patients in their
decision making than clinical measures.
Response: We agree that patient-centered measures, such as
awareness of treatment options, are important for the ESRD population
in making decisions such as where they wish to seek care. We appreciate
the recommendation to incorporate measures evaluating patient outcomes
from a patient's perspective, including patient awareness of treatment
options, percentage of patients working or in rehabilitation, and
quality of life surveys into the QIP. The NQF has endorsed measures of
this type, and we are actively seeking a data source for such data as
well as developing a means to collect these data. We intend to use such
measures in future payment years and will do subsequent rulemaking on
these additional measures.
Comment: One commenter recommended the inclusion of a Practice-
related Risk Score (PRS) and a patient-level all Clinical Performance
Measure (CPM) index as QIP measures, stating that these types of
measures may be better for establishing a facility or provider's
quality of care. Composite measures are made up of discrete quality
measures that, when calculated together, provide a score that assesses
more than one aspect of patient care. According to the commenter, the
recommended PRS would be a composite, facility-level index of four key
dialysis quality measures, including the percent of patients with: (1)
Kt/V >1.2; (2) Hemoglobin >11g/dL; (3) Albumin >4.0g/dL; and (4) A
central venous catheter for dialysis access. The commenter noted that
the score for the PRS may be a good predictor of mortality. The
commenter also recommended a patient-level CPM index that would be
similar to the PRS and would be composed of dialysis adequacy (single-
pooled Kt/V urea of >1.2); Anemia (Hemoglobin >11g/dL); albumin (>40g/L
with bromcresol green or >37g/L with bromcresol purple); and access
(that is, use of an arteriovenous fistula). The commenter noted that
patient risk for hospitalization and/or death increases, according to
their studies, with each unmet target (component) of the CPM index.
Response: We appreciate this recommendation. Measures development
is already underway in the areas the commenter recommends such as
vascular access measures. Technical Expert Panels (TEP) were convened
in Spring 2010 to begin development of these additional measures, and
subsequent to these initial TEPs, more work on measures development
will take place. As stated above, we intend to fully test all measures
before proposing to adopt them for the QIP in order to assure that they
are reliable indicators of the quality of care and feasible for data
collection. Because measures we are adopting at this time are limited
to data available on ESRD claims, we would not have the specificity
needed to calculate the composite measures presented by the commenter.
However, we will continue to consider and evaluate component measures
such as those suggested by the commenter as more data resources become
available.
Comment: One commenter wrote that CMS must understand and create a
category for mortality rates within long term care hospital (LTCH)
settings separate from outpatient clinics and other home dialysis
settings. Commenters stated that a facility may have greater than 50
percent of its patients with an end of life care option, such as
hospice, when such patients can
[[Page 49188]]
no longer care for themselves and are thus compromised on many levels.
Commenters stated that the other 50 percent of patients may be in LTCH
rehabilitation settings and are admitted only a short time, but come to
the facility after a lengthy hospitalization in a compromised condition
that in many cases includes life threatening morbidity.
Response: We appreciate the recommendation. For the initial year of
the QIP, we have decided to limit the measures to the Anemia Management
and the Dialysis Adequacy Measures because they go to the core of ESRD
patient care, are feasible to collect, and reliably reflect the quality
of patient care. However, as we evaluate and refine the mortality
measures currently used for the DFC, these issues will be considered.
Comment: Two commenters recommended that there should be measures
of fluid balance (overload) in the measure set.
Response: Appropriate and effective fluid management reduces the
risk of congestive heart failure, hospitalizations and premature death,
and therefore we believe that measures of fluid management are
important for evaluating another aspect of ESRD patient care. We are in
the process of developing additional quality measures for possible use
in future years of the QIP and will be researching the feasibility of
including fluid balance as a measure.
Comment: One commenter recommended that the QIP should include
measures of treatments, laboratory testing, medications and other
clinical care services included in the new bundled payment to evaluate
potential impact on patient care (for example, phosphate binders for
mineral metabolism).
Response: The selection of the anemia management measures
(Hemoglobin Less Than 10 g/dL and Hemoglobin More Than 12 g/dL) and the
Hemodialysis Adequacy Measure (URR) was driven by what is required in
section 153(c) of MIPPA, as well as the limitations of complete
facility-level data currently available to us. Patient outcomes are a
key focus of the ESRD QIP. Therefore, we are developing or identifying
performance measures that will assess the quality of care delivered to
the ESRD patients under the bundled payment. For example, we are
currently developing measures of bone mineral metabolism, an important
clinical issue with ESRD patients. Implementation of the ESRD bundled
payment system may have the impact of providers/facilities decreasing
use of medications used to treat clinical conditions associated with
the appropriate management of bone mineral metabolism therefore
measures to address these issues are important.
Comment: One commenter recommended an approach to monitoring
quality by analyzing the drug utilization data that providers/
facilities report on Part B claims submitted for Medicare payment. It
was further recommended that CMS continue to collect information on the
volume and use of drugs and other services included in the broader
bundled ESRD payment.
Response: We will monitor drug utilization data to the extent that
reliable data is available. However, we note that the linkage between
drug utilization patterns and patient quality outcomes needs further
exploration. Therefore, we are in the process of identifying possible
quality measures related to drug utilization and identifying pertinent
drug utilization data sources for potential use in future years of the
QIP.
Comment: One commenter suggested that CMS develop quality measures
that use a real-time system for reporting rates of hospitalization,
emergency department use, and mortality for the dialysis population.
The commenter further suggested that such information could help CMS
and researchers monitor unintended effects of the new bundled payment
method.
Response: We agree that real-time data would be beneficial for
tracking in a timely manner, clinical outcomes and the quality of care
being delivered, and that more timely access to data would further
advance the goals of the QIP to improve the quality of care delivered
to ESRD patients. While this type of data source is not currently
available, we plan to have a comprehensive monitoring strategy in place
that will provide the necessary information to evaluate the quality of
care being delivered to Medicare patients with ESRD as the bundled
payment system is implemented. Along with the development of additional
measures, we are seeking data sources that will allow for more timely
assessment and reporting of the data.
Comment: Two commenters requested that CMS add venous access flow
surveillance to the measure set. One of the commenters offered that, in
addition to the three measures proposed in the ESRD QIP conceptual
model, vascular access surveillance metrics be added to include metrics
for: (1) Assessment of patient condition; (2) treatment interventions;
and (3) thrombotic events. Commenters recommended use of electronic
surveillance devices for venous access flow monitoring.
Response: We appreciate the comment and agree that the development
of venous access monitoring strategies and the development of measures
are important for optimizing outcomes within the ESRD population
because decreased venous access flow has implications for
hospitalizations, potential stroke and other adverse patient outcomes.
We are dedicated to the ongoing process of developing additional
quality measures, refining existing quality measures and identifying
complete and accurate data sources for use in future years of QIP.
Comment: One commenter recommended the development and use of a
list of ``Never Events'' in the ESRD QIP.
Response: We appreciate the recommendation because these types of
events are ones that are avoidable. We will consider the potential
development and use of sentinel events (never events)--in future years
of the ESRD QIP.
Comment: A commenter requested that CMS act with all due speed to
ensure that quality of care for vulnerable patients may be measured and
facilities may be held accountable.
Response: We agree that monitoring the quality of care for
vulnerable populations under the QIP is critical. A program monitoring
and evaluation program is being developed to track impact on vulnerable
populations and will be addressed in future rulemaking. The current
measures, to the extent that relevant data are available (for example,
socio-demographics), will be evaluated for potential disparities in
future years. Data on the socio-demographics of the ESRD population
might be collected from patient, facility/provider enrollment forms;
however, we would need to ensure that data analysis methodologies in
use would be able to accurately identify these populations and monitor
effectively.
Comment: One commenter urged CMS to verify that all quality data
aggregated through the ESRD Clinical Performance Measurement Project
and used to calculate the QIP performance measures is case-mix and
severity adjusted; further, the commenter asked that special
consideration be given for hospital-based units.
Response: We acknowledge that some patients may present additional
challenges for the treatment of anemia and achieving adequate dialysis
because of existing co-morbid conditions, but we do not believe that
the anemia management or dialysis adequacy measures should be risk-
adjusted for the
[[Page 49189]]
ESRD population. The specifications for these measures may be found in
the Dialysis Facility Report instructions and descriptions. Patients
with hemoglobin <5 g/dL and >20 g/dL are excluded from the measured
population as are patients who are less than 18 years of age. Further,
to be included in the measurement population (for both anemia
management and dialysis adequacy) patients must have received dialysis
for at least 90 days and have had four claims submitted. Additionally,
these claims must indicate the use of erythropoiesis-stimulating agents
(ESAs) for at least 90 days. These exclusions and inclusions from the
measurement population act to adjust the measures for certain patient
aspects. However, regardless of the type of unit or patient acuity, all
patients should receive the appropriate level of care.
Comment: One commenter noted that, because nursing home patients
have a higher patient acuity, the national standards may not be
achievable by these facilities, resulting in unfair payment reductions.
Response: We agree that this patient population may have multiple
co-morbid conditions that make achieving the national standard
difficult. However, given the practice guidelines recommended for all
ESRD patients, we would expect a majority of ESRD patients in nursing
homes to meet or exceed the national average.
Comment: One commenter noted that by using Kt/V in the CPM program
and URR in the QIP, Medicare is targeting the mortality rates from a
model that was developed over thirty years ago that has also proven no
more predictive of morbidity and mortality than patient self-reported
physical and mental functioning scores. The commenter recommended that
CMS consider mix adjusted physical and mental functioning scores from
patient self-report data and expect dialysis providers to improve the
scores that indicate higher risk of hospitalization or death.
Response: We will consider this comment as we develop new measures
for use in the QIP in the future. We agree that there are challenges
related to different levels of patient acuity within the ESRD
population that may have an impact on morbidity and mortality beyond
URR. Even though these measures are not risk-adjusted, the
specifications for the three measures we are finalizing provide
exclusions that act as a level of risk-adjustment. Exclusions remove
from the denominator a population with a higher than normal severity of
illness or have conditions that prevent them for receiving ``normal''
treatment and therefore, may unfairly impact on performance measurement
scores.
Comment: One commenter noted that the quality baseline year should
be aligned with the payment baseline year for calculating the payment
rate. The commenter recommended that to prevent ``gaming'' the agency
should provide clear and unambiguous requirements surrounding the
manner and timing of laboratory measurements (that is, when during the
dialysis process laboratory samples are collected for analysis).
Response: The baseline year for performance measurement the
commenter referred to is the performance period for the QIP payment
consequence year 2012 which is being proposed in the QIP proposed rule
published on August 12, 2010 in the Federal Register. Currently, ESRD
claims provide the only complete set of facility level quality data to
support the existing measures. With regard to the timing of laboratory
testing (time of specimen collection on day of patient visit), KDOQI
provides guidelines for the timing of laboratory testing. The
guidelines may be accessed at: http://www.kidney.org/professionals/kdoqi/pdf/12-50-0210_JAG_DCP_Guidelines-HD_Oct06_SectionA_ofC.pdf. We support the KDOQI guidelines and measure specifications
which provide the parameters for the timing of testing. Additionally,
there will be monitoring and evaluation of the QIP to track and, where,
necessary, take action to prevent ``gaming'' of data.
Comment: One commenter voiced concern that the three proposed
measures may not be an accurate reflection of the quality of care. The
commenter further stated that the proper goal for the anemia management
measures (Hemoglobin Less Than 10 g/dL and Hemoglobin Greater Than 12
g/dL) and the Dialysis Adequacy Measure (URR) may change over time, and
that having the measures written in regulations may make it difficult
to update to new standards. The commenter also offered that the skill
of dialysis staff (measured through turnover rates) may be a better
measure of quality of care and that measures of importance to patients
(for example, dialysis-induced hypotension) should be used rather than
measures such as urea kinetics.
Response: The selection of the proposed measures was driven by what
is required in section 153(c) of MIPPA 2008 as well as the limitations
of the complete facility-level data currently available to us. In
addition, appropriate anemia management and providing adequate dialysis
are important to the assessment of care provided to the ESRD population
because these measures evaluate the core clinical issues for ESRD
patients especially those on in-center hemodialysis. However, we are in
the process of developing additional quality measures and identifying
data sources for use in future years of QIP. Lastly, we acknowledge
that the skill of a facility's staff can have an impact on the quality
of care provided to dialysis patients and look forward to gathering
more evidenced-based information that we can use to develop appropriate
and valid measures in this area.
Comment: One commenter recommended that, for measures related to
immunization and vascular access, a one-month, end-of-year value should
be considered since these facility outcomes are cumulative.
Response: We are in the process of considering additional quality
measures and potentially including measures of immunization and
vascular access. We will consider the validity of using a one-month,
end of the year value as these measures are developed and tested.
Comment: One commenter voiced concern that the two-year lag between
data collection for the performance measures and measure reporting will
not allow for facilities to be measured on improvements that may occur
during that lag time. The commenter recommended that the QIP measures
use Elab data as a source of more current data.
Response: We are seeking data sources that will allow for more
timely assessment and reporting of the data in future years of QIP. We
are working towards the timely assessment and reporting of data sources
that will close the two-year lag in the data. However, we will use the
data collection methodology used by the DFC since 2001 for the first
year of the QIP.
Comment: One commenter suggested that facilities and providers be
rewarded for proactive, real-time monitoring of plasma water volume,
vascular compartment refilling and use of techniques that assure
optimal fluid volume management.
Response: MIPPA section 153(c) does not grant us the authority to
reward providers/facilities on their performance. At most, the statute
allows us to provide full ESRD payments to providers/facilities that
satisfy the QIP. We view quality as the standard of care that all
provider/facilities should strive for and not as an extra that needs to
be rewarded. The ESRD QIP will provide those providers/facilities that
meet or exceed the performance standard full ESRD payment. With regard
to the
[[Page 49190]]
commenter's suggestion to measure plasma water volume, vascular
compartment refilling and use of techniques assuming optimal fluid
volume management, this is an area that experts in the renal community
are currently evaluating in the ESRD population because of poor fluid
management's implications for hospitalizations, development of
congestive heart failure and other avoidable adverse events.
Comment: One commenter requested a detailed outline of the process
for measure development.
Response: We use a standardized process for developing measures
which can be found at: http://www.cms.hhs.gov/QualityInitiativesGenInfo/downloads/QualityMeasuresDevelopmentOverview.pdf. Tested measures are then
submitted to the NQF for endorsement.
After careful consideration of the comments, we have decided that
for the QIP payment consequence year 2012, we are finalizing the three
proposed measures; the two anemia management measures (Hemoglobin Less
Than 10 g/dL and Hemoglobin More Than 12 g/dL) and the Dialysis
Adequacy Measure (Urea Reduction Rate (URR) >=65 percent) as proposed
with one change. As described above, we will not include ESRD patients
less than 18 years of age in the measure calculation of the two anemia
management measures (Hemoglobin Less Than 10 g/dL and Hemoglobin More
Than 12 g/dL).
III. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 30-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.
We solicited public comment on each of these issues for the
following sections of this document that contain information collection
requirements (ICRs):
A. ICRs Regarding a Low-volume adjustment. (Sec. 413.232(f))
As discussed in section VIII.A.2.b. of the proposed rule (74 FR
49975), to receive the low-volume adjustment, we proposed that an ESRD
facility must provide an attestation to the Medicare administrative
contractor or fiscal intermediary that it has met the criteria to
qualify as a low-volume facility. The Medicare administrative
contractor or fiscal intermediary would verify the ESRD facility's
attestation of their low-volume status using the ESRD facility's final-
settled cost reports.
In the proposed rule, we indicated that the burden associated with
the requirement would be the time and effort necessary for an ESRD
facility attesting as a low-volume facility to develop an attestation
and submit it to the Medicare administrative contractor or fiscal
intermediary (74 FR 50016). In the 2006 data analysis conducted by our
contractor, UM-KECC, 489 ESRD facilities were identified as below the
low-volume threshold of 3,000 treatments per year. Of these 488
facilities, 166 met the additional low-volume criteria as specified in
Sec. 413.232 of this proposed rule. We estimated that it would require
an administrative staff member from each low-volume facility 5 minutes
to develop the attestation and a negligible amount of time to submit it
to the Medicare administrative contractor or fiscal intermediary (74 FR
50016). We further estimated several dozen additional ESRD facilities
may meet the criteria of a low-volume facility prior to implementation
of the ESRD PPS and therefore, we rounded the total number of estimated
low-volume facilities to 200 (74 FR 50016). Therefore, we estimated
that the total initial ESRD facility burden would be 16.6 hours (74 FR
50017).
We did not receive any public comments related to this information
collection. However, as discussed in section II.F.4. of this final
rule, we are finalizing a threshold of 4,000 instead of 3,000
treatments. Therefore, we identified 857 ESRD facilities as below the
updated low-volume threshold of 4,000 treatments per year. Of these 857
facilities, 351 meet the low-volume criteria specified in Sec. 413.232
of this final rule. We continue to believe that the estimated
administrative staff time burden of 5 minutes to develop the
attestation and a negligible amount of time to submit it to the FI/MAC
is appropriate. Therefore, we are finalizing our estimated
administrative staff time burden of 5 minutes per facility. We estimate
several dozen additional ESRD facilities may meet the criteria of a
low-volume facility based on the 4,000 treatment threshold prior to
implementation of the ESRD PPS and therefore, we rounded the total
number of estimated low-volume facilities to 400. Therefore, we are
finalizing the total initial ESRD facility burden to be 33.2 hours.
B. ICRs Regarding Transition Period (Sec. 413.239)
As discussed in section XIII.A. of the proposed rule, prior to
January 1, 2011, an ESRD facility may make a one-time election to be
excluded from the four-year transition to the ESRD PPS (74 FR 50003).
That is, a facility may elect to be paid entirely based on the proposed
ESRD PPS beginning January 1, 2011. Under proposed Sec. 413.239(b), an
ESRD facility may make a one-time election to be paid for items and
services provided during transition based on 100 percent of the payment
amount determined under Sec. 413.215 of this part, rather than based
on the payment amount determined under paragraph (a) of this section.
The section specified that such election must be submitted to the
facility's FI/MAC no later than November 1, 2010.
We estimated in the proposed rule that it would require an
accountant or financial management staff member from each of the 4,921
ESRD facilities 1 hour to simulate average aggregate payments under the
proposed ESRD PPS and compare them to average aggregate payments under
the current basic case-mix adjusted composite payment system, for a
total of 4,921 hours (74 FR 50016). In addition, for those facilities
electing to be excluded from the four-year transition, we estimated
that the burden associated with the requirement in proposed Sec.
413.239(b) would be the time and effort necessary to develop an
election and submit it to the FI/MAC (74 FR 50016). We estimated that
it would require an administrative staff member from each facility 15
minutes to develop the notice and a negligible amount of time to submit
it. We estimated that 36 percent of the estimated 4,921 ESRD
facilities, or 1,794 ESRD facilities, would make the election no later
than November 1, 2010. Therefore, we estimated that the total one-time
ESRD facility burden would be 448.5 hours (74 FR 50017).
The comments pertaining to this information collection, the updated
facility data included in the impact analysis and our responses are set
forth below.
[[Page 49191]]
Comment: One commenter pointed out that we projected that it would
take one hour per patient, per month for billing costs related to the
proposed ESRD PPS. The commenter indicated that facilities should be
compensated for the administrative costs associated with implementing
the new payment system including the additional billing related ESRD
PPS costs. The commenter further believed that one hour was an
insufficient amount of time for this task.
Response: The one-hour timeframe to which the commenter referred
pertained to the time that would be spent by ESRD facilities in making
a determination to opt out of the 4-year ESRD PPS transition.
Specifically, we estimated that each ESRD facility would spend one hour
simulating average aggregate payments under the proposed ESRD PPS as
compared to the average aggregate payments under the current basic
case-mix adjusted composite payment system. With regard to the comment
that ESRD facilities should be compensated for billing costs associated
with the ESRD PPS and that the projected one-hour timeframe is
insufficient to account for their per patient per month billing costs,
we note that we computed the ESRD PPS base rate using ESRD facility
2007 costs updated to 2011 which include billing costs. As discussed in
more detail in section II.K.2. of this final rule, we have not made
significant changes to the current billing requirements. Under the ESRD
PPS, facilities will continue to identify the renal dialysis items and
services they furnish as well as other non-renal related services for
each day of service. The only new additional reporting is related to
the use of oral equivalents of injectable drugs. Thus, we believe that
the ESRD PPS base rate adequately accounts for providers' billing
costs.
Comment: One commenter indicated that they have exceeded the
estimated 1-hour timeframe for deciding whether to opt out of the
transition and stated that they have spent hundreds of hours attempting
to assess the bundle's impact on their 14 facilities.
Response: We believe that the impact of the final ESRD PPS will be
easier for ESRD facilities to assess than the proposed system because
we are not implementing oral-only ESRD drugs effective January 1, 2011
and the final ESRD PPS has fewer adjustments. However, we disagree that
the analysis will take ESRD facilities hundreds of hours to complete.
We believe that ESRD facilities have been aware of and planning for the
ESRD PPS for several years and have gained insight as to the factors
that will go into their decisions regarding the transition. However,
based on the public comments, we believe it is more appropriate to
estimate two hours for an ESRD facility to complete an analysis of the
significant changes made to the ESRD PPS in this final rule and
determine whether to opt out of the ESRD PPS transition.
As reflected in section IV.B. of this final rule, there are 4,951
ESRD facilities. We have increased the number of hours necessary to
simulate average aggregate payments under the current basic case-mix
adjusted composite payment system from one hour to two hours, for a
total of 9,902 hours. We are finalizing the estimated administrative
staff member burden at 15 minutes per facility to develop and submit
the election notice to elect to be excluded from the transition. We are
finalizing that 43 percent of the estimated 4,951 ESRD facilities (or
2,120 ESRD facilities), will make the election no later than November
1, 2010. Therefore, we are finalizing the total one-time ESRD facility
burden to be 530 hours. The final collection of information burden
hours are indicated below in Table 34.
[GRAPHIC] [TIFF OMITTED] TR12AU10.042
We have submitted a copy of this final rule to OMB for its review
and approval of the aforementioned information collection requirements.
IV. Regulatory Impact Analysis
A. Overall Impact
We have examined the impacts of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993), the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, section 202 of the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C.
804(2)).
Executive Order 12866 directs 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). A regulatory impact
analysis (RIA) must be prepared for major rules with economically
significant effects ($100 million or more in any 1 year). This final
rule is an economically significant rule because we estimate that the
requirement under section 1881(b)(14)(A)(ii) of the Act--that the
estimated total payments for renal dialysis services in CY 2011 equal
98 percent of the estimated total payments that would have been made if
the ESRD PPS were not implemented--equates to an approximate $200
million decrease in payments to ESRD facilities in CY 2011. In
addition, given this estimated impact, this final rule also is a major
rule under the Congressional Review Act. Accordingly, we have prepared
a RIA that to the best of our ability presents the costs and benefits
of the final rule. We requested comments on the economic analysis.
The RFA requires agencies to analyze options for regulatory relief
of small businesses if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, approximately 22
percent of ESRD dialysis facilities are considered small entities
according to the Small Business Administration's size standards, which
considers small businesses those dialysis facilities having total
Medicare
[[Page 49192]]
revenues of $34.5 million or less in any 1 year, and 19 percent of
dialysis facilities are nonprofit organizations. For more information
on SBA's size standards, see the Small Business Administration's Web
site at http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf
(Kidney Dialysis Centers are listed as 621492 with a size standard
of $34.5 million). For purposes of the RFA, we estimate that
approximately 22 percent of ESRD facilities are small entities as that
term is used in the RFA (which includes small businesses, nonprofit
organizations, and small governmental jurisdictions). This amount is
based on the number of ESRD facilities shown in the ownership category
in the impact Table 35. Using the definitions in this ownership
category, we consider the 614 facilities that are independent and the
470 facilities that are shown as hospital-based to be small entities.
The ESRD facilities that are owned and operated by large dialysis
organizations (LDOs) and regional chains would have total revenues more
than $34.5 million in any year when the total revenues for all
locations are combined for each business (individual LDO or regional
chain). Overall, a hospital based ESRD facility (as defined by
ownership type) is estimated to receive a 1.7 percent increase in
payments under the new ESRD PPS for 2011. An independent facility (as
defined by ownership type) is estimated to receive a -0.3 percent
decrease in payments under the ESRD PPS for 2011. Therefore, the
Secretary has determined that this final rule will not have a
significant economic impact on a substantial number of small entities.
The claims data we use to estimate payments to ESRD facilities in
this RFA and RIA does not identify which dialysis facilities are part
of an LDO, regional chain, or other type of ownership. As each
individual dialysis facility has its own provider number and bills
Medicare using this number. Therefore, in previous RFAs and RIAs
presented in proposed and final rules that updated to the basic case-
mix adjusted composite payment system, we considered each ESRD to be a
small entity for purposes of the RFA. However, we conducted a special
analysis for this final rule that enabled us to identify the ESRD
facilities that are part of an LDO or regional chain. The results of
this analysis are presented in the type of ownership category of impact
Table 35.
We do not believe ESRD facilities are operated by small government
entities such as counties or towns with populations 50,000 or less and
therefore, they are not enumerated or included in this final RFA.
Individuals and States are not included in the definition of a small
entity.
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 604 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 final rule has a significant impact on operations of a
substantial number of small rural hospitals because most dialysis
facilities are freestanding. While there are 187 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 187 rural
hospital-based dialysis facilities will experience an estimated 4.4
percent increase in payments. As a result, this rule will not have a
significant impact on small rural hospitals. Therefore, the Secretary
has determined that this final rule will not have a significant impact
on the operations of a substantial number of small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 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 2010, that
threshold is approximately $135 million. While dialysis facilities will
be paid approximately $200 million less, we do not believe that this
rule includes any mandates that would impose spending costs on State,
local, or tribal governments in the aggregate, or by the private
sector, of $133 million.
Executive Order 13132 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 do not believe this final rule will have a substantial
direct effect on State or local governments, preempt State law, or
otherwise have Federalism implications.
Payment for ESRD Bad Debt
The changes to the ESRD bad debt payment in this final rule are not
changes to the existing ESRD bad debt payment methodology and,
therefore, there is no impact on ESRD payments from implementing the
Rule of Construction described in Section 153(a)(4) of MIPPA and
described elsewhere in this final rule.
B. Anticipated Effects
1. 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 in CY 2011 under the current basic case-mix adjusted
composite payment system (current payments) to estimated payments in CY
2011 under the final ESRD PPS, including payments to ESRD facilities
paid a blended rate under the transition (new payments). To estimate
the impact among various classes of ESRD facilities, it is imperative
that the estimates of current payments and new payments contain similar
inputs. Therefore, we simulated payments only for those ESRD facilities
that we are able to calculate both current payments and new payments.
ESRD providers were grouped into the categories based on
characteristics provided in the Online Survey and Certification and
Reporting (OSCAR) file and the most recent cost report data from the
Healthcare Cost Report Information System (HCRIS). We also used the
June 2008 update of CY 2007 National Claims History file as a basis for
Medicare dialysis treatments and separately billable drugs and
biologicals.
Table 35 shows the impact of the ESRD PPS compared to current
payments to ESRD facilities under the basic case-mix composite payment
system, including all separately billable items. Column A of impact
Table 35 indicates the number of ESRD facilities for each impact
category and column B indicates the number of dialysis treatments (in
millions).
[[Page 49193]]
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[[Page 49194]]
[GRAPHIC] [TIFF OMITTED] TR12AU10.044
Section 1881(b)(14)(E)(ii) of the Act provides all ESRD facilities
with the option to make a one-time election to be excluded from the
transition from the current payment system to the ESRD PPS. Electing to
be excluded from the 4-year transition means that the ESRD facility
receives payments for renal dialysis services provided on or after
January 1, 2011, based on 100 percent of the payment rate under the
final ESRD PPS, rather than a blended rate based in part on the payment
rate under the current payment system and in part on the payment rate
under the ESRD PPS.
In order to estimate which ESRD facilities would and would not
elect to opt out of the transition and receive payment based on 100
percent of the payment amount under the ESRD PPS, we estimated both the
aggregate payments for each ESRD facility under the ESRD PPS (based on
100 percent of the payment amount under ESRD PPS) and payments in the
first year of the transition (based on a blend of 25 percent of
payments under the ESRD PPS and 75 percent of payments under the
current basic case-mix adjusted composite payment system). We then
assume that facilities that would receive higher aggregate payments
under the ESRD PPS would elect to be paid based on 100 percent of the
payment amount under the ESRD PPS, and facilities that would receive
higher aggregate payments under the first year of the transition (based
on a blend of 25 percent of payments under the ESRD PPS and 75 percent
of payments under the current basic case-mix adjusted composite payment
system) will elect to be paid under the transition. Based on these
assumptions, we are estimating that 43 percent of ESRD facilities would
choose to be excluded from the transition and we estimate that 57
percent of ESRD facilities would choose to be paid the blended rate
under the transition.
Additionally, in accordance with section 1881(b)(14)(E)(iii) of the
Act and as described in section VII.E of this final rule, we intend to
apply a transition budget-neutrality adjustment factor to all payments.
The purpose of this factor is to make the estimated total payments
under the ESRD PPS equal the estimated total payments that would have
been made if there had been no transition. We estimate this factor to
be 0.969. Since the same factor would be applied to all payments,
including the blended payment rates under the transition, the effect of
the transition budget neutrality adjustment factor is the same for all
impact categories.
The overall effect of the final ESRD PPS, in the first year of the
transition, is shown in column C. This effect is determined by
comparing total estimated payments under the ESRD PPS, which includes
blended payments and payments that are computed using our assumption
that 43 percent of ESRD facilities would elect to be paid 100 percent
ESRD PPS and 57 percent of ESRD facilities would elect to go through
the transition. These payments have also been adjusted to reflect the
transition budget neutrality adjustment factor. Total payments are then
compared to payments that would have been made to facilities for renal
dialysis services provided during CY 2011 under the basic case-mix
adjusted composite payment system plus items and services separately
billable under Title XVIII, including ESRD-related Part D drugs.
In column C, the aggregate impact on all facilities is a 2.0
percent reduction in payments, which reflects the statutory 98 percent
budget neutrality provision. Hospital-based ESRD providers of services
show a 1.8 percent increase because as a group they receive higher
payments under the ESRD PPS than they would receive under the current
system. We believe that the model used to create the ESRD PPS
adjustment factors more accurately predicts costs for this provider
category. Facilities with less than 4,000 treatments show a 5.4 percent
increase in payments under the ESRD PPS because many of these
facilities are eligible to receive the low-volume adjustment, which is
a 18.9 percent adjustment per treatment. As with hospital-based ESRD
providers of services, we believe that the model more accurately
predicts costs for this category. Facilities that chose to retain a
composite rate exception in the current system will have an 11.3
percent increase in payments under the ESRD PPS. This may be explained
by the fact that the current basic case-mix adjusted composite payment
system does not completely account for their higher costs and that the
ESRD PPS more accurately accounts for the higher costs of these
facilities as a group. The largest decrease in payments under the ESRD
PPS is for facilities in the South Atlantic census region which will
experience a 4.1 percent decrease. We believe this decrease is a result
of the current over usage of separately billable drugs.
Column D shows the effect if all ESRD facilities were paid 100
percent of the ESRD PPS. In this column, we are showing a hypothetical
effect, as the statute provides for a 4-year transition to a fully
implemented ESRD PPS. We show this column as a comparison to column C,
in order to show how each impact category would have been effected if
the ESRD PPS had been fully implemented in 2011. In column D, the
overall effect for all facilities in aggregate is a 2.0 percent
reduction, which reflects the statutory 98 percent budget neutrality
provision. As with column C, we see the same categories of ESRD
facilities most impacted by the ESRD PPS. However, in column D the
changes are generally more pronounced as those providers do not have
the mitigating effect of the transition. Since column D shows the
hypothetical effect if all ESRD facilities were to be paid 100 percent
of the ESRD PPS in the first year of the transition, there would be no
need for a transition budget neutrality adjustment to account for the
cost of the ESRD PPS transition. Therefore, we did not apply the
transition budget neutrality factor to column D.
We believe that the comparison of columns C and D shows that the
statutory option to transition does
[[Page 49195]]
provide a more gradual affect for provider categories that receive
lower payments under the ESRD PPS, as well as the effect of the
transition budget neutrality factor. Generally, providers that do well
under the ESRD PPS show larger increases in column D compared to column
C because column D does not reflect the transition budget neutrality
adjustment. However, many provider categories include a combination of
providers that are estimated to receive higher payments under the ESRD
PPS and providers that are estimated to receive lower payments under
the ESRD PPS. We believe the comparison of columns C and D also shows
that application of the transition budget neutrality factor to all
payments does not penalize any one group, but rather it evenly
distributes the effect of this transition budget neutrality factor
among all provider types.
2. Effects on Other Providers
Under the expanded bundle in the ESRD PPS, other provider types
such as laboratories, DME suppliers, and pharmacies would have to seek
payment from ESRD facilities rather than Medicare. This is because
under the ESRD PPS, Medicare is paying ESRD facilities one combined
payment for services that may have been separately paid by Medicare in
the past. We noted that other provider types noted above may continue
to provide certain ESRD-related serves; however, beginning January 1,
2011, they may no longer bill Medicare directly and instead must seek
payment from ESRD facilities.
3. Effects on the Medicare and Medicaid Programs
We estimate that Medicare spending (total Medicare program
payments) for ESRD facilities in 2011 will be approximately $8.0
billion. This estimate is based on various price update factors
discussed in section II.E.2. of this final rule. In addition, we
estimate that there will be an increase in fee-for-service Medicare
beneficiary enrollment of 3.6 percent in CY 2011. Consistent with the
requirement for 98 percent budget neutrality in the initial year of
implementation, we intend for estimated aggregate payments under the
ESRD PPS to equal 98 percent of the estimated aggregate payments that
would have been made if the ESRD PPS were not implemented. Our
methodology for estimating payment for purposes of the budget
neutrality calculation uses the best available data.
4. Effects on Medicare Beneficiaries
The principal effect of the ESRD PPS on beneficiaries is that
implementation of the system will change beneficiary financial
liability for co-insurance. Under the current basic case-mix adjusted
composite payment system, beneficiaries pay 20 percent of the basic
case-mix adjusted payment amount plus 20 percent of ESRD-related
separately billable drugs; however they do not pay co-insurance on
separately billable laboratory tests. Under the ESRD PPS, beneficiaries
will be responsible for paying 20 percent of the ESRD PPS payment
amount or blended payment amount for patients treated in facilities
that choose the ESRD PPS transition. As the beneficiary will be
responsible for the co-insurance on the laboratory tests, we estimate
they will have a 1.2 percent increase in their payments. Additional
information regarding beneficiary co-insurance is in section II.K.1.b.
of this final rule.
C. Alternatives Considered
In developing this final rule, we considered a number of
alternatives. We considered other adjustments, including race,
modality, and site of service. We considered alternative adjustments to
explain variation in cost and resource usage among patients and ESRD
facilities. For example, we considered alternatives in the outlier
policy, such as outlier percentages of 1.5, 2, 2.5, to 3 percent,
rather than the 1 percentage policy. We also considered a monthly
payment, but instead are finalizing a per treatment payment.
The statute requires a low-volume adjustment of at least 10 percent
and an outlier policy. However, the statute did provide the Secretary
with discretion in defining low-volume facilities and establishing the
details of the outlier policy. Throughout this final rule, we discuss
our rationale for the policy decisions we have made for each adjustment
that we are finalizing. Although we have discretion on some of the
adjustments we are finalizing, there is no impact on the aggregate
amount of spending in the first year of the ESRD PPS (CY 2011) because
we have standardized the base rate. The base rate is standardized to
account for the overall positive effect of the case-mix and other
adjustments.
D. Accounting Statement and Table
Whenever a rule is considered a significant rule under Executive
Order 12866, we are required to develop an Accounting Statement showing
the classification of the expenditures associated with the provisions
of this final rule.
Table 36, below provides our best estimate of the decrease in CY
2011 Medicare payments under the ESRD PPS as a result of the changes
presented in this final rule based on the best available data. The
expenditures are classified as a transfer to the Federal Government of
$230 million dollars (or as a savings to the Medicare Program) and as a
transfer to provider from the beneficiaries of $30 million.
[GRAPHIC] [TIFF OMITTED] TR12AU10.045
We received the following comments regarding the impact of the
proposed rule on small dialysis organizations and independent dialysis
facilities.
Comment: One commenter stated that CMS should include within the
RFA, an analysis of the impact of the compliance requirements of the
proposed rule on SDOs and an analysis of options for
[[Page 49196]]
regulatory relief. Other commenters expressed concern about the
increase in administrative costs that will occur due to implementing
the infrastructure to collect information to support the case-mix
adjusters, specifically the co-morbidity adjustments.
Response: As discussed throughout this preamble, we have made
numerous changes to the proposed ESRD PPS in response to public
comments and further analysis. The principle change we have made that
reduces the burden on ESRD facilities is to delay implementation of
oral-only ESRD-related drugs currently paid under Part D. The inclusion
of ESRD-related oral drugs is limited and should have minimal impact.
We believe that many ESRD facilities already have contractual
arrangements with a pharmacy to obtain Part B injectable drugs. Thus,
we believe the inclusion of a limited number of oral drugs will not
pose a significant burden on any ESRD facilities.
Many of the other adjustments reflect the adjustments in the
current basic case-mix adjusted composite payment system (that is, age,
BSA, and BMI) and therefore, should not pose new burden on ESRD
facilities. In addition, we have not made significant changes in the
information that ESRD facilities will be required to report on claims
in order to be eligible for payment adjustments. The only new billing
requirement is that facilities will be required to line item report
ESRD-related oral drugs currently covered under Part D. Consistent with
the policy under the current basic case-mix adjusted composite payment
system, ESRD facilities will have to report non-ESRD-related services
(that is, services that are not renal dialysis services) and the
appropriate modifier on their claims in order to receive payment for
these services outside the ESRD PPS payment. We have reduced the number
of co-morbidity adjustment factors and limited the number of acute co-
morbidity diagnostic categories which will minimize the effort needed
to track and report co-morbid medical conditions that would be eligible
for an adjustment.
Comment: Several commenters did not agree with the impacts provided
in the proposed rule. One commenter conducted an independent analysis
and asserted that LDOs were more likely than other dialysis providers
to serve patients disadvantaged by poverty. While the commenter
believes this finding would support a case-mix adjuster to better
compensate LDOs for disproportionately servicing areas of high poverty,
the commenter urged CMS to avoid implementing a case mix adjuster that
is based on facility type. Other commenters indicated that CMS lacks
the authority to adjust payments to facilities based on whether they
are owned by a dialysis organization of a particular size. The
commenters indicated that distinguishing facilities based on ownership
status would be an unprecedented extension of CMS' authority to
determine Medicare payments. One commenter stated that creating a
tiered reimbursement on the basis of facility size or ownership type
would create incentives for centers to pursue or retain a certain
ownership status to receive higher reimbursement.
Other commenters advocated for an adjustment that would apply to
small independent and hospital-based facilities, asserting that these
providers have higher costs and lower margins than LDOs. One commenter
disputed a finding by MedPAC that the spread in Medicare margin for
LDOs compared to small dialysis organizations (SDOs) is about 6 percent
and stated that SDOs are incurring even further losses from Medicare,
maybe 3 percent more per treatment.
One commenter suggested that we revise the facility-level
adjustments or develop a new case-mix adjustment to account for the
administrative and financial burden for SDOs. Other commenters stated
that the SDOs do not have the economies of scale and resources to
implement the ESRD PPS and, therefore, will be forced to provide
substandard care or close. The commenters expressed concern that
competition allows patient choice and access to care and that we should
support small businesses and work to ``level the playing field for
providers of all sizes.''
Response: We have not provided a facility-level adjustment to
reflect the size of the chain of dialysis facilities with which an ESRD
facility is affiliated because our analysis does not indicate that such
adjustments are warranted. In the final impact table (Table 35),
facilities that are part of LDOs are projected to experience a -3.0
percent decrease in payment under the PPS compared to what they would
have received in the absence of the PPS; medium-sized dialysis
organizations (which are captured under the heading regional chains)
are projected to experience a -0.9 percent decrease; SDOs are projected
to experience a -0.3 percent decrease; and hospital-based facilities
are projected to experience a 1.7 percent increase. Given that the
impact percentages include the -2.0 percent decrease mandated by
section 1881(b)(14)(A)(ii) of the Act, we do not believe these
projected impacts indicate a need for adjustments based on the size of
the facility or chain organization.
In addition, although there may currently be differences in the
spread in Medicare margin for LDOs compared to small dialysis
organizations (SDOs), the estimate indicated by the commenter is based
upon the current basic case-mix adjusted composite payment system. As
stated above, our analysis based on the payment adjustments in this
final rule indicate that SDOs are projected do better under the ESRD
PPS than larger organizations. We will be monitoring the effects of the
ESRD PPS and will consider the commenters' suggestions as we refine the
ESRD PPS.
With regard to the need for an adjustment for SDOs due to the
administrative and financial burden of the ESRD PPS, we believe the
decision to delay the implementation of oral-only Part D drugs under
the ESRD PPS until after the transition as discussed in section II.A.3.
of this final rule and the reduction in the number of co-morbidity
adjustments described in section II.F.3. of this final rule will reduce
substantially the administrative and financial burden on all ESRD
facilities, including SDOs.
Comment: Many commenters stated that SDOs provide essential
services to ESRD beneficiaries and requested that we take steps to
ensure the survival of small ESRD facilities, thus preserving
beneficiary choice. Commenters identified additional services such as
dressing changes, staple removal and other basic nursing related tasks
that small and independent ESRD facilities provide to patients who
reside in remote areas to alleviate some of the burden associated with
traveling to multiple healthcare providers for the provision of basic
services. Commenters asserted that the calculations and adjusting of
the base rate have reduced it to a value that will not allow SDOs and
independents to survive. The commenters believed that the closure of
these facilities would compromise beneficiary access to life sustaining
dialysis and other basic services. The commenters stated that a higher
base rate and fewer adjusters would be more beneficial to the SDOs and
MDOs.
Response: We agree that ESRD facilities located in remote areas
provide essential services to their patients and are interested in
preserving beneficiary choice and access in these areas. As discussed
further in sections II.F.3. and 4. of this final rule, we are
finalizing a more targeted set of payment adjustments and reducing the
standardization factor that is applied to the base rate. As a result,
as discussed in section II.E.3. of this final rule, the
[[Page 49197]]
adjusted base rate has increased from $198.64 in the proposed rule to
$229.63.
Comment: One commenter believed that section 150(d)(iv) of MIPPA
provides CMS with the authority to make an annual update to account for
the cost differential of ESRD facilities that do not qualify for the
low-volume adjustment. This commenter further stated that such an
adjustment would balance the incentives for efficiency and budget
neutrality with the needs of patient care and a more competitive
marketplace.
Response: We believe the commenter is referring to section
1881(b)(14)(D)(iv) of the Act which provides authority for other
payment adjustments. Although we have the authority to establish other
payment adjustments, we do not believe creating adjustments to create a
more competitive marketplace is an appropriate use of this authority.
Comment: Several commenters did not believe that the market basket
update would address the low margins for SDOs especially in the context
of a two percent reduction in payments under the bundle. The commenters
believed that at baseline, the SDO payments would be reduced while many
of the cost inputs would continue to increase from inflation resulting
in further reduction in SDOs' margins. The commenters asserted that
SDOs have less room than other facilities to adjust under the PPS.
These commenters concluded that even with new systems and processes in
place, the adjustments that the SDOs will receive under the proposed
ESRD PPS may not be sufficient to cover the additional costs and
burdens of the ESRD PPS.
Response: As we indicated previously, the final impact analysis
does not indicate that an adjustment for SDOs is warranted. In
addition, to the extent facilities affiliated with SDOs expect to
receive financial benefits from the ESRD PPS transition, that option is
available to them.
Comment: Several commenters stated that they did not believe that
the proposed facility adjustments and outlier policy adequately
addresses the many needs of isolated essential facilities.
Response: We disagree with these commenters as the final impact
analysis shows that all rural facilities (including those facilities
that received IEF exceptions) would see only a slight decrease under
the ESRD PPS in 2011 (-2.1 percent decrease). The impact on those few
facilities that received a composite rate exception as isolated
essential facilities is expected to be positive as those facilities are
projected to receive an increase in payment over the current composite
payment system.
Comment: One commenter stated that certain drugs used in the
treatment of ESRD, particularly ESAs, have no competition within their
drug class because they represent a manufacturer's monopoly. Because of
the lack of competitive bidding, the commenter maintained that rural
ESRD facilities would not be able to compete in price due to their
smaller buying power compared to the larger chains. The commenter
recommended an adjustment factor for small rural facilities to address
this disadvantage.
Response: We do not believe that we should provide a special
subsidy to facilities based on size or ownership because of a perceived
disadvantage in buying power. We point out that facilities that believe
that they are at a competitive disadvantage in purchasing required
drugs or supplies due to size or location have the option of forming
purchasing consortia in order to leverage their ability to buy products
at discounted rates. In addition, in this final rule we have provided
for a low-volume adjustment for qualifying ESRD facilities that furnish
a small number of treatments and meet other requirements in order to
preserve access to dialysis care, where operational costs due to
economies of scale might otherwise jeopardize that access. Finally, we
note that the impact analysis does not show that small or rural ESRD
facilities are particularly disadvantaged under the new system.
E. Conclusion
The impact analysis shows an overall decrease in payments to all
ESRD facilities for renal dialysis services of 2.0 percent. This is
because of the statutory requirement that payments under the ESRD PPS
in 2011 equal 98 percent of what ESRD facilities would have received
were the ESRD PPS not implemented (or 98 percent of payments to ESRD
facilities under the current payment system).
The analysis above, together with the remainder of this preamble,
provides an initial Regulatory Flexibility Analysis. The analysis
above, together with the remainder of this preamble, provides a
Regulatory Impact Analysis.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
List of Subjects
42 CFR Part 410
Health facilities, Health professions, Kidney diseases,
Laboratories, Medicare, Reporting and recordkeeping requirements, Rural
areas, X-rays.
42 CFR Part 413
Health facilities, Kidney diseases, Medicare, Reporting and
recordkeeping requirements.
42 CFR Part 414
Administrative practice and procedure, Health facilities, Health
professions, Kidney diseases, Medicare, Reporting and recordkeeping
requirements.
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For reasons stated in the preamble of this document, the Centers for
Medicare & Medicaid Services amends 42 CFR Chapter IV as follows:
PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS
Subpart B--Medical and Other Health Services
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1. The authority citation for part 410 is revised to read as follows:
Authority: Secs. 1102, 1834, 1871, 1881, and 1893 of the Social
Security Act (42 U.S.C. 1302. 1395m, 1395hh, and 1395ddd.
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2. Section 410.50 is amended by revising paragraph (a) to read as
follows:
Sec. 410.50 Institutional dialysis services and supplies: Scope and
conditions.
* * * * *
(a) All services, items, supplies, and equipment necessary to
perform dialysis and drugs medically necessary and the treatment of the
patient for ESRD and, as of January 1, 2011, renal dialysis services as
defined in Sec. 413.171 of this chapter.
* * * * *
PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED
PAYMENT RATES FOR SKILLED NURSING FACILITIES
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3. The authority citation for part 413 continues to read as follows:
Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and
(n), 1861(v), 1871, 1881, 1883, and 1886 of the Social Security Act
(42 U.S.C. 1302, 1395d(d), 1395f(b), 1395(g), 1395I(a), (i), and
(n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of
Public Law 106-113 (133 stat. 1501A-332)
[[Page 49198]]
Subpart F--Specific Categories of Costs
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4. Section 413.89 is amended by adding a new paragraph (h)(3) to read
as follows:
Sec. 413.89 Bad debts, charity, and courtesy allowances.
* * * * *
(h) * * *
(3) ESRD facilities--
(i) Limitation on bad debt. The amount of ESRD facility bad debts
otherwise treated as allowable costs described in Sec. 413.178.
(ii) Exception. Bad debts arising from covered services paid under
a reasonable charge-based methodology or a fee schedule are not
reimbursable under the program. Additional exceptions for ESRD bad debt
payments are described in Sec. 413.178(d).
Subpart H--Payment for End-Stage Renal Disease (ESRD) Services and
Organ Procurement Costs
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5. Section 413.170 is amended by revising the introductory text,
paragraph (a) and paragraph (b) to read as follows:
Sec. 413.170 Scope.
This subpart implements sections 1881(b)(2), (b)(4), (b)(7), and
(b)(12) through (b)(14) of the Act by--
(a) Setting forth the principles and authorities under which CMS is
authorized to establish a prospective payment system for outpatient
maintenance dialysis services in or under the supervision of an ESRD
facility that meets the conditions of coverage in part 494 of this
chapter and as defined in Sec. 413.171(c).
(b) Providing procedures and criteria under which a pediatric ESRD
facility (an ESRD facility with at least a 50 percent pediatric patient
mix as specified in Sec. 413.184 of this subpart) may receive an
exception to its prospective payment rate prior to January 1, 2011; and
* * * * *
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6. Section 413.171 is added to read as follows:
Sec. 413.171 Definitions.
For purposes of this subpart, the following definitions apply:
Base rate. The average payment amount per-treatment, standardized
to remove the effects of case-mix and area wage levels and further
reduced for budget neutrality and the outlier percentage. The base rate
is the amount to which the patient-specific case-mix adjustments and
any ESRD facility adjustments, if applicable, are applied.
Composite Rate Services. 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) and the basic case-mix adjusted composite payment system
established under section 1881(b)(12) of the Act.
ESRD facility. An ESRD facility is an independent facility or a
hospital-based provider of services (as described in Sec. 413.174(b)
and (c) of this chapter), including facilities that have a self-care
dialysis unit that furnish only self-dialysis services as defined in
Sec. 494.10 of this chapter and meets the supervision requirements
described in part 494 of this chapter, and that furnishes institutional
dialysis services and supplies under Sec. 410.50 and Sec. 410.52 of
this chapter.
New ESRD facility. A new ESRD facility is an ESRD facility (as
defined above) that is certified for Medicare participation on or after
January 1, 2011.
Pediatric ESRD Patient. A pediatric ESRD patient is defined as an
individual less than 18 years of age who is receiving renal dialysis
services.
Renal dialysis services. Effective January 1, 2011, the following
items and services are considered ``renal dialysis services,'' and paid
under the ESRD prospective payment system under section 1881(b)(14) of
the Act:
(1) Items and services included in the composite rate for renal
dialysis services as of December 31, 2010;
(2) Erythropoiesis stimulating agents and any oral form of such
agents that are furnished to individuals for the treatment of ESRD;
(3) Other drugs and biologicals that are furnished to individuals
for the treatment of ESRD and for which payment was (prior to January
1, 2011) made separately under Title XVIII of the Act (including drugs
and biologicals with only an oral form),
(4) Diagnostic laboratory tests and other items and services not
described in paragraph (1) of this definition that are furnished to
individuals for the treatment of ESRD.
(5) Renal dialysis services do not include those services that are
not essential for the delivery of maintenance dialysis.
Separately billable items and services. Items and services used in
the provision of outpatient maintenance dialysis for the treatment of
individuals with ESRD that were or would have been, prior to January 1,
2011, separately payable under Title XVIII of the Act and not included
in the payment systems established under section 1881(b)(7) and section
1881(b)(12) of the Act.
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7. Section 413.172 is amended by revising paragraph (a), paragraph (b),
and paragraph (b)(1) to read as follows:
Sec. 413.172 Principles of prospective payment.
(a) Payment for renal dialysis services as defined in Sec. 413.171
and home dialysis services as defined in Sec. 413.217 of this chapter
are based on payment rates set prospectively by CMS.
(b) All approved ESRD facilities must accept the prospective
payment rates established by CMS as payment in full for covered renal
dialysis services as defined in Sec. 413.171 or home dialysis
services. Approved ESRD facility means--
(1) Any independent ESRD facility or hospital-based provider of
services (as defined in Sec. 413.174(b) and Sec. 413.174(c) of this
part) that has been approved by CMS to participate in Medicare as an
ESRD supplier; or
* * * * *
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8. Section 413.174 is amended as follows:
0
a. By revising paragraph (a).
0
b. By revising paragraphs (f) introductory text, (f)(3), and (f)(4).
0
c. By adding a new paragraphs (f)(5) and (f)(6). The revisions and
additions read as follows:
Sec. 413.174 Prospective rates for hospital-based and independent
ESRD facilities.
(a) Establishment of rates. CMS establishes prospective payment
rates for ESRD facilities using a methodology that--
(1) Differentiates between hospital-based providers of services and
independent ESRD facilities for items and services furnished prior to
January 1, 2009;
(2) Does not differentiate between hospital-based providers of
services and independent ESRD facilities for items and services
furnished on or after January 1, 2009; and
(3) Requires the labor share be based on the labor share otherwise
applied to independent ESRD facilities when applying the geographic
index to hospital-based ESRD providers of services, on or after January
1, 2009.
* * * * *
(f) Additional payment for separately billable drugs and
biologicals. Prior to January 1, 2011, CMS makes additional payment
directly to an ESRD facility for certain ESRD-related drugs and
biologicals furnished to ESRD patients.
* * * * *
(3) For drugs furnished prior to January 1, 2006, payment is made
to hospital-based ESRD providers of services on a reasonable cost
basis.
[[Page 49199]]
Effective January 1, 2006, and prior to January 1, 2011, payment for
drugs furnished by a hospital-based ESRD provider of service is based
on the methodology specified in Sec. 414.904 of this chapter.
(4) For drugs furnished prior to January 1, 2006, payment is made
to independent ESRD facilities based on the methodology specified in
Sec. 405.517 of this chapter. Effective January 1, 2006, and prior to
January 1, 2011, payment for drugs and biological furnished by
independent ESRD facilities is based on the methodology specified in
Sec. 414.904 of this chapter.
(5) Effective January 1, 2011, except as provided below, payment to
an ESRD facility for renal dialysis service drugs and biologicals as
defined in Sec. 413.171, furnished to ESRD patients on or after
January 1, 2011 is incorporated within the prospective payment system
rates established by CMS in Sec. 413.230 and separate payment will no
longer be provided.
(6) Effective January 1, 2014, payment to an ESRD facility for
renal dialysis service drugs and biologicals with only an oral form
furnished to ESRD patients is incorporated within the prospective
payment system rates established by CMS in Sec. 413.230 and separate
payment will no longer be provided.
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9. Section 413.176 is revised to read as follows:
Sec. 413.176 Amount of payments.
For items and services, for which payment is made under section
1881(b)(7), section 1881(b)(12), and section 1881(b)(14) of the Act:
(a) If the beneficiary has incurred the full deductible applicable
under Part B of Medicare before the dialysis treatment, Medicare pays
the ESRD facility 80 percent of its prospective rate.
(b) If the beneficiary has not incurred the full deductible
applicable under Part B of Medicare before the dialysis treatment, CMS
subtracts the amount applicable to the deductible from the ESRD
facility's prospective rate and pays the facility 80 percent of the
remainder, if any.
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10. Section 413.178 is amended by revising paragraph (d) to read as
follows:
Sec. 413.178 Bad debts.
* * * * *
(d) Exceptions. (1) Bad debts arising from covered ESRD services
paid under a reasonable charge-based methodology or a fee schedule are
not reimbursable under the program.
(2) For services furnished on or after January 1, 2011, bad debts
arising from covered ESRD 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.
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11. Section 413.180 is amended by adding a new paragraph (l) to read as
follows.
Sec. 413.180 Procedures for requesting exceptions to payment rates.
* * * * *
(l) Periods of exceptions. (1) Prior to December 31, 2000, an ESRD
facility may receive an exception to its composite payment rate for
isolated essential facilities, self dialysis training costs, atypical
service intensity (patient mix) and pediatric facilities.
(2) Effective December 31, 2000, an ESRD facility not subject to
paragraph (l)(3), is no longer granted any new exception to the
composite payment rate as defined in Sec. 413.180(1).
(3) Effective April 1, 2004 through September 27, 2004, and on an
annual basis, an ESRD facility with at least 50 percent pediatric
patient mix as specified in Sec. 413.184 of this part, that did not
have an exception rate in effect as of October 1, 2002, may apply for
an exception to its composite payment rate.
(4) For ESRD facilities that are paid a blended rate for renal
dialysis services provided during the transition described in Sec.
413.239 of this part, any existing exceptions for isolated essential
facilities, self dialysis training costs, atypical service intensity
(patient mix) and pediatric facilities are used as the payment amount
in place of the composite rate, and will be terminated for ESRD
services furnished on or after January 1, 2014.
(5) For ESRD facilities that, in accordance with Sec. 413.239(b)
of this part, elect to be paid for renal dialysis services provided
during the transition based on 100 percent of the payment amount
determined under Sec. 413.220, any existing exceptions for isolated
essential facilities, self dialysis training costs, atypical service
intensity (patient mix) and pediatric facilities are terminated for
ESRD services furnished on or after January 1, 2011.
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12. Section 413.195 is added to read as follows:
Sec. 413.195 Limitation on Review.
Administrative or judicial review under section 1869 of the Act,
section 1878 of the Act, or otherwise of the following is prohibited:
The determination of payment amounts under section 1881(b)(14)(A) of
the Act, the establishment of an appropriate unit of payment under
section 1881(b)(14)(C) of the Act, the identification of renal dialysis
services included in the bundled payment, the adjustments under section
1881(b)(14)(D) of the Act, the application of the phase-in under
section 1881(b)(14)(E) of the Act, and the establishment of the market
basket percentage increase factors under section 1881(b)(14)(F) of the
Act.
0
13. Section 413.196 is amended by adding new paragraphs (c) and (d) to
read as follows:
Sec. 413.196 Notification of changes in rate-setting methodologies
and payment rates.
* * * * *
(c) Effective for items and services furnished on or after January
1, 2011 and before January 1, 2012, CMS adjusts the composite rate
portion of the basic case-mix adjusted composite payment system
described in Sec. 413.220 by the ESRD bundled market basket percentage
increase factor.
(d) Effective for items and services furnished on or after January
1, 2012, CMS updates on an annual basis the following:
(1) The per-treatment base rate and the composite rate portion of
the basic case-mix adjusted composite payment system described in Sec.
413.220 by the ESRD bundled market basket percentage increase factor
minus a productivity adjustment factor.
(2) The wage index using the most current hospital wage data.
(3) The fixed dollar loss amount as defined in Sec. 413.237 of
this part to ensure that outlier payments continue to be 1.0 percent of
total payments to ESRD facilities.
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14. Section 413.210 is added to subpart H to read as follows:
Sec. 413.210 Conditions for payment under the end-stage renal disease
(ESRD) prospective payment system.
Except as noted in Sec. 413.174(f), items and services furnished
on or after January 1, 2011, under section 1881(b)(14)(A) of the Act
and as identified in Sec. 413.217 of this part, are paid under the
ESRD prospective payment system described in Sec. 413.215 through
Sec. 413.235 of this part.
(a) Qualifications for payment. To qualify for payment, ESRD
facilities must meet the conditions for coverage in part 494 of this
chapter.
(b) Payment for items and services. CMS will not pay any entity or
supplier other than the ESRD facility for covered items and services
furnished to a Medicare beneficiary. The ESRD facility must furnish all
covered items and
[[Page 49200]]
services defined in Sec. 413.217 of this part either directly or under
arrangements.
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15. Section 413.215 is added to subpart H to read as follows:
Sec. 413.215 Basis of payment.
(a) Except as otherwise provided under Sec. 413.235 or Sec.
413.174(f) of this part, effective January 1, 2011, ESRD facilities
receive a predetermined per treatment payment amount described in Sec.
413.230 of this part, for renal dialysis services, specified under
section 1881(b)(14) of the Act and as defined in Sec. 413.217 of this
part, furnished to Medicare Part B fee-for-service beneficiaries.
(b) In addition to the per-treatment payment amount, as described
in Sec. 413.215(a) of this part, the ESRD facility may receive payment
for bad debts of Medicare beneficiaries as specified in Sec. 413.178
of this part.
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16. Section 413.217 is added to subpart H to read as follows:
Sec. 413.217 Items and services included in the ESRD prospective
payment system.
The following items and services are included in the ESRD
prospective payment system effective January 1, 2011:
(a) Renal dialysis services as defined in Sec. 413.171; and
(b) Home dialysis services, support, and equipment as identified in
Sec. 410.52 of this chapter.
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17. Section 413.220 is added to subpart H to read as follows:
Sec. 413.220 Methodology for calculating the per-treatment base rate
under the ESRD prospective payment system effective January 1, 2011.
(a) Data sources. The methodology for determining the per treatment
base rate under the ESRD prospective payment system utilized:
(1) Medicare data available to estimate the average cost and
payments for renal dialysis services.
(2) ESRD facility cost report data capturing the average cost per
treatment.
(3) The lowest per patient utilization calendar year as identified
from Medicare claims is calendar year 2007.
(4) Wage index values used to adjust for geographic wage levels
described in Sec. 413.231 of this part.
(5) An adjustment factor to account for the most recent estimate of
increases in the prices of an appropriate market basket of goods and
services provided by ESRD facilities.
(b) Determining the per treatment base rate for calendar year 2011.
Except as noted in Sec. 413.174(f), the ESRD prospective payment
system combines payments for the composite rate items and services as
defined in Sec. 413.171 of this part and the items and services that,
prior to January 1, 2011, were separately billable items and services,
as defined in Sec. 413.171 of this part, into a single per treatment
base rate developed from 2007 claims data. The steps to calculating the
per-treatment base rate for 2011 are as follows:
(1) Per patient utilization in CY 2007, 2008, or 2009. CMS removes
the effects of enrollment and price growth from total expenditures for
2007, 2008 or 2009 to determine the year with the lowest per patient
utilization.
(2) Update of per treatment base rate to 2011. CMS updates the per-
treatment base rate under the ESRD prospective payment system in order
to reflect estimated per treatment costs in 2011.
(3) Standardization. CMS applies a reduction factor to the per
treatment base rate to reflect estimated increases resulting from the
facility-level and patient-level adjustments applicable to the case as
described in Sec. 413.231 through Sec. 413.235 of this part.
(4) Outlier percentage. CMS reduces the per treatment base rate by
1 percent to account for the proportion of the estimated total payments
under the ESRD prospective payment system that are outlier payments as
described in Sec. 413.237 of this part.
(5) Budget neutrality. CMS adjusts the per treatment base rate so
that the aggregate payments in 2011 are estimated to be 98 percent of
the amount that would have been made under title XVIII of the Social
Security Act if the ESRD prospective payment system described in
section 1881(b)(14) of the Act were not implemented.
(6) First 4 Years of the ESRD prospective payment system. During
the first 4 years of ESRD prospective payment system (January 1, 2011
to December 31, 2013), CMS adjusts the per-treatment base rate in
accordance with Sec. 413.239(d).
0
18. Section 413.230 is added to subpart H to read as follows:
Sec. 413.230 Determining the per treatment payment amount.
The per-treatment payment amount is the sum of:
(a) The per treatment base rate established in Sec. 413.220,
adjusted for wages as described in Sec. 413.231, and adjusted for
facility-level and patient-level characteristics described in Sec.
413.232 and Sec. 413.235 of this part;
(b) Any outlier payment under Sec. 413.237; and
(c) Any training adjustment add-on under Sec. 414.335(b).
0
19. Section 413.231 is added to subpart H to read as follows:
Sec. 413.231 Adjustment for wages.
(a) CMS adjusts the labor-related portion of the base rate to
account for geographic differences in the area wage levels using an
appropriate wage index (established by CMS) which reflects the relative
level of hospital wages and wage-related costs in the geographic area
in which the ESRD facility is located.
(b) The application of the wage index is made on the basis of the
location of the ESRD facility in an urban or rural area as defined in
this paragraph (b).
(1) Urban area means a Metropolitan Statistical Area or a
Metropolitan division (in the case where a Metropolitan Statistical
Area is divided into Metropolitan Divisions), as defined by OMB.
(2) Rural area means any area outside an urban area.
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20. Section 413.232 is added to subpart H to read as follows:
Sec. 413.232 Low-volume adjustment.
(a) CMS adjusts the base rate for low-volume ESRD facilities, as
defined in paragraph (b) of this section.
(b) Definition of low-volume facility. A low-volume facility is an
ESRD facility that:
(1) Furnished less than 4,000 treatments in each of the 3 years
preceding the payment year; and
(2) Has not opened, closed, or had a change in ownership in the 3
years preceding the payment year.
(c) For the purpose of determining the number of treatments under
paragraph (b)(1) of this section, the number of treatments considered
furnished by the ESRD facility shall equal the aggregate number of
treatments furnished by the ESRD facility and the number of treatments
furnished by other ESRD facilities that are both:
(1) Under common ownership with, and
(2) 25 miles or less from the ESRD facility in question.
(d) The determination under paragraph (c) of this section does not
apply to an ESRD facility that was in existence and certified for
Medicare participation prior January 1, 2011.
(e) Common ownership means the same individual, individuals,
entity, or entities, directly, or indirectly, own 5 percent or more of
each ESRD facility.
(f) To receive the low-volume adjustment, an ESRD facility must
provide an attestation statement to their Medicare administrative
contractor that the facility has met all the criteria as established in
paragraphs (a), (b), (c), and (d) of this section.
[[Page 49201]]
(g) The low-volume adjustment applies only for dialysis treatments
provided to adults (18 years or older).
0
21. Section 413.235 is added to subpart H to read as follows:
Sec. 413.235 Patient-level adjustments.
Adjustments to the per-treatment base rate may be made to account
for variation in case-mix. These adjustments reflect patient
characteristics that result in higher costs for ESRD facilities.
(a) CMS adjusts the per treatment base rate for adults to account
for patient age, body surface area, low body mass index, onset of
dialysis (new patient), and co-morbidities, as specified by CMS.
(b) CMS adjusts the per treatment base rate for pediatric patients
in accordance with section 1881(b)(14) (D)(iv)(I) of the Act, to
account for patient age and treatment modality.
(c) CMS provides a wage-adjusted add-on per treatment adjustment
for home and self-dialysis training.
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22. Section 413.237 is added to subpart H to read as follows:
Sec. 413.237 Outliers.
(a) The following definitions apply to this section.
(1) ESRD outlier services are the following items and services that
are included in the ESRD PPS bundle: (i) ESRD-related drugs and
biologicals that were or would have been, prior to January 1, 2011,
separately billable under Medicare Part B;
(ii) ESRD-related laboratory tests that were or would have been,
prior to January 1, 2011, separately billable under Medicare Part B;
(iii) Medical/surgical supplies, including syringes, used to
administer 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 effective January 1, 2014.
(2) Adult predicted ESRD outlier services Medicare allowable
payment (MAP) amount means the predicted per-treatment case-mix
adjusted amount for ESRD outlier services furnished to an adult
beneficiary by an ESRD facility.
(3) Pediatric predicted ESRD outlier services Medicare allowable
payment (MAP) amount means the predicted per-treatment case-mix
adjusted amount for ESRD outlier services furnished to a pediatric
beneficiary by an ESRD facility.
(4) Adult fixed dollar loss amount is the amount by which an ESRD
facility's imputed per-treatment MAP amount for furnishing ESRD outlier
services to an adult beneficiary must exceed the adult predicted ESRD
outlier services MAP amount to be eligible for an outlier payment.
(5) Pediatric fixed dollar loss amount is the amount by which an
ESRD facility's imputed per-treatment MAP amount for furnishing ESRD
outlier services to a pediatric beneficiary must exceed the pediatric
predicted ESRD outlier services MAP amount to be eligible for an
outlier payment.
(6) Outlier Percentage: This term has the meaning set forth in
Sec. 413.220(b)(4).
(b) Eligibility for outlier payments.
(1) Adult beneficiaries. An ESRD facility will receive an outlier
payment for a treatment furnished to an adult beneficiary if the ESRD
facility's per-treatment imputed MAP amount for ESRD outlier services
exceeds the adult predicted ESRD outlier services MAP amount plus the
adult fixed dollar loss amount. To calculate the ESRD facility's per-
treatment imputed MAP amount for an adult beneficiary, CMS divides the
ESRD facility's monthly imputed MAP amount of providing ESRD outlier
services to the adult beneficiary by the number of dialysis treatments
furnished to the adult beneficiary in the relevant month. A beneficiary
is considered an adult beneficiary if the beneficiary is 18 years old
or older.
(2) Pediatric beneficiaries. An ESRD facility will receive an
outlier payment for a treatment furnished to a pediatric beneficiary if
the ESRD facility's per-treatment imputed MAP amount for ESRD outlier
services exceeds the pediatric predicted ESRD outlier services MAP
amount plus the pediatric fixed dollar loss amount. To calculate the
ESRD facility's per-treatment imputed MAP amount for a pediatric
beneficiary, CMS divides the ESRD facility's monthly imputed MAP amount
of providing ESRD outlier services to the pediatric beneficiary by the
number of dialysis treatments furnished to the pediatric beneficiary in
the relevant month. A beneficiary is considered a pediatric beneficiary
if the beneficiary is under 18 years old.
(c) Outlier payment amount: CMS pays 80 percent of the difference
between:
(1) The ESRD facility's per-treatment imputed MAP amount for the
ESRD outlier services, and
(2) The adult or pediatric predicted ESRD outlier services MAP
amount plus the adult or pediatric fixed dollar loss amount, as
applicable.
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23. Section 413.239 is added to subpart H to read as follows:
Sec. 413.239 Transition period.
(a) Duration of transition period and composition of the blended
transition payment. ESRD facilities not electing under paragraph (b) of
this section to be paid based on the payment amount determined under
Sec. 413.230 of this part, will be paid a per-treatment payment amount
for renal dialysis services (as defined in Sec. 413.171 of this part)
and home dialysis, provided during the transition as follows--
(1) For services provided on and after January 1, 2011 through
December 31, 2011, a blended rate equal to the sum of:
(i) 75 percent of the payment amount determined under the ESRD
payment methodology in effect prior to January 1, 2011 in accordance
with section 1881(b)(12) of the Act and items and services separately
paid under Part B; and
(ii) 25 percent of the payment amount determined in accordance with
section 1881(b)(14) of the Act;
(2) For services provided on and after January 1, 2012 through
December 31, 2012, a blended rate equal to the sum of:
(i) 50 percent of the payment amount determined under the ESRD
payment methodology in effect prior to January 1, 2011 in accordance
with section 1881(b)(12) of the Act and items and services separately
paid under Part B; and
(ii) 50 percent of the payment rate determined in accordance with
section 1881(b)(14) of the Act;
(3) For services provided on and after January 1, 2013 through
December 31, 2013, a blended rate equal to the sum of:
(i) 25 percent of the payment amount determined under the ESRD
payment methodology in effect prior to January 1, 2011 in accordance
with section 1881(b) (12) of the Act and items and services separately
paid under Part B; and
(ii) 75 percent of the payment amount determined in accordance with
section 1881(b)(14) of the Act;
(4) For services provided on and after January 1, 2014, 100 percent
of the payment amount determined in accordance with section 1881(b)(14)
of the Act.
(b) One-time election. Except as provided in paragraph (b)(2) of
this section, ESRD facilities may make a one-time election to be paid
for renal dialysis services provided during the transition based on 100
percent of the payment amount determined under Sec. 413.215 of this
part, rather than based
[[Page 49202]]
on the payment amount determined under paragraph (a) of this section.
(1) Except as provided in paragraph (b)(3) of this section, the
election must be received by each ESRD facility's Medicare
administrative contractor (MAC) by November 1, 2010. Requests received
by the MAC after November 1, 2010, will not be accepted regardless of
postmarks, or delivered dates. MACs will establish the manner in which
an ESRD facility will indicate their intention to be excluded from the
transition and paid entirely based on payment under the ESRD PPS. Once
the election is made, it may not be rescinded.
(2) If the ESRD facility fails to submit an election, or the ESRD
facility's election is not received by their MAC by November 1, 2010,
payments to the ESRD facility for items and services provided during
the transition will be based on the payment amounts determined under
paragraph (a) of this section.
(3) ESRD facilities that become certified for Medicare
participation and begin to provide renal dialysis services, as defined
in Sec. 413.171 of this part, between November 1, 2010 and December
31, 2010, must notify their designated MAC of their election choice at
the time of enrollment.
(c) Treatment of new ESRD facilities. For renal dialysis services
as defined in Sec. 413.171, furnished during the transition period,
new ESRD facilities as defined in Sec. 413.171, are paid based on the
per-treatment payment amount determined under Sec. 413.215 of this
part.
(d) Transition budget-neutrality adjustment. During the transition,
CMS adjusts all payments, including payments under this section, under
the ESRD prospective payment system so that the estimated total amount
of payment equals the estimated total amount of payments that would
otherwise occur without such a transition.
0
24. Section 413.241 is added to subpart H to read as follows:
Sec. 413.241 Pharmacy arrangements.
Effective January 1, 2011, an ESRD facility that enters into an
arrangement with a pharmacy to furnish renal dialysis service drugs and
biologicals must ensure that the pharmacy has the capability to provide
all classes of renal dialysis service drugs and biologicals to patients
in a timely manner.
PART 414--PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES
0
25. The authority citation for part 414 continues to read as follows:
Authority: Secs. 1102, 1871, and 1881(b)(l) of the Social
Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(l))
Subpart E--Determination of Reasonable Charges Under the ESRD
Program
0
26. Section 414.330 is amended by--
0
A. Removing ``Sec. 413.170'' and adding in its place ``Sec. 413.210''
in paragraph (a)(1) and paragraph (b)(1).
0
B. Revising the heading of paragraph (a)(2).
0
C. Revising the heading of paragraph (b)(2).
0
D. Removing the paragraph heading and adding in its place new
introductory text in paragraph (c).
Sec. 414.330 Payment for home dialysis equipment, supplies, and
support services.
(a) * * *
(2) Exception for equipment and supplies furnished prior to January
1, 2011. * * *
* * * * *
(b) * * *
(2) Exception for home support services furnished prior to January
1, 2011. * * *
* * * * *
(c) Payment limits for support services, equipment and supplies,
and notification of changes to the payment limits apply prior to
January 1, 2011 as follows:
* * * * *
0
27. Revise Sec. 414.335 to read as follows:
Sec. 414.335 Payment for EPO furnished to a home dialysis patient for
use in the home.
(a) Prior to January 1, 2011, payment for EPO used at home by a
home dialysis patient is made only to either a Medicare approved ESRD
facility or a supplier of home dialysis equipment and supplies.
Effective January 1, 2011, payment for EPO used at home by a home
dialysis patient is made only to a Medicare-approved ESRD facility in
accordance with the per treatment payment as defined in Sec. 413.230.
(b) After January 1, 2011, a home and self training amount is added
to the per treatment base rate for adult and pediatric patients as
defined in Sec. 413.230
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: July 15, 2010.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
Approved: July 22, 2010.
Kathleen Sebelius,
Secretary.
Note: The following tables will not appear in the Code of
Federal Regulations.
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[FR Doc. 2010-18466 Filed 7-26-10; 4:15 pm]
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