Federal Register, Volume 76 Issue 218 (Thursday, November 10, 2011)

[Federal Register Volume 76, Number 218 (Thursday, November 10, 2011)]
[Rules and Regulations]
[Pages 70228-70316]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-28606]

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Vol. 76

Thursday,

No. 218

November 10, 2011

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 413 and 414

Medicare Program; End-Stage Renal Disease Prospective Payment System
and Quality Incentive Program; Ambulance Fee Schedule; Durable Medical
Equipment; and Competitive Acquisition of Certain Durable Medical
Equipment, Prosthetics, Orthotics and Supplies; Final Rule

Federal Register / Vol. 76 , No. 218 / Thursday, November 10, 2011 /
Rules and Regulations

[[Page 70228]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 413 and 414

[CMS-1577-F]
RIN 0938-AQ27

Medicare Program; End-Stage Renal Disease Prospective Payment
System and Quality Incentive Program; Ambulance Fee Schedule; Durable
Medical Equipment; and Competitive Acquisition of Certain Durable
Medical Equipment, Prosthetics, Orthotics and Supplies

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

ACTION: Final rule.

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SUMMARY: This final rule updates and makes certain revisions to the
End-Stage Renal Disease (ESRD) prospective payment system (PPS) for
calendar year (CY) 2012. We are also finalizing the interim final rule
with comment period published on April 6, 2011, regarding the
transition budget-neutrality adjustment under the ESRD PPS,. This final
rule also sets forth requirements for the ESRD quality incentive
program (QIP) for payment years (PYs) 2013 and 2014. In addition, this
final rule revises the ambulance fee schedule regulations to conform to
statutory changes. This final rule also revises the definition of
durable medical equipment (DME) by adding a 3-year minimum lifetime
requirement (MLR) that must be met by an item or device in order to be
considered durable for the purpose of classifying the item under the
Medicare benefit category for DME. Finally, this final rule implements
certain provisions of section 154 of the Medicare Improvements for
Patients and Providers Act of 2008 (MIPPA) related to the durable
medical equipment, prosthetics, orthotics and supplies (DMEPOS)
Competitive Acquisition Program and responds to comments received on an
interim final rule published January 16, 2009, that implemented these
provisions of MIPPA effective April 18, 2009. (See the Table of
Contents for a listing of the specific issues addressed in this final
rule.)

DATES: Effective dates: These regulations are effective on January 1,
2012. Also, effective January 1, 2012, we are finalizing the interim
final rule with comment (``Medicare Programs: Changes to the End-Stage
Renal Disease Prospective Payment System Transition Budget-Neutrality
Adjustment'') published on April 6, 2011 (76 FR 18930). Additionally,
effective January 12, 2012 the interim rule amending 42 CFR Part 414,
published on January 16, 2009 (74 FR 2873), is confirmed as final.

FOR FURTHER INFORMATION CONTACT:
Terri Deutsch, (410) 786-4533, for issues related to ESRD.
Roechel Kujawa, (410) 786-9111, for issues related to ambulance
services.
Heidi Oumarou, (410) 786-7942, for issues related to the ESRD
market basket.
Shannon Kerr, (410) 786-3039, for issues related to the quality
incentive program.
Sandhya Gilkerson, (410) 786-4085, for issues related to DME MLR.
Hafsa Bora, (410) 786-7899 or Iffat Fatima, (410) 786-6709, for
DMEPOS Competitive Acquisition Program issues related to comments
received on an interim final rule that implemented provisions of MIPPA
effective April 18, 2009.

SUPPLEMENTARY INFORMATION:

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

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

Table of Contents

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

I. Calendar Year (CY) 2012 End-Stage Renal Disease (ESRD)
Prospective Payment System (PPS)
A. Background on the End-Stage Renal Disease Prospective Payment
System
B. Summary of the Proposed Provisions and Responses to Comments
on the CY 2012 ESRD PPS
1. Updates to the Composite Rate and ESRD PPS Base Rate
a. Composite Rate
b. ESRD PPS Base Rate
2. ESRD Bundled Market Basket
a. Overview and Background
b. Final Market Basket Update Increase Factor and Labor-Related
Share for ESRD Facilities for CY 2012
c. Productivity Adjustment
d. Calculation of the ESRDB Market Basket Update, Adjusted for
Multifactor Productivity for CY 2012
3. Transition Budget-Neutrality Adjustment for CY 2011
4. Transition Budget-Neutrality Adjustment for CY 2012
5. Low-Volume Facility Provisions
6. Update to the Drug Add-On to the Composite Rate Portion of
the ESRD Blended Payment Rate
a. Estimating Growth in Expenditures for Drugs and Biologicals
in CY 2012
b. Estimating per Patient Growth
c. Applying the Growth Update to the Drug Add-On Adjustment
d. Update to the Drug Add-On Adjustment for CY 2012
7. Updates to the Wage Index Values and Wage Index Floor for the
Composite Rate Portion of the Blended Payment and the ESRD PPS
Payment
a. Reduction to the ESRD Wage Index Floor
b. Policies for Areas with no Hospital Data
c. Wage Index Budget-Neutrality Adjustment
d. ESRD PPS Wage Index Tables
8. Drugs
a. Vancomycin
b. Drug Overfill
9. Revisions to Patient-Level Adjustment for Body Surface Area
(BSA)
10. Revisions to the Outlier Policy
a. Revisions Related to Outlier ESRD Drugs and Biologicals
b. Exclusion of Automated Multi-Channel Chemistry (AMCC)
Laboratory Tests From the Outlier Calculation
c. Impact of Final Changes to the Outlier Policy
D. Technical Corrections
1. Training Add-On
2. ESRD-Related Laboratory Test
E. Clarifications to the CY 2011 ESRD PPS
1. ICD-9-CM Diagnosis Codes
2. Emergency Services to ESRD Beneficiaries
F. Miscellaneous Comments
II. End-Stage Renal Disease Quality Incentive Program for Payment
Years (PYs) 2013 and 2014
A. Background for the End-Stage Renal Disease Quality Incentive
Program for PY 2013 and PY 2014
B. Summary of the Proposed Provisions and Responses to Comments
on the End-Stage Renal Disease (ESRD) Quality Incentive Program
(QIP) for PY 2013 and PY 2014
1. PY 2013 ESRD QIP Requirements
a. Performance Measures for the PY 2013 ESRD QIP
b. Performance Period and Case Minimum for the PY 2013 ESRD QIP
c. Performance Standards for the PY 2013 ESRD QIP
d. Methodology for Calculating the Total Performance Score and
Payment Reduction for the PY 2013 ESRD QIP

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2. PY 2014 ESRD QIP
a. Performance Measures for the PY 2014 ESRD QIP
i. Anemia Management Measure
ii. Dialysis Adequacy Measure
iii. Vascular Access Type (VAT) Measure
iv. Vascular Access Infections Measure
v. Standardized Hospitalization Ratio (SHR)-Admissions Measure
vi. Minimum Case Number for Clinical Measures and Other
Considerations
vii. National Healthcare Safety Network (NHSN) Dialysis Event
Reporting Measure
viii. Patient Experience of Care Survey Usage Measure
ix. Mineral Metabolism Reporting Measure
3. Performance Period for the PY 2014 ESRD QIP
4. Performance Standards and the Methodology for Calculating the
Total Performance Score for the PY 2014 ESRD QIP
i. Performance Standards for the PY 2014 ESRD QIP
ii. Setting Performance Benchmarks and Thresholds
iii. Scoring Provider and Facility Performance on Clinical
Measures Based on Achievement
iv. Scoring Provider/Facility Performance on Clinical Measures
Based on Improvement
v. Calculating the VAT Measure Score
vi. Calculating the NHSN Dialysis Event Reporting Measure,
Patient Experience Survey Usage Reporting Measure and Mineral
Metabolism Reporting Measure Scores
vii. Weighting of the PY 2014 ESRD QIP Measures and Calculation
of the PY 2014 ESRD QIP
viii. Examples for 2014 ESRD QIP Performance Scoring Model
6. Payment Reductions for the PY 2014 ESRD QIP
7. Public Reporting Requirements
8. Future QIP Measures
9. Process of Updating Measures
III. Ambulance Fee Schedule
A. Summary of Proposed Provisions
1. Section 106 of the Medicare and Medicaid Extenders Act of
2010 (MMEA)
a. Amendment to Section 1834(l)(13) of the Act
b. Amendment to Section 146(b)(1) of MIPPA
c. Amendment to Section 1834(l)(12) of the Act
2. Technical Correction
B. Response to Comments
IV. Durable Medical Equipment and Supplies
A. Background for Durable Medical Equipment (DME) and Supplies
B. Current Issues
C. Overview of the Provisions of the Proposed Durable Medical
Equipment (DME) Regulation
D. Summary of the Proposed Provisions and Responses to Comments
on the Definition of Durable Medical Equipment (DME) and the 3-Year
Minimum Lifetime Requirement (MLR)
1. Application of the 3-Year MLR to Items Currently Covered as
DME and to Supplies and Accessories of Covered DME
2. Application of the 3-Year MLR to Multi-Component Devices
V. Interim Final Rule Regarding the Competitive Acquisition Program
for Certain Durable Medical Equipment, Prosthetics, Orthotics and
Supplies (DMEPOS)
A. Background
1. Legislative and Regulatory History of the DMEPOS Competitive
Bidding Program
2. The MIPPA and the Medicare DMEPOS Competitive Bidding Program
B. Overview of the Interim Final Rule
C. Summary of the Interim Final Rule Provisions and Response to
Comments on Changes to the Competitive Acquisition of Certain
Durable Medical Equipment, Prosthetics, Orthotics and Supplies
(DMEPOS) by Certain Provisions of the Medicare Improvements for
Patients and Providers Act of 2008 (MIPPA)
1. General Changes to the DMEPOS Competitive Bidding Program
a. Temporary Delay of the Medicare DMEPOS Competitive Bidding
Program
b. Supplier Feedback on Missing Covered Documents
c. Disclosure of Subcontractors and Their Accreditation Status
Under the Competitive Bidding Program
d. Exemption From Competitive Bidding for Certain DMEPOS
e. Exclusion of Group 3 Complex Rehabilitative Power Wheelchairs
2. Round 1 Changes to the Competitive Bidding Program
a. Rebidding of the ``Same Areas'' as the Previous Round 1,
Unless Otherwise Specified
b. Rebidding of the ``Same Items and Services'' as the Previous
Round 1, Unless Otherwise Specified
D. Other Public Comments Received on the January 16, 2009
Interim Final Rule
VI. Collection of Information Requirements
VII. Economic Analyses
VIII. Regulatory Flexibility Act Analysis
IX. Unfunded Mandates Reform Act Analysis
X. Federalism Analysis
XI. Files Available to the Public via the Internet
Regulations Text

Acronyms

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

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

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

A. Background on the End-Stage Renal Disease Prospective Payment System

On August 12, 2010, we published in the Federal Register, a final
rule (75 FR 49030 through 49214), entitled, ``End-Stage Renal Disease
Prospective Payment System'', hereinafter referred to as the CY 2011
ESRD PPS final rule. In the CY 2011 ESRD PPS final rule, we implemented
a case-mix adjusted bundled PPS for Medicare outpatient ESRD dialysis
patients beginning January 1, 2011, in accordance with section
1881(b)(14) of the Social Security Act (the Act), as added by section
153(b) of the Medicare Improvements for Patients and Providers Act of
2008 (MIPPA). The ESRD PPS replaced the basic case-mix adjusted
composite payment system and the methodologies for the reimbursement of
separately billable outpatient ESRD services.
Also, section 1881(b)(14)(F) of the Act, as added by section 153(b)
of MIPPA and amended by section 3401(h) of Public Law 111-148, the
Affordable Care Act, established that beginning CY 2012, and each
subsequent year, the Secretary shall reduce the market basket increase
factor by a productivity adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act.
In the CY 2011 ESRD PPS final rule (75 FR 49030), the Centers for
Medicare & Medicaid Services (CMS) finalized the following:
A base rate of $229.63 per treatment for renal dialysis
services (but postponed payment for oral-only renal dialysis drugs
under the ESRD PPS until January 1, 2014) that applies to both adult
and pediatric dialysis patients prior to the application of any case-
mix adjustments. This amount included the 2 percent reduction for
budget neutrality required by MIPPA, a one percent reduction for
estimated outlier payments, and a reduction to account for estimated
payments for case-mix and the low-volume payment adjustments.
A 4-year transition period (for those ESRD facilities that
elected to receive blended payments during the transition) during which
ESRD facilities receive a blend of payments under the prior basic case-
mix adjusted composite payment system and the new ESRD PPS. Although
the statute uses the term ``phase-in'', we use the term ``transition''
to be consistent with other Medicare payment systems.
A -3.1 percent transition budget-neutrality adjustment to
ensure that overall spending under the ESRD PPS did not increase as a
result of the provision that permits ESRD facilities to be excluded
from the 4-year transition.
Payment adjustments for dialysis treatments furnished to
adults for patient age, body surface area (BSA), low body mass index
(BMI), onset of dialysis, and six specified co-morbidities.
A home or self-care dialysis training payment adjustment
of $33.44 per treatment paid in addition to the case-mix adjusted per
treatment amount, which is wage adjusted and applies to claims for
patients trained by ESRD facilities certified to provide home dialysis
training.
Payment adjustments for dialysis treatments furnished to
pediatric patients for patient age and dialysis modality.
A low-volume payment adjustment for adult patients of 18.9
percent that applies to the otherwise applicable case-mix adjusted
payment rate for facilities that qualify as low-volume ESRD facilities.
An outlier payment policy that provides an additional
payment to ESRD facilities treating high cost, resource-intensive
patients.
The wage index adjustment that is applied when calculating
the ESRD PPS payment rates in order to account for geographic
differences in area wage levels.
An ESRD bundled (ESRDB) market basket index used to
project prices in the costs of goods and services used to furnish
outpatient maintenance dialysis.
In addition, on April 6, 2011, we published an interim final rule
with comment period in the Federal Register (76 FR 18930), entitled
``Changes in the End-Stage Renal Disease Prospective Payment System
Transition Budget-Neutrality Adjustment'', which revised the ESRD
transition budget-neutrality adjustment for CY 2011. In the interim
final rule, we revised the 3.1 percent transition budget-neutrality
adjustment reduction to a zero percent transition budget-neutrality
adjustment for renal dialysis services furnished on April 1, 2011
through December 31, 2011.

B. Summary of the Proposed Provisions and Responses to Comments on the
CY 2012 ESRD PPS

The proposed rule entitled, ``Medicare Program; Changes to the End-
Stage Renal Disease Prospective Payment System for CY 2012, End-Stage
Renal Disease Quality Incentive Program for PY 2013 and PY 2014;
Ambulance Fee Schedule; and Durable Medical Equipment'' (76 FR 40498)
(the ``proposed rule'') appeared in the Federal Register on July 8,
2011, with a comment period that ended on August 30, 2011 (76 FR
40498). In that proposed rule, for the ESRD PPS, we proposed to (1)
make a number of routine updates for CY 2012, (2) implement the second
year of the transition, (3) make several policy changes and
clarifications, and (4) technical changes with regard to the CY 2011
ESRD PPS final rule. We received approximately 40 public comments on
the ESRD PPS proposals, including comments from dialysis facilities,
the national organizations representing dialysis facilities,
nephrologists, patients, pharmaceutical manufacturers, hospitals and
their representatives, and MedPAC. In this final rule, we provide a
summary of each proposed provision, a summary of the public comments
received, our responses to them, and what we are finalizing for the CY
2012 ESRD PPS in this final rule.
1. Updates to the Composite Rate and ESRD PPS Base Rate
a. Composite Rate
Section 1881(b)(14)(E)(i) of the Act requires a 4-year transition
under the ESRD PPS. For CY 2012, under 42 CFR 413.239(a)(2), ESRD
facilities that receive payment through the transition receive a
blended rate equal to the sum of 50 percent of the ESRD PPS amount and
50 percent of the basic case-mix adjusted composite payment amount.
Accordingly, we continue to update the composite rate portion of the
blended payment during the 4-year transition (that is, CYs 2011 through
2013). For a historical perspective of the basic case-mix adjusted
composite payment system for ESRD facilities, including the CY 2011
update to the composite rate portion of the blended rate, please see
the CY 2011 Physician Fee Schedule (PFS) proposed rule, (75 FR 40164)
and the CY 2011 PFS final rule (75 FR 49031 through 49033). In
addition, we discuss the CY 2012 drug add-on and the updated wage index
values for the composite rate portion of the blended payment in
sections I.C.6 and I.C.7, respectively, of this final rule.
Under section 1881(b)(14)(F)(ii) of the Act, for years during which
the transition applies, the composite rate portion of the blend shall
be annually increased by the ESRDB market basket, which for CY 2012 and
each subsequent year, shall be reduced by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II) of the Act. In section
I.B.2.b of this final rule, we are finalizing the CY 2012 ESRDB market
basket update of 3.0 percent, based on the third quarter 2011 IGI
forecast of the ESRDB market basket. In

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section I.B.2.c of this final rule, we are finalizing the CY 2012 MFP
adjustment of 0.9 percent based on the third quarter 2011 IGI forecast
of the MFP.
We proposed to add the CY 2011 Part D per treatment amount (that
is, $0.49) to the CY 2011 composite rate in order to update the Part D
amount for CY 2012 using the ESRDB market basket minus the productivity
adjustment (76 FR 40502). We believed this approach is preferable to
applying a growth factor to the $0.49 that is based on the rates for
overall prescription drug prices that were used in the National Health
Expenditure Projections, as we did for the establishment of the CY 2011
ESRD PPS base rate, because it is consistent with the update applied to
the ESRD PPS base rate, which includes a per treatment amount for
former part D drugs (that is, $0.49). We sought comment on our proposal
to add the CY 2011 part D payment amount (that is, $0.49) to the
composite rate portion of the blended payment and update it using the
ESRDB market basket minus productivity adjustment. The basis for the
first part of the transition budget-neutrality adjustment (that is, the
calculation of the $0.49 part D amount) was set forth in the CY 2011
ESRD PPS final rule at 75 FR 49082. The comments and our responses are
set forth below.
Comment: Several commenters expressed concerns about the proposed
methodology to add the former Part D oral drug amount ($0.49) to the
composite rate and then apply the market basket reduced by the
productivity adjustment. Some commenters believe that updating the
payment for oral equivalents of injectable drugs by the ESRD market
basket minus productivity could set a precedent that might affect
access to care for preferred agents when oral drugs are included in the
bundle in 2014. One commenter stated that it is inappropriate to apply
the productivity adjustment to full transition blended payment.
Instead, they believe the blended payment amount, for CY 2012, should
be split with 50 percent of it paid at the PPI-inflated market basket
rates and 50 percent of it adjusted using the update factors because
the transition blended payment rate is based on 50 percent of the PPS
payment rate and 50 percent on the old composite rate plus drug add-on
rate. One commenter acknowledged that by using the split methodology,
ESRD PPS would be updated differently than other payment systems, but
the commenter believed that this distinction was appropriate because of
the unique nature of the program and because drugs represent such a
large portion of the overall costs incurred by dialysis facilities.
Response: Beginning in 2012, section 1881(b)(14)(F) of the Act,
requires us to annually update the ESRD PPS payment amounts and the
composite rate portion of the blended transition payment by an ESRD
market basket increase that is reduced by the productivity adjustment
described in section 1886(b)(3)(B)xi)(II) of the Act. Given that the
same update is used for both ESRD PPS and transition blended payments,
and given the ESRD PPS base rate includes a portion of former Part D
drugs, we proposed to add the $0.49 part D drug amount to the composite
rate portion of the blended payment because we wanted to update it
consistent with how we update the ESRD PPS base rate. Further, because
the statute requires an update using the ESRDB market basket less
productivity and the ESRDB market basket is comprised of the Producer
Price Index (PPI) for prescription drugs as a proxy for measuring price
growth in ESRD-related drugs, we believe that our proposal to add the
$0.49 to the composite rate and update it using the ESRDB market basket
less productivity is appropriate. Therefore, for CY 2012, the composite
rate payment, including the $0.49 Part D amount, will be updated by the
ESRDB market basket less productivity. With regard to the commenter's
concerns that the addition of $0.49 to the composite rate would set a
precedent that might affect access to care for preferred agents when
oral-only drugs are included in the bundle in 2014, we note that we did
not propose any payment policies for the oral-only drugs in the
proposed rule. We will address in future rulemaking oral-only drugs and
the bundled amount established in CY 2011, and there will be an
opportunity for public comment on any future proposals we may make.
Consequently, for CY 2012, the composite rate portion of the ESRD
PPS blended payment is $141.94. The $141.94 reflects the addition of
the CY 2011 part D per treatment amount ($0.49) to the CY 2011
composite rate of $138.53, and application of the ESRDB market basket
minus productivity adjustment ($138.53 + 0.49 = $139.02; $139.02 x
1.021 = $141.94).
b. ESRD PPS Base Rate
We described the development of the ESRD PPS per-treatment base
rate in the CY 2011 ESRD PPS final rule (75 FR 49071) and established
Medicare regulations at 42 CFR 413.220 and 413.230. The CY 2011 ESRD
PPS final rule also provides a detailed discussion of the methodology
used to calculate the ESRD PPS base rate and the computation of factors
used to adjust the ESRD PPS base rate for projected outlier payments
and budget-neutrality in accordance with sections 1881(b)(14)(D)(ii)
and 1881(b)(14)(A)(ii) of the Act, respectively (75 FR 49071 through
49082). Specifically, the ESRD PPS base rate was developed from CY 2007
claims (that is, the lowest per patient utilization year), updated to
CY 2011, and represented the average per treatment Medicare allowable
payment (MAP) for composite rate and separately billable services. In
addition, in accordance with Sec. 413.230, the ESRD PPS base rate is
adjusted for the patient-specific case-mix adjustments, applicable
facility adjustments, geographic differences in area wage levels using
an area wage index, as well as any outlier payment or training add-on
adjustments. For CY 2011, the ESRD PPS base rate was $229.63 (75 FR
49082).
As required by section 1881(b)(14)(F) of the Act, in this final
rule, for CY 2012, we applied the 2.1 percent increase (ESRDB market
basket update less productivity) to the CY 2011 ESRD PPS base rate of
$229.63, which results in an ESRD PPS base rate for CY 2012 of $234.45
(229.63 x 1.021 = 234.45). The ESRD PPS base rate applies to the ESRD
PPS portion of the blended payments under the transition and to the
ESRD PPS payments. In addition, as discussed in section I.C.7.c of the
proposed rule (76 FR 40509), we proposed to apply the wage index
budget-neutrality adjustment factor to the ESRD PPS base rate in CY
2012.
We did not receive any comments on this proposal. Therefore, we are
finalizing the policy to apply the wage index budget-neutrality
adjustment to the ESRD PPS base rate. For CY 2012, we apply the wage
index budget-neutrality adjustment factor of 1.001520 to the updated
base rate (that is, $234.45), yielding an ESRD PPS wage-index budget-
neutrality adjusted base rate for CY 2012 of $234.81 ($234.45 x
1.001520 = 234.81).
2. ESRD Bundled Market Basket
a. Overview and Background
In accordance with section 1881(b)(14)(F)(i) of the Act, as added
by section 153(b) of MIPPA and amended by section 3401(h) of the
Affordable Care Act, beginning in 2012, the ESRD bundled payment
amounts are required to be annually increased by an ESRD market basket
increase factor that is reduced by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II) of the Act. The statute
further provides that the market basket increase factor

[[Page 70232]]

should reflect the changes over time in the prices of an appropriate
mix of goods and services used to furnish renal dialysis services.
Under section 1881(b)(14)(F)(ii) of the Act, as added by section 153(b)
of MIPPA and amended by section 3401(h) of the Affordable Care Act, the
ESRD bundled (ESRDB) rate market basket increase factor will also be
used to update the composite rate portion of ESRD payments during the
ESRD PPS transition period from 2011 through 2013; though beginning in
2012, such market basket increase factor will be reduced by the
productivity adjustment. As a result of amendments by section 3401(h)
of the Affordable Care Act, a full market basket was applied to the
composite rate portion of the blended payment in CY 2011 during the
first year of the transition.
b. Final Market Basket Update Increase Factor and Labor-Related Share
for ESRD facilities for CY 2012
As required under section 1881(b)(14)(F) of the Act, CMS developed
an all-inclusive ESRDB input price index (75 FR 49151 through 49162).
Although ``market basket'' technically describes the mix of goods and
services used to produce ESRD care, this term is also commonly used to
denote the input price index (that is, cost categories, their
respective weights, and price proxies combined) derived from that
market basket. Accordingly, the term ``ESRDB market basket'', as used
in this document, refers to the ESRDB input price index.
We proposed to use the same methodology described in the CY 2011
ESRD PPS final rule (75 FR 49151 through 49162) to compute the CY 2012
ESRDB market basket increase factor and labor-related share based on
the best available data (76 FR 40503). Consistent with historical
practice, we estimate the ESRDB market basket update based on IHS
Global Insight (IGI), Inc.'s forecast using the most recently available
data. IGI is a nationally recognized economic and financial forecasting
firm that contracts with CMS to forecast the components of the market
baskets.
Using this method and the IGI forecast for the first quarter of
2011 of the CY 2008-based ESRDB market basket (with historical data
through the fourth quarter of 2010), and consistent with our historical
practice of estimating market basket increases based on the best
available data, the proposed CY 2012 ESRDB market basket increase
factor was 3.0 percent. We also proposed that if more recent data
became subsequently available (for example, a more recent estimate of
the market basket), we would use that data, if appropriate, to
determine the CY 2012 update in the final rule. Therefore, we used the
IGI's third quarter 2011 forecast with history through the second
quarter of 2011, and as discussed below, the projected market basket
update for CY 2012 that we are finalizing is 3.0 percent based on the
2008-based ESRDB market basket.
Additionally, we proposed to continue to use a labor-related share
of 41.737 percent for CY 2012 for the ESRD PPS payment (76 FR 40503),
which was finalized in the CY 2011 ESRD final rule (75 FR 49161). We
also proposed to continue to use a labor-related share of 53.711
percent for the ESRD composite rate portion of the blended payment for
all years of the transition (76 FR 40503). This labor-related share was
developed from the labor-related components of the 1997 ESRD composite
rate market basket that was finalized in the 2005 PFS final rule (70 FR
70168), and is consistent with the mix of labor-related services paid
under the composite rate, as well as the method finalized in the CY
2011 ESRD PPS final rule (75 FR 49116).
The comments we received on these proposals and our responses are
set forth below.
Comment: Several commenters believe that there should be more
transparency in the calculation of the market basket update and are
concerned about the lack of data available to validate the
calculations.
Response: We agree that the public should be able to replicate the
methodology used to construct the ESRDB market basket. We disagree,
however, that CMS has not been fully transparent in the calculation of
the market basket update. In the CY 2011 ESRD final rule (75 FR 49151
through 49161), we provided the public with the cost shares for the
ESRDB market basket and the data sources for the establishment of those
cost shares. We also provided a detailed description of the data
sources used to develop the ESRDB market basket cost weights and the
price proxies used in the ESRDB market basket were listed for each cost
category, which are based on data maintained and published by the
Bureau of Labor Statistics (BLS). We refer the commenter to the BLS
regarding any specific information on the detailed price proxies. In
addition, 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 the final rule and the directions for obtaining the data
through the BLS Web site. These two pieces of information, the cost
weights and the price proxies, allow the public to replicate the
historical time series of the ESRDB market basket.
The forecasts of the individual price proxies used in a market
basket are developed independently by 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 aggregate those
projections into higher level categories and then publish the results
with a one-quarter lag on the CMS Web site. This is consistent with the
level of data provided for other PPS payment system market baskets. The
ESRDB market basket data, including the detail as described above, is
published on the CMS Web site at the following link: (https://www.cms.gov/MedicareProgramRatesStats/04_MarketBasketData.asp#TopOfPage).
After considering the public comments received and for the reasons
we previously articulated, we are finalizing our proposals to continue
to use the ESRDB market basket forecasts for the ESRD PPS and
transition payment updates. Therefore, we are finalizing the ESRDB
market basket update of 3.0 percent, based on the IGI third quarter
forecast of the ESRDB market basket. We did not receive any public
comments regarding our proposal to continue to use the labor-related
shares for the ESRD PPS portion and composite portion of the blended
payment during the transition period. Therefore, we are also finalizing
the proposal to continue to use the labor-related share of 41.737
percent for the CY 2012 ESRD PPS payment and the labor-related share of
53.711 percent for the CY 2012 ESRD composite rate portion of the
blended payment, for those facilities that elected to transition to the
bundled ESRD PPS.
c. Productivity Adjustment
The ESRDB market basket must be annually adjusted by changes in
economy-wide productivity. Specifically, under section 1881(b)(14)(F)
of the Act, as amended by section 3401(h) of the Affordable Care Act,
for CY 2012 and each subsequent year, the ESRD market basket percentage
increase factor shall be reduced by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II) of the Act. The statute
defines the productivity

[[Page 70233]]

adjustment to be equal to the 10-year moving average of changes in
annual economy-wide private nonfarm business multifactor productivity
(MFP) (as projected by the Secretary for the 10-year period ending with
the applicable fiscal year, year, cost reporting period, or other
annual period) (the ``MFP adjustment''). The BLS is the agency that
publishes the official measure of private nonfarm business MFP. Please
see http://www.bls.gov/mfp to obtain the BLS historical published MFP
data.
CMS notes that the proposed and final methodology for calculating
and applying the MFP adjustment to the ESRD payment update is similar
to the methodology used in other payment systems, as required by
section 3401 of the Affordable Care Act.
The projection of MFP is currently produced by IGI, an economic
forecasting firm. In order to generate a forecast of MFP, IGI
replicated the MFP measure calculated by the BLS using a series of
proxy variables derived from IGI's U.S. macroeconomic models. These
models take into account a very broad range of factors that influence
the total U.S. economy. IGI forecasts the underlying proxy components
such as gross domestic product (GDP), capital, and labor inputs
required to estimate MFP and then combines those projections according
to the BLS methodology. In Table 1 below, we identify each of the major
MFP component series employed by the BLS to measure MFP. We also
provide the corresponding concepts forecasted by IGI and determined to
be the best available proxies for the BLS series.
[GRAPHIC] [TIFF OMITTED] TR10NO11.000

IGI found that the historical growth rates of the BLS components used
to calculate MFP and the IGI components identified are consistent
across all series and therefore suitable proxies for calculating MFP.
We have included below a more detailed description of the methodology
used by IGI to construct a forecast of MFP, which is aligned closely
with the methodology employed by the BLS. For more information
regarding the BLS method for estimating productivity, please see the
following link: http://www.bls.gov/mfp/mprtech.pdf.
At the time of the development of this CY 2012 final rule, the BLS
published a historical time series of private nonfarm business MFP for
1987 through 2010, with 2010 being a preliminary value. Using this
historical MFP series and the IGI forecasted series, IGI has developed
a forecast of MFP for 2011 through 2021, as described below. We note
that the historical MFP series and the IGI forcasted series are updates
from those used at the time of the proposed rule (1987 through 2009,
and 2010 through 2021, respectively).
To create a forecast of BLS' MFP index, the forecasted annual
growth rates of the ``non-housing, nongovernment, non-farm, real GDP,''
``hours of all persons in private nonfarm establishments adjusted for
labor composition,'' and ``real effective capital stock'' series
(ranging from 2011 to 2021) are used to ``grow'' the levels of the
``real value-added output,'' ``private non-farm business sector labor
input,'' and ``aggregate capital input'' series published by the BLS.
Projections of the ``hours of all persons'' measure are calculated
using the difference between the projected growth rates of real output
per hour and real GDP. This difference is then adjusted to account for
changes in labor composition in the forecast interval.
Using these three key concepts, MFP is derived by subtracting the
contribution of labor and capital inputs from output growth. However,
in order to estimate MFP, we need to understand the relative
contributions of labor and capital to total output growth. Therefore,
two additional measures are needed to operationalize the estimation of
the IGI MFP projection: Labor compensation and capital income. The sum
of labor compensation and capital income represents total income. The
BLS calculates labor compensation and capital income (in current dollar
terms) to derive the nominal values of labor and capital inputs. IGI
uses the ``nongovernment total compensation'' and ``flow of capital
services from the total private non-residential capital stock'' series
as proxies for the BLS' income measures. These two proxy measures for
income are divided by total income to obtain the shares of labor
compensation and capital income to total income. In order to estimate
labor's contribution and capital's contribution to the growth in total
output, the growth rates of the proxy variables for labor and capital
inputs are multiplied by their respective shares of total income. These
contributions of labor and capital to output growth is subtracted from
total output growth to calculate the ``change in the growth rates of
multifactor productivity:''

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

The change in the growth rates (also referred to as the compound
growth rates) of the IGI MFP are multiplied by 100 in order to
calculate the percent change in growth rates (the percent change in
growth rates are published by

[[Page 70234]]

the BLS for its historical MFP measure). Finally, the growth rates of
the IGI MFP are converted to index levels based to 2005 to be
consistent with the BLS' methodology. For benchmarking purposes, the
historical growth rates of IGI's proxy variables were used to estimate
a historical measure of MFP, which was compared to the historical MFP
estimate published by the BLS. The comparison revealed that the growth
rates of the components were consistent across all series, and
therefore validated the use of the proxy variables in generating the
IGI MFP projections. The resulting MFP index was then interpolated to a
quarterly frequency using the Bassie method for temporal
disaggregation. The Bassie technique utilizes an indicator (pattern)
series for its calculations. IGI uses the index of output per hour
(published by the BLS) as an indicator when interpolating the MFP
index.
The comments we received on this proposal and our response are set
forth below.
Comment: One commenter stated that the factors used in the
productivity adjustor, which are mostly derived from capital and labor
related economic measures, are not appropriate for use to modify the
market basket costs of drugs, which are consumable items. One commenter
further believes that ESRD PPS should be treated differently than other
PPS payment systems because drugs represent such a large portion of the
overall costs incurred by dialysis services. One pharmaceutical company
expressed concern about the proposal to apply the productivity
adjustment to the Part D oral drug portion of the blended payment.
Response: In accordance with section 1881(b)(14)(F)(i) of the Act,
beginning in 2012, all renal dialysis services included in the ESRD
bundle 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. Therefore, CMS
is statutorily required to update ESRD PPS payments by a market basket
update less productivity. We also note that CMS is statutorily required
to update the ESRD composite rate portion of the blended payment by the
ESRDB market basket less productivity. During the transition, any items
or services included in the bundle have been factored into the cost
shares for the ESRDB market basket; as such, the costs associated with
oral drugs that were formerly paid under Part D are included in the
ESRDB market basket cost share weight for drugs. As finalized in the CY
2011 ESRD final rule (75 FR 49156), the market basket drug cost share
weight accounts for all drugs included in the ESRD bundled payment,
including ESRD-related oral drugs with injectable equivalents that were
formerly covered under Medicare Part D as well as the costs associated
with any other drugs as reported on the ESRD Medicare Cost Report. In
2014, any changes to the bundle will be factored into a revised ESRDB
market basket and be subject to notice and comment rulemaking.
Therefore, although drugs account for a larger proportion of expenses
in the ESRDB market basket than in some other provider-type PPS market
baskets, we will continue to update the ESRD payments as statutorily
mandated by the Congress. As such, for CY 2012, the ESRD PPS payment
rate and the composite portion of the blended payment will be increased
by the estimated market basket update less productivity, 2.1 percent
(3.0 percent ESRDB market basket less 0.9 percentage point MFP
adjustment), which is described in more detail below.
After careful consideration of the public comments and to satisfy
the statutory requirement for ESRD payment updates mentioned above, we
are finalizing our proposed method for calculating and applying the MFP
adjustment to the ESRDB market basket.
d. Calculation of the ESRDB Market Basket Update, Adjusted for
Multifactor Productivity for CY 2012
Under section 1881(b)(14)(F)(i) of the Act, beginning in 2012, ESRD
PPS payment amounts and the composite rate portion of the transition
blended payment amounts shall be annually increased by an ESRD market
basket percentage increase factor reduced by a productivity adjustment.
We proposed to estimate the ESRDB market basket percentage for CY
2012 based on the CY 2008-based ESRDB market basket (76 FR 40504). In
order to calculate the MFP-adjusted update for the ESRDB market basket
during the transition period, we proposed that the MFP percentage
adjustment be subtracted from the CY 2012 market basket update
calculated using the CY 2008-based ESRDB market basket (75 FR 40504).
We proposed that the end of the 10-year moving average of changes in
the MFP should coincide with the end of the appropriate CY update
period. Since the market basket update is reduced by the MFP adjustment
to determine the annual update for the ESRD PPS and the ESRD composite
rate portions of the blended payment during the transition, we believe
it is appropriate for the numbers associated with both components of
the calculation (the market basket and the productivity adjustment) to
coincide so that changes in market conditions are aligned. Therefore,
for the CY 2012 update, we proposed that the MFP adjustment be
calculated as the 10-year moving average of changes in MFP for the
period ending December 31, 2012. We proposed to round the final annual
adjustment to the one-tenth of one percentage point level up or down as
applicable according to conventional rounding rules (that is, if the
number we are rounding is followed by 5, 6, 7, 8, or 9, we will round
the number up; if the number we are rounding is followed by 1, 2, 3, or
4, we will round the number down).
Thus, in accordance with section 1881(b)(14)(F)(i) of the Act, the
proposed market basket increase factor for CY 2012 for the ESRDB market
basket was based on the 1st quarter 2011 forecast of the CY 2008-based
ESRDB market basket update, which was estimated to be 3.0 percent. This
market basket percentage was then reduced by the MFP adjustment (the
10-year moving average of MFP for the period ending CY 2012) of 1.2
percent, which is calculated as described above and based on IGI's 1st
quarter 2011 forecast. The resulting proposed MFP-adjusted ESRDB market
basket update for CY 2012 was equal to 1.8 percent, or 3.0 percent less
1.2 percent. We proposed that if more recent data were subsequently
available (for example, a more recent estimate of the market basket and
MFP adjustment), we would use such data, if appropriate, to determine
the CY 2012 market basket update and MFP adjustment in the CY 2012 ESRD
PPS final rule. Consistent with historical practice and our proposal,
we update the market basket increase factor estimate and the MFP
adjustment in this final rule to reflect the most recent available data
(75 FR 40505).
We received no public comments related to the proposed MFP-adjusted
ESRDB market basket update for CY 2012. Therefore, we are finalizing
our proposal to base the CY 2012 market basket update, which is used to
determine the applicable percentage increase for the ESRD PPS and
transition payments, on the most recent data available, which is the
third quarter 2011 forecast of the CY 2008-based ESRDB market basket
(estimated to be 3.0 percent). The MFP adjustment (the 10-year moving
average of MFP for the period ending CY 2012) we are finalizing is 0.9
percent, which was calculated as described above and based on IGI's
third quarter 2011 forecast.

[[Page 70235]]

Therefore, the final MFP-adjusted ESRDB market basket update for CY
2012 is 2.1 percent (3.0 percent ESRDB market basket less 0.9
percentage point MFP adjustment).
3. Transition Budget-Neutrality Adjustment for CY 2011
Section 1881(b)(14)(E)(iii) of the Act requires that an adjustment
to payments be made for renal dialysis services provided by ESRD
facilities during the transition so that the estimated total payments
under the ESRD PPS, including payments under the transition, equal the
estimated total amount of payments that would otherwise occur under the
ESRD PPS without such a transition. In the CY 2011 ESRD PPS final rule,
we explained that because we would not know the actual number of ESRD
facilities that would elect to opt out of the transition prior to
publishing the final rule, we would simulate payments under the
existing basic case-mix adjusted composite payment system and under the
ESRD PPS to determine how many ESRD facilities we believed would elect
to receive payment under 100 percent ESRD PPS. Based on our simulations
using 2007 data, we estimated that 43 percent of ESRD facilities would
financially benefit from receiving full payment under the ESRD PPS. We
indicated that based on the simulation of estimated payments, a 3.1
percent reduction would be applied to all payments made to ESRD
facilities for renal dialysis services furnished on January 1, 2011
through December 31, 2011 (75 FR 49082 through 49083).
On April 6, 2011, we published an interim final rule with comment
period in the Federal Register (76 FR 18930), entitled ``Changes to the
End-Stage Renal Disease Prospective Payment System Transition Budget-
Neutrality Adjustment'', which revised the ESRD transition budget-
neutrality adjustment finalized for CY 2011. In the interim final rule,
we indicated that based upon the election data submitted by ESRD
facilities, 87 percent of ESRD facilities elected to opt out of the
transition. When we applied the actual number of ESRD facilities
electing to receive payment under the ESRD PPS, the transition budget-
neutrality adjustment was determined to be zero rather than a 3.1
reduction in payments. We revised the 3.1 percent transition budget-
neutrality adjustment reduction to a zero percent transition budget-
neutrality adjustment for renal dialysis services furnished on April 1,
2011 through December 31, 2011. We also indicated that we would respond
to comments submitted on the interim final rule in the CY 2012 ESRD PPS
final rule.
We received four comments during the IFC comment period and three
comments in response to the CY 2012 ESRD PPS proposed rule. All
comments were in support of the revised CY 2011 transition budget-
neutrality adjustment factor. Therefore, we are finalizing the revised
CY 2011 transition budget-neutrality adjustment factor of zero for ESRD
claims for renal dialysis services furnished on April 1, 2011 through
December 31, 2011.
4. Transition Budget-Neutrality Adjustment for CY 2012
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. We use the term
``transition'' rather than ``phase-in'' to be consistent with other
Medicare payment systems.
Section 1881(b)(14)(E)(ii) of the Act permitted ESRD facilities to
make a one-time election to be excluded from the transition. An ESRD
facility that elected to be excluded from the transition would receive
payment for renal dialysis services provided on or after January 1,
2011, based on 100 percent of the payment rate under the ESRD PPS
rather than a blended payment based in part on the payment rate under
the basic case-mix adjusted composite payment system and in part on the
payment rate under the ESRD PPS. Section 1881(b)(14)(E)(iii) of the Act
also requires that we make an adjustment to payments during the
transition so that the estimated total amount of payments under the
ESRD PPS, including payments under the transition, equals the estimated
total amount of payments that would otherwise occur under the ESRD PPS
without such a transition. We refer to this provision as the transition
budget-neutrality adjustment.
As described in the CY 2011 ESRD PPS final rule (75 FR 49082), the
transition budget-neutrality adjustment is comprised of two parts. For
the first part, we created a payment adjustment to the composite rate
portion of the blended payment during the transition to account for the
per treatment costs of drugs that were paid under Part D. For the
second part, we computed a factor that would make the estimated total
amount of payments under the ESRD PPS, including payments under the
transition, equal to the estimated total amount of payments that would
otherwise occur without such a transition. In the proposed rule, we
addressed both parts of the transition budget-neutrality adjustment (76
FR 40505 and 40506). The first part of the transition budget-neutrality
adjustment was addressed in section I.C.1. of this final rule where we
address updates to the composite rate and the ESRD PPS base rate.
For the second part of the transition budget-neutrality factor, we
first determined the estimated increase in payments under the
transition and then determined an offset factor, based on estimates of
which facilities would choose to opt out of the transition (for a
detailed description, see the CY 2011 ESRD PPS proposed rule, 74 FR
49946). We estimated the number of facilities that would choose to opt
out of the transition by comparing payment under the transition to
payment under the PPS and choosing the option that was financially
beneficial to each facility. Using that approach, we estimated that 43
percent of facilities would choose to opt out of the transition and
determined the transition budget-neutrality adjustment to be a
reduction of 3.1 percent. In the April 6, 2011 interim final rule with
comment (76 FR 18930 through 18934), however, we updated the number of
facilities that chose to opt out of the transition to 87 percent, based
on actual election data that we received and recalculated a transition
budget-neutrality adjustment of zero percent.
Given that the transition budget-neutrality adjustment required
under section 1881(b)(14)(A)(ii) of the Act applies in each year of the
transition, we must update the transition budget-neutrality adjustment
for CY 2012. In the proposed rule (76 FR 40506), we noted that we were
not proposing for CY 2012 to change the methodology used to calculate
the second part of the budget-neutrality adjustment. However, we
proposed to use more updated data. In order to ensure that total
payments under the transition equal total payment amounts without a
transition, we would reduce all payments to ESRD facilities in CY 2012
by a factor that is equal to 1 minus the ratio of estimated payments
under the ESRD PPS if there were no transition to the total estimated
payments under the transition.
In the proposed rule, we explained that we started with 2009
utilization data from claims, as 2009 was the latest complete year of
claims data available of complete claims data. In this final rule, we
used 2010 claims as it is the latest available year. Using price growth
factors for CY 2011 and CY 2012 that are discussed in the impact
analysis in section I.VII.B.1 of this final rule, we updated the CY
2010 utilization data to

[[Page 70236]]

CY 2011 and CY 2012 payments. We then took the estimated CY 2012
payments under the full ESRD PPS and the blended payments under the
transition based on actual facility election data and compared these
estimated payments to the total estimated payments in CY 2012 as if all
facilities had elected to receive payment under the full ESRD PPS. We
then calculated the transition budget-neutrality factor to be 1 minus
the ratio of estimated payments under the ESRD PPS if there were no
transition to the total estimated payments under the transition, which
results in zero percent. Therefore, for CY 2012, we proposed that a
zero percent reduction to all payments would be made to ESRD facilities
(that is, the zero percent adjustment would be applied to both the
blended payments under the transition and payments made under the 100
percent ESRD PPS). We solicited comments on the proposed second part of
CY 2012 transition budget-neutrality adjustment methodology. The
comments and our responses are set forth below.
Comment: Several national associations and one dialysis
organization supported the zero percent transition budget-neutrality
adjustment for CY 2012. One commenter indicated that the proposed rule
appropriately reflected that a greater percentage of ESRD facilities
than estimated elected to receive payment under the ESRD PPS.
Response: We thank the commenters for their support. Therefore, in
this final rule, we are finalizing the proposed second part of the
transition budget-neutrality adjustment and the zero percent budget-
neutrality adjustment for CY 2012.
5. Low-Volume Facility Provisions
Section 1881(b)(14)(D)(iii) of the Act requires a low-volume
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''. We
established the low-volume payment adjustment, including the
methodology we used to develop the low-volume treatment threshold in
the CY 2011 ESRD PPS final rule (75 FR 49117 through 49125). Because
the analysis included data that spanned a 3-year period, we defined a
low-volume ESRD facility as a facility that is able to maintain its
low-volume status each year of the 3-year period. This timeframe
provided us with a sufficient span of time to view consistency in
business operations through the data. Under 42 CFR 413.232(b), a low-
volume facility is an ESRD facility that: (1) Furnished less than 4,000
dialysis treatments in each of the 3 years preceding the payment year
and (2) has not opened, closed, or received a new provider number due
to a change in ownership during the 3 years preceding the payment year.
Under Sec. 413.232(c), the number of treatments shall be equal to the
aggregate number of treatments furnished by other ESRD facilities that
are both under common ownership and 25 road miles or less from the ESRD
facility in question. This geographic proximity criterion is only
applicable to ESRD facilities that are Medicare certified on or after
January 1, 2011. Section 413.232(f) requires an ESRD facility to
provide an attestation statement to their respective fiscal
intermediary or Medicare administrative contractor (FI/MAC) that the
facility meets all the criteria in order to receive the low-volume
adjustment. We note that furnishing 4,000 treatments in a year equates
to approximately 25 patients per year receiving three dialysis
treatments a week (or hemo-equivalent treatments).
In the proposed rule, we discussed Sec. 413.232 and clarified that
the ``payment year'' is the period of time that we use for determining
payment to ESRD facilities, which is a calendar year, and that
eligibility years mean the 3 years preceding the payment year and are
based on cost reporting years (76 FR 40506). We made this clarification
to ensure that ESRD facilities and their respective FI/MACs understand
the distinction between eligibility (which is based on cost reporting
years) and the payment year (when ESRD facilities can begin to receive
the low-volume payment adjustment).
We did not seek comments on the clarifications of the payment and
cost report years, however, we received three comments indicating the
clarifications were helpful.
In the proposed rule (76 FR 40506 and 40507), we proposed to
establish the process for CY 2012 and each year thereafter, that an
ESRD facility would be required to follow when submitting its
attestation to notify its FI/MAC that it is eligible for the low-volume
payment adjustment. We further explained that the attestation is
required because: (1) ESRD facility's cost reporting periods vary and
may not be based on the calendar year; and (2) the cost reports are due
5 months after the close of the cost reporting period (that is, there
is a lag in the cost reporting submission). Thus, the FI/MACS may not
have the cost report for the third year to determine eligibility and
would need to rely on the attestation for that year. We proposed that
if an ESRD facility believes that it is eligible for the low-volume
adjustment, the ESRD facility would be required to submit an
attestation to its respective FI/MAC no later than November 1st of each
year, and proposed to amend the regulation text at Sec. 413.232(f) (76
FR 40507). We noted that this timeframe provides 60 days for a FI/MAC
to verify the cost report information and update the systems (76 FR
40507). We explained that if ESRD facilities are receiving the low-
volume adjustment for the CY 2011 payment year, those ESRD facilities
should submit another attestation to their respective FI/MAC no later
than November 1, 2011, to qualify for the low-volume adjustment for the
CY 2012 payment year. An ESRD facility must continue to attest that it
is a low-volume facility for each subsequent payment year it believes
it is eligible for the low-volume facility adjustment.
We explained that if the FI/MAC does not receive an ESRD facility's
attestation stating that the ESRD facility is eligible for the low-
volume adjustment on or before November 1 prior to the payment year,
the ESRD facility would not receive the low-volume adjustment for that
payment year. We also noted that in the event a dialysis organization
submits the low-volume attestation on behalf of its ESRD facilities,
the dialysis organization will be required to identify each ESRD
facility by name and provider number and submit them by the November 1
deadline.
We solicited comment on our proposal and the proposed regulation
text changes at Sec. 413.232(f).
We did not receive any comments and, therefore, in this final rule,
we are finalizing a yearly November 1 deadline for attestation
submission and we are revising the regulation at Sec. 413.232(f) to
reflect this date for CY 2012 and each year thereafter. However,
because the CY 2012 final rule will not be effective before November 1,
2011, we are finalizing a later low-volume attestation submission
deadline of January 3, 2012, for attestations that pertain to the CY
2012 low-volume adjustment. We believe this due date provides
facilities sufficient time to submit an attestation and allows the
agency (that is, the FI/MACs) time to process submissions. In addition,
a later date is not possible since the CY 2012 payment year will be
underway. Accordingly, we also are

[[Page 70237]]

revising the regulation at Sec. 413.232(f) to reflect this change.
In the proposed rule, we indicated that the ESRD facility's cost
reports for the cost reporting periods ending in the 3 years
immediately preceding the payment year must report costs for 12-
consecutive months (76 FR 40507). For example, an FI/MAC should not
consider a short period cost report (that is, reporting costs for less
than 12 months which may occur for new facilities or facilities under
new ownership), for low-volume eligibility. Specifically, when an ESRD
facility is assessing its eligibility for the low-volume adjustment and
preparing its attestation, the ESRD facility should look at its 12-
consecutive month cost reports for the cost reporting periods that end
in the 3 years immediately preceding the payment year.
As we indicated previously, the FI/MAC may not have a final-settled
cost report for all 3 years needed to complete the ESRD facility's
verification and we provided examples of such situations (76 FR 40507).
Therefore, we proposed to amend the regulations at Sec. 413.232(b)(1)
and (b)(2) to clarify the meaning of year with regard to the treatment
threshold that is used for determining low-volume eligibility and how
it relates to the payment year. This proposed change to the regulations
would make clear that the ESRD facility's cost reports for the 3 years
immediately preceding the payment year must report costs for 12-
consecutive months, and provide clarification that in the absence of an
ESRD facility's final settled cost report, an FI/MAC can review the
ESRD facility's as-filed cost report when determining if an ESRD
facility meets the low-volume criteria. We believe that it is
appropriate for the FI/MAC to determine eligibility based upon an as-
filed cost report because the number of total treatments should not
change between submission of the as-filed cost report and the final
settled cost report. We solicited comment on the proposed changes at
Sec. 413.232(b)(1) and (b)(2). We did not receive any comments and,
therefore, we are finalizing these proposed changes to the regulation
at Sec. 413.232(b)(1) and (b)(2).
In the proposed rule, we explained that if an FI/MAC receives an
ESRD facility's attestation stating that the ESRD facility believes
that it qualifies for the low-volume payment adjustment and then finds
that the ESRD facility did not meet the low-volume criteria, the FI/MAC
will discontinue application of the low-volume adjustment (76 FR
40508). If the ESRD facility does not remain low-volume for each of the
3 years (12-consecutive month cost reporting periods) immediately
preceding the payment year, the ESRD facility is not eligible for the
low-volume adjustment until it can demonstrate again that for 3 years
(12-consecutive month cost reporting periods) it has met the low-volume
criteria. The comments we received and our responses are set forth
below.
Comment: One independent ESRD facility asked if an ESRD facility
was determined not to qualify for the low-volume adjustment, would the
low-volume adjustment be discontinued without payment implication.
Response: Medicare is obligated to provide appropriate payment. If
an ESRD facility has not met the eligibility requirements as described
in 42 CFR 413.232, the ESRD facility would not be entitled to receive
the low-volume adjustment and the inappropriate low-volume payments
made in that payment year would be recouped.
Comment: One commenter indicated that in the CY 2011 ESRD PPS final
rule, we defined a low-volume facility at Sec. 413.232(b)(2) as an
ESRD facility that has not opened, closed, or received a new provider
number due to a change in ownership during the 3 years preceding the
payment year (75 FR 49118). The commenter pointed out that in the CY
2011 ESRD PPS final rule we did not finalize the phrase, ``or received
a new provider number due to a change in ownership'' in the regulation
text at Sec. 413.232(b)(2) and in our discussion of the definition of
a low-volume facility in this year's proposed rule we only referred to
the phrase, ``or had a change in ownership'' (76 FR 40507). The
commenter is concerned that if we do not include the phrase, ``or
received a new provider number due to a change in ownership'' in the
regulation text at Sec. 412.232(b)(2) that it will negatively impact
new owners of underperforming clinics that would otherwise wish to
apply for the low-volume designation.
Response: We agree with the commenter that in the CY 2011 final
rule we inadvertently omitted the phrase, ``or received a new provider
number due to a change in ownership'' in the regulation text finalized
at Sec. 413.232(b)(2). In the preamble of both the CY 2011 ESRD PPS
proposed and final rules (74 FR 49118 through 49919, 74 FR 49975), we
made clear that under Sec. 413.232(b), a low-volume facility is
defined as an ESRD facility that ``has not opened, closed, or received
a new provider number due to a change of ownership * * *''; however, we
inadvertently omitted language from the regulation (74 FR 50024, 74 FR
49200). Therefore, in this final rule, we are making a technical
correction to the regulation text at Sec. 413.232(b)(2) to reflect
that a low-volume facility is an ESRD facility that has not open,
closed, or received a new provider number due to a change in ownership
in the 3 years preceding the payment year.
Comment: One independent ESRD facility questioned the policy that
ESRD facilities must remain low volume (that is, provide less than
4,000 dialysis treatments) for three years immediately preceding the
payment year or risk not qualifying for the low-volume adjustment until
it can once again demonstrate it is low volume for three consecutive
years. The commenter further stated that many small or rural dialysis
facilities provide the only access to care in a geographic area and
this policy requires the established low-volume facility to choose
between providing access to care and significant, long term payment
reductions. The commenter further stated that this policy could result
in dialysis facilities denying care to avoid crossing the 4,000
threshold. The commenter suggested that CMS consider reducing the
eligibility timeline for small facilities that have met the low-volume
eligibility criteria so that they could re-qualify for the low-volume
adjustment in the following year if their treatments returned to less
than 4,000 per year.
Response: We do not agree with the commenter's assertion of the
negative effects of the low-volume eligibility criteria. The low-volume
adjustment is intended for ESRD facilities that are located in areas
that have a population base resulting in less than 4,000 treatments per
year and is not intended to account for fluctuations or business
decisions that increase or decrease the number of treatments that can
or would be provided. We do not believe that these fluctuations or
changes in the population from year to year would in most circumstances
result in a facility not being eligible for the low-volume adjustment.
As we indicated in the CY 2011 ESRD PPS final rule (75 FR 49118 and
49119), we believe the low-volume adjustment should encourage small
ESRD facilities to continue to provide access to care, but are
concerned about potential disincentives that low-volume facilities
could have regarding patient care. We are monitoring the number of
facilities that are receiving the low-volume adjustment. Any changes in
the low-volume methodology will be discussed in future rulemaking.
As for allowing facilities that lose low-volume status to requalify
for low-volume status the next year, any changes in the low-volume
eligibility

[[Page 70238]]

criteria would be addressed in future rulemaking.
6. Update to the Drug Add-On to the Composite Rate Portion of the ESRD
Blended Payment Rate
Section 1881(b)(14)(E)(i) of the Act requires a four-year
transition under the ESRD PPS. Under Sec. 413.239, ESRD facilities
were permitted to make a one-time election by November 1, 2011, to be
excluded from the transition and receive full payment under the ESRD
PPS. Under Sec. 413.239, in CY 2012, ESRD facilities that elected to
receive payment under the transition will be paid a blended amount that
will consist of 50 percent of the basic case-mix adjusted composite
payment system and 50 percent on the ESRD PPS payment. Thus, we must
continue to update the composite rate portion of the blended payment
amount during the ESRD PPS 4-year transition (CYs 2011 through 2013),
which includes an update to the drug add-on.
Under section 1881(b)(12) of the Act, the basic case-mix adjusted
composite payment system includes the services comprising the composite
rate and an add-on to the composite rate component to account for the
difference between pre-MMA payments for separately billed drugs and the
revised drug pricing specified in the statute. For the drug add-on for
CY 2012 (76 FR 40508 and 40509), we did not propose any changes to the
methodology, but merely updated the data used in computing the drug
add-on as described below.
a. Estimating Growth in Expenditures for Drugs and Biologicals in CY
2012
Section 1881(b)(12)(F) of the Act specifies that the drug add-on
increase must reflect ``the estimated growth in expenditures for drugs
and biologicals (including erythropoietin) that are separately billable
* * *''. By referring to ``expenditures'', we believe the statute
contemplates that the update would account for both increases in drug
prices, as well as increases in utilization of those drugs.
To account for increases in drug prices and utilization, we used
the 5 years of drug expenditure data based on ASP pricing and proposed
to use this data for trend analysis (76 FR 40508). We then removed
growth in enrollment for the same time period from the expenditure
growth so that the residual reflects the per patient expenditure growth
(which includes price and utilization combined).
To estimate drug expenditure growth using trend analysis for CY
2012, we looked at the average annual growth in total drug expenditures
between 2006 and 2010. First, we estimated the total drug expenditures
for all ESRD facilities in CY 2010. We used the final CY 2006 through
CY 2009 ESRD claims data and the latest available CY 2010 ESRD facility
claims, updated through December 31, 2010 (that is, claims with dates
of service from January 1 through December 31, 2010, that were
received, processed, paid, and passed to the National Claims History
File as of December 31, 2010). We indicated that for this final rule,
we intended to use additional updated CY 2010 claims with dates of
service for the same timeframe (76 FR 40508). This updated CY 2010 data
file would include claims received, processed, paid, and passed to the
National Claims History File as of June 30, 2011.
We inflated the CY 2010 drug expenditures to estimate the June 30,
2011 update of the 2010 claims file. The net adjustment to the CY 2010
claims data was an increase of 11.62 percent to the 2010 expenditure
data, which allowed us to more accurately compare the 2009 and 2010
drug expenditure data to estimate per patient growth. Next, we
calculated the average annual change in drug expenditures from 2006
through 2010. This average annual change showed an increase of 1.4
percent in drug expenditures from 2006 through 2010 (76 FR 40508). We
used this 1.4 percent increase to project drug expenditures for both
2011 and 2012.
For the final rule, using the full-year 2010 drug expenditure
figure, we calculated the average annual change in drug expenditure
from 2006 through 2010. This average annual change showed an increase
of 1.0 percent in drug expenditures from 2006 through 2010. We used
this 1.0 percent increase to project drug expenditures for both 2011
and 2012. We note, the change in the drug expenditures increase is a
result of updated data.
b. Estimating per Patient Growth
In the proposed rule, we explained that once we had the projected
growth in drug expenditures from 2011 to 2012, we calculated per
patient growth between CYs 2011 and 2012 by removing the estimated
growth in enrollment data between CY 2011 and CY 2012 (76 FR 40508). We
estimate a 4.2 percent estimated growth in enrollment between CY 2011
and CY 2012. To obtain the per-patient estimated growth in
expenditures, we divided the total drug expenditure change between 2011
and 2012 (1.014) by enrollment growth of 4.2 percent (1.042) for the
same timeframe. The result was a per-patient growth factor equal to
0.973 (1.014/1.042 = 0.973). Thus, we projected a 2.7 percent decrease
(2.7 percent = .027 = 0.973-1) in per patient growth in drug
expenditures between 2011 and 2012.
For this final rule, we estimate a 4.3 percent estimated growth in
enrollment between CY 2011 and CY 2012. To obtain the per-patient
estimated growth in expenditures, we divided the total drug expenditure
change between 2011 and 2012 (1.010) by enrollment growth of 4.3
percent (1.043) for the same timeframe. The result is a per-patient
growth factor equal to 0.968 (1.010/1.043 = 0.968). Thus, in this final
rule, for CY 2012 we are projecting a 3.2 percent decrease (-3.2
percent = 1.010/1.043-1 = 0.968-1) in per patient growth in drug
expenditures between 2011 and 2012.
c. Applying the Growth Update to the Drug Add-On Adjustment
In the CY 2006 PFS final rule (71 FR 69683), we applied the
projected growth update percentage to the total amount of drug add-on
dollars established for CY 2005 to establish a dollar amount for the CY
2006 growth update. In addition, we projected the growth in dialysis
treatments for CY 2006 based on the projected growth in ESRD
enrollment. We divided the projected total dollar amount of the CY 2006
growth by the projected growth in total dialysis treatments to develop
the per treatment growth update amount. This growth update amount,
combined with the CY 2005 per treatment drug add-on amount, resulted in
an average drug add-on amount per treatment of $18.88 (or a 14.5
percent adjustment to the composite rate) for CY 2006.
In the CY 2007 PFS final rule with comment period (71 FR 69684), as
a result of public comments, we revised our update methodology by
applying the growth update to the per treatment drug add-on amount.
That is, for CY 2007, we applied the growth update factor of 4.03
percent to the $18.88 per treatment drug add-on amount resulting in an
updated per treatment drug add-on amount of $19.64 per treatment (71 FR
69684). For CY 2008, the per treatment drug add-on amount was updated
to $20.33. In the CY 2009, 2010 and 2011 PFS final rule with comment
period (73 FR 69755 through 69757, 74 FR 61923, and 75 FR 73485,
respectively), we applied a zero update to the per treatment drug add-
on amount resulting in a per treatment drug add-on amount of $20.33. As
discussed in detail below, in this final rule, for CY 2012, we are
finalizing a zero update to the per treatment drug add-on amount of
$20.33 established in CY 2008.

[[Page 70239]]

d. Update to the Drug Add-On Adjustment for CY 2012
We estimated a 1.4 percent increase in drug expenditures between CY
2011 and CY 2012 (76 FR 40509). Combining this increase with a 4.2
percent increase in enrollment, as described above, we projected a 2.7
percent decrease in per patient growth of drug expenditures between CY
2011 and CY 2012. Therefore, we projected that the combined growth in
per patient utilization and pricing for CY 2012 would result in a
decrease to the drug add-on equal to 0.4 percentage points. This figure
was derived by applying the 2.7 percent decrease to the CY 2011 drug
add-on of $20.33. This resulted in a revised drug add-on of $19.78,
which is 14.0 percent of the proposed CY 2012 base composite rate of
$141.52. If we were to apply no decrease to the drug add-on of $20.33,
this would result in a 14.4 percent drug add-on. However, similar to
last year and as indicated above, we proposed a zero update to the drug
add-on adjustment. We explained in the proposed rule that we believed
this approach is consistent with the language under section
1881(b)(12)(F) of the Act, which states in part that ``the Secretary
shall annually increase'' the drug add-on amount based on the growth in
expenditures for separately billed ESRD drugs. Our understanding of the
statute contemplates ``annually increase'' to mean a positive or zero
update to the drug add-on. Therefore, we proposed to apply a zero
update and maintain the $20.33 per treatment drug add-on amount for CY
2012. The comments and our responses are set forth below.
Comment: Two commenters supported our proposed zero drug-add.
Response: We thank the commenters for their support.
Comment: One commenter indicated that ESA usage is overstated in
2006 through 2010 and that this would have an effect on the drug add-on
and the ESRD PPS base rate calculations. The commenter recommended that
we develop an ESA adjuster for the ESRD PPS base rate.
Response: We used the best available data to compute the drug add-
on and the base rate. We continue to believe that the information on
ESRD claims represent the best information currently available to the
agency. Because we are required under section 1881(b)(14)(A)(ii) of the
Act to use the lowest utilization year (which we determined to be
2007), we did not have discretion on the data we used in calculating
the ESRD PPS base rate. We note that it is common for utilization of
services to change after implementation of a PPS. That is why we
periodically review our payment systems to determine if a refinement is
warranted. In addition, if we were to adjust for ESA over usage in
computing the drug add-on, this would lower the trend and the drug add-
on would become more negative. As we discussed above, section
1881(b)(12)(F) of the Act, precludes a reduction of the drug add-on
because the statute requires that we annually increase the drug add-on.
In this final rule, for CY 2012, we estimate a 1.0 percent increase
in drug expenditures between CY 2011 and CY 2012. Combining this
increase with a 4.3 percent increase in enrollment, we project a 3.2
percent decrease in per patient growth of drug expenditures between CY
2011 and CY 2012. Therefore, we project that the combined growth in per
patient utilization and pricing for CY 2012 would result in a decrease
to the drug add-on equal to 0.4 percentage points. This figure is
derived by applying the 3.2 percent decrease to the CY 2011 drug add-on
of $20.33. This results in a revised drug add-on of $19.69, which is
13.9 percent of the final CY 2012 base composite rate of $141.94. If we
were to apply no decrease to the drug add-on of $20.33, this would
result in a 14.3 percent drug add-on. Similar to last year and as
discussed above, for CY 2012, we are finalizing a zero update to the
drug add-on and maintaining the $20.33 per treatment drug add-on
amount.
The current $20.33 per treatment drug add-on reflected a 14.7
percent drug add-on adjustment to the composite rate in effect for CY
2011. Using the latest ESRDB market basket minus productivity
adjustment to update the composite rate portion of the ESRD PPS payment
(forecast of 2.1 percent in 2012 effective January 1, 2012, as
discussed in section I.B.2.b. of this final rule), results in a
decrease to the CY 2012 drug add-on adjustment from 14.7 to 14.3
percent in order to maintain the drug add-on at $20.33. This decrease
occurs because the drug add-on adjustment is a percentage of the
composite rate. Since the final CY 2012 composite rate is higher than
the CY 2011 composite rate, and since the drug add-on remains at
$20.33, the percentage decreases. Therefore, we are finalizing for CY
2012 the drug add-on adjustment of 14.3 percent to the composite rate.
7. Updates to the Wage Index Values and Wage Index Floor for the
Composite Rate Portion of the Blended Payment and the ESRD PPS Payment
Section 1881(b)(14)(D)(iv)(II) of the Act provides that the ESRD
PPS may include such other payment adjustments as the Secretary
determines appropriate, such as a payment adjustment by a geographic
wage index, such as the index referred to in section 1881(b)(12)(D) of
the Act. In the CY 2011 ESRD PPS final rule (75 FR 49117 through 49117)
and CY 2011 PFS final rule (75 FR 73486), we finalized the wage index
policy under the ESRD PPS. Specifically, under the ESRD PPS, we have
adopted the same method and source of wage index values used previously
for the basic case-mix adjusted composite payment system.
We use the Office of Management and Budget's (OMB's) Core Based
Statistical Area (CBSA)-based geographic area designations to define
urban and rural areas and corresponding wage index values (76 FR
40509). In addition, the wage index values used under the ESRD PPS are
the inpatient prospective payment system (IPPS) wage index values
calculated without regard to geographic reclassifications authorized
under sections 1881(d)(8) and (d)(10) of the Act, and utilize pre-floor
hospital data that are unadjusted for occupational case mix. The CBSA-
based geographic area designations are described in OMB Bulletin 03-04,
originally issued June 6, 2003, and are 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. All ESRD rules and notices are
considered to incorporate the CBSA changes published in the most recent
OMB bulletin that applies to the hospital wage index used to determine
the current ESRD wage index. The OMB bulletins may be accessed online
at http://www.whitehouse.gov/omb/bulletins/index.html.
Under the ESRD PPS, we adopted a wage index floor during the
transition, though we intended to gradually reduce the ESRD wage index
floor (76 FR 40509, 75 FR 49117, 75 FR 73486). In the proposed rule (76
FR 40502-40503), we did not propose any changes to the labor-related
share for the ESRD PPS and the composite rate portion of the blend and
proposed to continue to use a labor-related share of 41.737 percent for
CY 2012 for the ESRD PPS. If an ESRD facility elected to transition to
the PPS, the labor-related share for the

[[Page 70240]]

composite rate portion of the blended payment is 53.711 percent. We
proposed to continue to use the labor-related share of 53.711 percent
for the composite rate portion of the blended payment for all the years
of the transition. As discussed in section I.2.b of this final rule, we
finalized the proposed labor-related share for the ESRD PPS and the
composite rate portion of the blended payment. Finally, the wage data
used to construct the wage index under the ESRD PPS is updated
annually, based on the most current data available and based on OMB's
definitions and corresponding wage index values.
As we previously indicated, because ESRD facilities could elect to
receive a blended payment during the transition, we continue to update
the composite rate portion of the ESRD PPS blended payment, including
adjusting payments for geographic differences in area wage levels (76
FR 40509, 75 FR 40163). We did not propose any changes to the
methodology for the wage index used to adjust the composite rate
portion of the ESRD PPS blended payment. However, we did propose to
update the wage index values and the wage index budget-neutrality
adjustment factor for CY 2012. We did not receive any comments
pertaining to our proposal to update the wage index values and the wage
index budget-neutrality adjustment factor for CY 2012 for the composite
rate portion of the blended payment under the transition. Consequently,
we are finalizing our proposal.
Although we did not propose to make any changes to the methodology
for updating the CY 2012 wage index under the ESRD PPS (that is, for
full ESRD PPS payments and the ESRD PPS portion of the blended payment
under the transition), we did propose a wage index budget-neutrality
adjustment factor to be applied in CY 2012 and in subsequent years for
the ESRD PPS (76 FR 40509).
We received one comment as set forth below.
Comment: One independent ESRD facility indicated that it based its
decision to receive payment under the transition because the CY 2011
composite rate wage index value for the facility's area was higher than
the wage index value for the ESRD PPS. The commenter stated that the
higher composite rate wage index would be beneficial to those
facilities that opted to receive payment under the transition. The
commenter indicated that the variances between the CY 2012 proposed
composite rate and ESRD PPS wage index values are not as great as
compared to the CY 2011 variance, which was not anticipated by the
commenter at the time the election was made to transition into the ESRD
PPS and stated that this is not beneficial for those dialysis
facilities transitioning to the ESRD PPS.
Response: The commenter is correct that the differences in the CY
2012 composite rate and ESRD PPS wage index values in the proposed rule
are not as significant as they were in the CY 2011 ESRD PPS final rule.
The principle reason for the differences in the composite rate and ESRD
PPS wage index values in the CY 2011 final rule is that the wage index
budget neutrality adjustment was applied to the composite rate values,
while budget neutrality for the ESRD PPS was achieved through the
overall 98 percent budget-neutrality requirement (76 FR 40510). The
reason the variances between the CY 2012 proposed composite rate and
ESRD PPS wage index values are less pronounced is because the proposed
wage index budget-neutrality adjustment for CY 2012 for the composite
rate portion of the blended payment is lower than the budget-neutrality
adjustment factor for CY 2011. As we discussed above, in detail and in
section I.C.1 of this final rule, the wage index budget-neutrality
adjustment for the ESRD PPS and the ESRD PPS portion of the blended
payment is not applied to the wage index values, but rather to the ESRD
PPS base rate. Therefore, the variance described by the commenter is
related solely to the wage index budget-neutrality adjustment for the
composite rate portion of the blended payment. A comparison to the ESRD
PPS wage index value is not appropriate because the composite rate wage
index has a wage index budget-neutrality adjustment applied while the
ESRD PPS wage index does not.
Since we did not receive any comments pertaining to our proposals
regarding the method of applying the wage index budget-neutrality
adjustment, that is, applying the wage index budget-neutrality
adjustment to the wage index values for the composite rate portion of
the blended payment and applying the wage index budget-neutrality
adjustment to the ESRD PPS base rate for the PPS portion of the blended
payment and the ESRD PPS payment, and for the reasons we discussed
previously, we are finalizing those policies.
a. Reduction to the ESRD Wage Index Floor
The wage index floor for CY 2011 is 0.600 (75 FR 49116 and 49117
and 75 FR 73487). For CY 2012 and CY 2013, we proposed to continue to
reduce the wage index floor by 0.05 for each of the remaining years of
the transition (that is, for CY 2012, the wage index value would be
reduced from 0.600 to 0.550, and further reduced to 0.500 for CY 2013)
(76 FR 40510). The ESRD wage index floor value of 0.550 would be
applied to areas with wage index values that are below the proposed
wage index floor. Beginning January 1, 2014, we proposed that the wage
index floor would no longer be applied because the wage index floor
would be lower than areas with low wage index values. In the CY 2012
ESRD PPS proposed rule, we stated that we continue to believe that a
gradual reduction in the floor is needed to support continuing patient
access to dialysis in areas that have low wage index values, especially
in areas where the wage index values are below the current wage index
floor--specifically, ESRD facilities located in Puerto Rico (76 FR
40510). We solicited comments on the proposal to continue to gradually
reduce the wage index floor in CYs 2012 and 2013 and, the elimination
of the floor in CY 2014. The comments we received and our responses are
set forth below.
Comment: Three commenters responded regarding our proposal to
reduce and eventually eliminate the wage index floor. One commenter
requested that the wage index floor be maintained for rural dialysis
facilities due to their higher staffing costs, which could aggravate
disparities in care and might impair access to care in rural areas. One
independent ESRD facility indicated that the reduction of the wage
index floor threatens facilities with low wage index values and may
result in access to care problems. One ESRD organization requested that
we reconsider establishing a wage index floor after the transition
because the commenter believes that eliminating the floor would be
detrimental to small dialysis organizations (SDOs). The commenter also
stated that some small facilities are located in a single community
and, as such, are not able to spread their operating costs as larger
organizations. The commenter further stated that these facilities are
in parts of the country where the wage index is lowest, and the absence
of a floor threatens their survival and negatively impacts access to
care.
Response: In the proposed rule, we proposed to reduce the floor by
0.05 for CYs 2012 and 2013 and to eliminate the floor beginning in 2014
(76 FR 40509 through 40510). We have been reducing the wage index floor
since CY 2006 when ESRD facilities began to transition

[[Page 70241]]

to the CBSAs and the wage index floor was 0.900 (70 FR 45799). We have
reduced the wage index floor by 0.05 each year since then. In CY 2011,
the floor is 0.600 and only impacts ESRD facilities located in Puerto
Rico, because no other ESRD facilities are located in areas with a wage
index value below 0.600. This is also the case in CY 2012, when the
0.05 reduction will bring the floor to 0.550. We continue to believe
that artificially adjusting wage index values by substituting a wage
index floor is not an appropriate method to address low wages in
certain geographic locations. However, we are willing to take the
points made by the commenters into consideration for future rulemaking
with regard to the issue of eliminating the wage index floor in the
future.
With regard to the comment that small facilities are located in
areas with the lowest wage index values and the negative effects of
eliminating the floor, we note that the commenter is located in West
Virginia and in CY 2011, has a wage index value of 0.7055, well above
the wage index floor of 0.600. Therefore, the reduction of the floor
does not impact this provider. With regard to areas that are impacted
by the reduction of the wage index floor (that is Puerto Rico), we note
that the overall impact (discussed in section VII.B of this final rule)
of the changes in the outlier policy discussed in section I.C.10 of
this final rule and the wage index results in a 0.3 percent increase in
estimated payments. Therefore, we do not believe that ESRD facilities
will be negatively impacted by the reduction in the wage index floor.
We note that the wage index values reflects\ hospital wages, unadjusted
for occupational mix. Therefore, we believe it reflects ESRD facility
staff wages. With regard to the comment that some small facilities are
located in a single community and, as such, are not able to spread
their operating costs as larger organizations can, we do not understand
the relationship between the wage index floor and limitations a
facility may have to spread its operating costs.
After considering the comments received, we are finalizing the 0.05
reduction to the wage index floor for CYs 2012 and 2013, resulting in a
wage index floor of 0.550 and a wage index floor of 0.500,
respectively. Although we continue to believe that artificially
adjusting the wage index value using a floor, which does not reflect
actual wages paid in that area, we will reconsider the floor in CY
2014.
b. Policies for Areas With No Hospital Data
In CY 2006, while adopting the CBSA designations for the basic
case-mix adjusted composite 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 wage index values. Since there
were ESRD facilities in these areas, we developed policies for each of
these areas. In the CY 2011 ESRD PPS final rule (75 FR 49117), we
finalized the methodology we have used for urban areas with no hospital
data, that is, we compute the average wage index value of all urban
areas within the State and use that value as the wage index. We also
finalized the methodology established for rural areas with no hospital
data originally adopted in the CY 2008 PFS final rule (72 FR 66283), in
which we computed the wage index using the average wage index values
from all contiguous CBSAs to represent a reasonable proxy for that
rural area. For rural Massachusetts, we determined that the borders of
Dukes and Nantucket Counties are continguous with Barnstable and
Bristol counties. Under the methodology, the values for these counties
are averaged to establish the wage index value for rural Massachusetts.
For rural Puerto Rico, we finalized a policy to use the wage index
floor as the wage index value, since all rural Puerto Rico areas were
subject to the floor.
In the proposed rule, we did not propose to change these
methodologies. We proposed for CY 2012 and for future years, to
continue to use the methodologies we adopted for establishing wage
index values in both urban and rural geographic areas where there are
no hospital wage data from which to calculate wage index values for
ESRD facilities (76 FR 40510).
We did not receive any comments on our proposed methodology for
computing a wage index value for areas without hospital data for urban
and rural geographic areas, or for Puerto Rico. Therefore, for CY 2012
and future years, we are finalizing our methodologies for computing a
wage index value for areas without hospital data for urban and rural
geographic areas and for Puerto Rico. For urban areas, we will compute
the average wage index value of all urban areas within the State; for
rural areas, we will compute the wage index using the average wage
index values from all contiguous CBSAs; and for rural Puerto Rico, we
will use the wage index floor.
c. Wage Index Budget-Neutrality Adjustment
We have broad discretion under section 1881(b)(14)(D)(iv)(II) of
the Act to develop a geographic wage index. In addition, that section
cites the wage index under the basic case-mix adjusted composite
payment system as an example. We have previously interpreted the
statute for the basic case-mix adjusted composite payment system
(section 1881(b)(12)(D) of the Act) as requiring that the geographic
adjustment be made in a budget-neutral manner. In CY 2011, we did not
apply a wage index budget-neutrality adjustment factor under the ESRD
PPS because budget-neutrality was achieved through the overall 98
percent budget-neutrality requirement in section 1881(b)(14)(A)(ii) of
the Act.
Given our authority to develop a wage index under section
1881(b)(14)(D)(iv)(II) of the Act, as well as the authority to use the
geographic index under section 1881(b)(12)(D) of the Act, we proposed
to apply the wage index in a budget-neutral manner under the ESRD PPS
using a wage index budget-neutrality adjustment factor (76 FR 40510).
However, as we discuss in greater detail below, we proposed that under
the ESRD PPS, we would apply the wage index budget-neutrality
adjustment factor to the ESRD PPS base rate.
Under the basic case-mix adjustment composite payment system, we
began applying the wage index budget-neutrality adjustment factor in CY
2006 (70 FR 70171). During the ESRD PPS transition, we proposed to
continue to apply the wage index budget-neutrality adjustment to the
wage index values for the composite rate portion of the ESRD PPS
blended payment for CYs 2012 and 2013 (76 FR 40510). We noted that
continuing to apply the budget-neutrality adjustment to the wage index
for the composite rate portion of the ESRD PPS blended payment allows
ESRD facilities going through the transition to continue to use a
methodology to which they are accustomed.
However, under the ESRD PPS, we believed that applying the wage
index budget-neutrality adjustment factor to the ESRD PPS base rate
would be consistent with the application of the wage index budget-
neutrality adjustment factor in other prospective payment systems. We
also believed that applying the wage index budget-neutrality adjustment
factor to the ESRD PPS base rate is simpler and more straightforward in
application and calculation. Applying the wage index budget-neutrality
adjustment factor to the ESRD PPS base rate produces results that are
not measurably different from applying the adjustment factor to the
wage index, as is done for the composite rate portion of the blended
payment during the transition. We sought

[[Page 70242]]

comment on our proposal to apply the wage index budget-neutrality
adjustment factor to the ESRD PPS base rate for purposes of the ESRD
PPS payments and the ESRD PPS component of the blended payments during
the transition.
We did not receive any comments on our proposal to apply the wage
index budget-neutrality adjustment to the ESRD PPS base rate and to
continue to apply the wage index budget-neutrality adjustment to the
wage index values for the composite rate portion of the blended
payment. Therefore, for CY 2012 and subsequent years, we are finalizing
our proposal to apply the wage index budget-neutrality adjustment
factor to the ESRD PPS base rate for the purposes of the ESRD PPS
payments and the ESRD PPS portion of the blended payment during the
transition. We are also finalizing our proposal to continue to apply
the wage-index budget-neutrality adjustment factor directly to the ESRD
wage index values for the composite rate portion of the blended payment
for CY 2012 and CY 2013.
Because the ESRD wage index is only applied to the labor-related
portion of the composite rate, we computed the wage index budget-
neutrality adjustment factor based on that portion. That is, the labor-
related share of the composite rate portion of the blended payment of
53.711 percent. This labor-related share was developed from the labor-
related components of the 1997 ESRD composite rate market basket that
was finalized in the 2005 PFS final rule (70 FR 70168). The labor-
related share of the ESRD PPS is 41.737 percent labor (that is, the
portion of the ESRD PPS payment rate and the ESRD PPS portion of the
blended payment). As discussed in the CY 2011 ESRD PPS final rule (75
FR 49161), 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. 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 and,
46 percent of the weight for Capital-related Building and Equipment
expenses.
To compute the proposed CY 2012 wage index budget-neutrality
adjustment factors, we proposed to use the fiscal year (FY) 2012 pre-
floor, pre-reclassified, non-occupational mix-adjusted hospital data to
compute the wage index values, 2010 outpatient claims (paid and
processed as of December 31, 2010), and geographic location information
for each facility which, may be found through Dialysis Facility Compare
(76 FR 40510-40511). Dialysis Facility Compare can be found at the
Dialysis Facility Compare Web page on the CMS Web site at http://www.cms.hhs.gov/DialysisFacilityCompare/. The FY 2012 hospital wage
index data for each urban and rural locale by CBSA may also be accessed
on the CMS Web site at http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp. The wage index data are located in the section entitled, ``FY
2012 Final Rule Occupational Mix Adjusted and Unadjusted Average Hourly
Wage and Pre-Reclassified Wage Index by CBSA.''
We did not receive any comments on the methodology used to compute
the budget-neutrality adjustment factors. Therefore, for CY 2012 and
beyond, we are finalizing the methodology we proposed for computing the
CY 2012 wage index budget-neutrality adjustment factors (76 FR 40510
and 40511). Using treatment counts from the 2010 claims and facility-
specific CY 2011 payment rates, we computed the estimated total dollar
amount each ESRD facility would have received in CY 2011. The total of
these payments became the target amount of expenditures for all ESRD
facilities for CY 2012. Next, we computed the estimated dollar amount
that would have been paid for the same ESRD facilities using the final
ESRD wage index for CY 2012. The total of these payments becomes the
new CY 2012 amount of wage-adjusted payment rate expenditures for all
ESRD facilities.
After comparing these two dollar amounts (target amount divided by
the new CY 2012 amount), we calculated two wage index budget-neutrality
adjustment factors that, when multiplied by the applicable CY 2012
estimated payments, would result in aggregate payments to ESRD
facilities that would remain budget-neutral when compared against the
target amount of payment rate expenditures. The first factor was
applied to the ESRD PPS base rate. The second factor was applied to the
wage index values for the composite rate portion of the blended
payment. Therefore, in this final rule, we are finalizing for CY 2012,
the wage index budget-neutrality adjustment factor for the composite
portion of the ESRD PPS blended payment of 1.002830, which is applied
directly to the ESRD wage index values. For the ESRD PPS (that is, for
the full ESRD PPS payments and the ESRD PPS portion of the blended
payments during the transition), we are finalizing the wage index
budget-neutrality adjustment factor of 1.001520 which is applied to the
ESRD PPS base rate. Under the ESRD PPS, the wage index floor for CY
2012 is 0.550 because the wage index budget-neutrality adjustment
factor is applied to the base rate.
As we indicated in the proposed rule (76 FR 40511), because we
apply the wage index budget-neutrality adjustment factor to the wage
index values to ensure budget-neutrality under the composite rate
portion of the blended payment, we also apply the wage index budget-
neutrality adjustment factor to the wage index floor. We note this
would apply to areas in Puerto Rico subject to the floor. Therefore,
for the composite rate portion of the blended payment, we are
finalizing for CY 2012 to apply the wage index budget-neutrality
adjustment factor to the wage index floor of 0.550 which results in an
adjusted wage index floor of 0.552 (1.002830 x 0.550).
d. ESRD PPS Wage Index Tables
The CY 2012 ESRD wage index tables, referred to as Addendum A (ESRD
facilities located in urban areas), and Addendum B (ESRD facilities
located in rural areas) are posted on the CMS Web site at: http://www.cms.gov/ESRDPayment/PAY/list.asp. The wage index tables list two
separate columns of wage index values. One column represents the wage
index values for the composite rate portion of the blended payment to
which the wage index budget-neutrality adjustment factor has been
applied. The other column lists the wage index values for the ESRD PPS,
which does not reflect the application of the wage index budget-
neutrality adjustment factor, because as we discussed above, we apply
the wage index budget-neutrality adjustment factor to the ESRD PPS base
rate.
8. Drugs
a. Vancomycin
In the CY 2011 ESRD PPS final rule (75 FR 49050 through 49052), we
stated that antibiotics used for the treatment of venous access
infections and peritonitis, are renal dialysis services under the ESRD
PPS. Payments for anti-infective drugs in injectable forms (covered
under part B) and oral or other forms of administration (formerly
covered under part D) used in the treatment of ESRD, were included in
computing the final ESRD PPS base rate and, would not be separately
paid under the ESRD PPS. We also noted that the oral versions of
vancomycin are not used for ESRD-related conditions and, therefore,
would not be considered a renal dialysis

[[Page 70243]]

service. We further stated that any anti-infective drug or biological
used for the treatment of ESRD-related conditions would be considered a
renal dialysis service and, not eligible for separate payment. We noted
this policy also applies to any drug or biological that may be
developed in the future. We established edits to ensure that separate
payment could not be made to ESRD facilities for vancomycin which has
traditionally been used by ESRD facilities to treat access infections.
In the proposed rule (76 FR 40511), we acknowledged that since the
publication of the CY 2011 ESRD PPS final rule, we had received
numerous comments indicating that vancomycin is indicated in the
treatment of both ESRD and non-ESRD conditions, such as skin
infections. We further stated that after consultation with our medical
experts, we concurred with the commenters. Therefore, we proposed to
eliminate the restriction on vancomycin to allow ESRD facilities to
receive separate payment by placing the AY modifier on the claim for
vancomycin when furnished to treat non-ESRD-related conditions. In
accordance with ICD-9 guidelines, as described in the ESRD PPS final
rule (75 FR 49107), the ESRD facility would also be required to
indicate the diagnosis code for which the vancomycin is indicated. We
noted that treatment of any skin infection that is related to renal
dialysis access management would be considered a renal dialysis service
and would continue to be paid under the ESRD PPS, and no separate
payment would be made. We sought public comments on our proposal to
eliminate the restriction on vancomycin to allow ESRD facilities to
receive separate payment for these drugs when furnished to treat non-
ESRD-related conditions. The comments we received and our responses are
set forth below:
Comment: Two commenters suggested that we allow for separate
payment for daptomycin when furnished by ESRD facilities for non-ESRD
related conditions.
Response: We thank the commenter for the suggestion to allow for
separate payment of daptomycin when used for non-ESRD related
conditions. As noted above, we had established system edits to ensure
that ESRD facilities could not be paid separately for both vancomycin
and daptomycin. We will consider removing the system edit for
daptomycin in future rulemaking.
Comment: We received six comments in support of our proposal to
eliminate the restriction on vancomycin and allow for separate payment
when furnished for non-ESRD-related conditions.
Response: We thank the commenters for their support. Consequently,
in this final rule we are finalizing the proposal to eliminate the
restriction on vancomycin to allow ESRD facilities to receive separate
payment by placing the AY modifier on the claim for vancomycin when
furnished to treat non-ESRD related conditions. In accordance with ICD-
9 guidelines as described in the CY 2011 ESRD PPS final rule (75 FR
49107), the ESRD facility must indicate the diagnosis code for which
the vancomycin is indicated. We reiterate that treatment of any skin
infection that is related to renal dialysis access management would be
considered a renal dialysis service and would continue to be paid under
the ESRD PPS, and no separate payment would be made.
b. Drug Overfill
In the CY 2011 PFS final rule (75 FR 73466), we explained the
methodology for Part B payment for drugs and biologicals that include
intentional overfill, and that the Medicare average sales price (ASP)
payment limit is based on the amount of drug conspicuously indicated on
the labeling approved by the Food and Drug Administration (FDA). We
indicated that we had become aware of situations where manufacturers
intentionally included a small amount of overfill in drug containers,
and that this overfill is provided at no extra charge to the provider.
We also noted that we understood the intent of the intentional overfill
was to compensate for product loss during the proper preparation and
administration of a drug. We explained that ASP calculations are based
on data reported by manufacturers, including ``volume per item''.
Therefore, providers may only bill for the amount of drug product
actually purchased and the cost that the product represents (75 FR
73467).
We stated in the proposed rule (76 FR 40511) that this part B
provision applies under the ESRD PPS. We explained that ESRD facilities
receiving blended payments under the transition would receive payments
based on ASP for separately billable ESRD drugs and biologicals for the
composite rate portion of the blend. In addition, under the ESRD PPS
outlier policy, the ESRD-related drugs that ESRD facilities report on
claims are priced for the outlier policy using ASP prices. Therefore,
ESRD facilities may only report units and charges for drugs or
biologicals actually purchased.
Comment: Three commenters expressed concern that the drug overfill
policy was not appropriate under the ESRD PPS. One commenter stated
that the use of overfill is an efficient operation and expressed
concern that the new policy would lead to excessive wastage. A
commenter disagreed with our assertion that overfill is provided by
manufacturers without charge to the provider and stated that there
would be additional costs if facilities are not allowed to maximize
drug usage. The commenter believes the cost to providers includes the
full amount of drug in each vial. One commenter stated that dialysis
providers may and should administer overfill if clinically appropriate
to reduce costs and waste. The commenter cited the administration of
EPO as an example. One commenter stated that, ``* * * providers have
been purchasing drugs with overfill amounts and use of the overfill
amount has long been known by both the Office of Inspector General
(OIG) and CMS.''
Response: We disagree with the commenters that believe our proposal
would restrict the clinical use of intentional overfill. As we
indicated in the CY 2011 PFS final rule (75 FR 73467), our policy here
is not intended to limit the use of intentional overfill during the
care of beneficiaries or in medical practice; such measures are beyond
CMS' authority. Rather, the proposed rule merely set forth how and
under what conditions we would make payment under the ESRD PPS outlier
policy. Consistent with prior rulemaking, under our authority in
section 1881(b)(14)(D)(ii) of the Act, we are adopting the ASP policy
on overfill for purposes of calculating the outlier payment. We believe
the use of the ASP policy for purposes of calculating the outlier
payment is appropriate because, for the reasons stated, we believe
overfill does not represent a cost to the facility; thus, overfill
should not factor into our determination of outlier payments. This rule
does not purport to regulate the use of overfill, only whether it is
reimbursed under our outlier policy and the composite rate portion of
the blended payment during the transition. Thus, whether we or the OIG
had information about certain providers' purchase and use of overfill
is irrelevant.
Comment: A large dialysis organization indicated that the drug
overfill policy should not apply to ESRD facilities because the ASP
payment regulation applies to drugs ``not paid on a cost or prospective
payment system basis.'' The commenter contends it would not apply under
the ESRD PPS even though outlier eligible drugs are priced using the
ASP prices established under section 1847A of the Act. The commenter
stated that CMS cannot

[[Page 70244]]

substitute the ASP method for a portion of the ESRD PPS. The commenter
further contends that because dialysis providers may administer
overfill, but CMS's proposal would prohibit them from submitting a
claim that includes overfill, it appears that CMS expects providers
either to inaccurately state the services furnished on the claims form
or incur significant expense to separately track overfill amounts,
which may be used for thousands of patients daily, resulting in
unnecessary burden. The commenter opined that applying the ASP payment
rule under the ESRD PPS is inconsistent with the policy objectives of a
PPS leading to wastage if facilities continue to use single-use vials
or extra expenses if facilities migrate to multi-dose vials.
Response: We disagree with these comments. First, as noted above,
we proposed to incorporate into our outlier policy the policy for
overfill under the ASP methodology; however, our authority to determine
an outlier policy is found in section 1881(b)(14) of the Act, which
calls for a prospective payment basis for renal dialysis services and
authorizes an outlier payment adjustment. Thus, contrary to the
commenter's assertion, we are paying for drugs subject to the ESRD PPS
outlier policy under a prospective payment system, not under section
1847A of the Act. Under the outlier policy, we use the ASP methodology,
which is based upon manufacturer reporting of the labeled amount of a
drug and not any other amount (that is, overfill amount). Therefore, we
are establishing that the ESRD PPS outlier policy does not include an
amount for overfill. Further, the outlier policy was designed to
provide additional payments for high cost patients. To the extent a
patient receives drug amounts at no cost to the facility (that is,
overfill amounts), that amount may not be attributed to the cost of
that patient. Finally, because we are continuing to pay under the
composite rate portion of the blended payment for separately billable
drugs using the ASP payment methodology, we should continue to utilize
the methodology for pricing drugs for the outlier policy.
Second, the commenter's contention about the scope of the
``incident to'' benefit reflects a misunderstanding of our proposal. We
refer the commenter to discussion of the overfill policy in the CY 2011
PFS final rule (75 FR 73469), where we stated that our ASP overfill
policy is not based on the ``incident to'' rules, but rather applies to
all drugs and biologicals paid under section 1847A of the Act,
regardless of setting. The ``incident to'' rules are similarly
irrelevant to our proposal here. Our policy pertains only to how and
whether we pay for drugs under our outlier policy under authority of
section 1881(b)(14)(D)(ii) of the Act.
Third, we disagree with the commenters that our policy will require
ESRD facilities to inaccurately reflect the services they furnish. We
expect that providers will continue to maintain accurate medical
records for all beneficiaries as well as accurate inventory records of
all drugs that were actually purchased and appropriately billed to
Medicare. We acknowledge that separate tracking of overfill may
increase burden on ESRD facilities that were not doing so before.
However, given that we have adopted ASP policies generally for outliers
under the ESRD PPS and we rely on data reported under the ASP
methodology to determine the outlier thresholds, even if we believed
overfill were something other than free product, we would have no
ability to account for it separately.
Finally, we disagree that our policy is inconsistent with waste
reduction. As noted above, our policy does not apply to the use of
overfill; rather, it applies only to whether we pay for overfill under
our outlier policy. ESRD facilities remain free to take steps to reduce
drug wastage and in doing so, reduce their costs in providing ESRD
services--our policy only prevents an ESRD facility from accounting for
something for which it incurred no cost in determining whether it met
the high cost outlier policy.
We are finalizing our proposal to incorporate the ASP overfill
policy into our outlier policy and for purposes of the composite rate
portion of the blended payment during the transition. Thus, ESRD
facilities may only report units and charges for drugs and biologicals
actually purchased.
9. Revisions to Patient-Level Adjustment for Body Surface Area (BSA)
Under section 1881(b)(14)(D)(i) of the Act, the bundled ESRD PPS
must include a payment adjustment based on case-mix that may take into
account patient weight, body mass index (BMI), body surface area (BSA),
and other appropriate factors. In the proposed rule (76 FR 40511 and
40512), we explained that we evaluated height and weight because the
combination of these two characteristics allows us to analyze two
measures of body size: BSA and BMI. We further explained that both body
size measures are strong predictors of variation in payment for ESRD
patients. As a result, in developing the ESRD PPS, we established a
case-mix patient level adjustment for BSA that would be applied to each
0.1 m2 change in BSA compared to the national average.
In the proposed rule (76 FR 40511 and 40512), we proposed to make
one change related to the use of the national BSA average value used in
the calculation of the BSA adjustment applied to the composite rate
portion of the blended payment during the transition. This change was
necessary because we believe that the BSA national average used to
compute payment under the composite rate portion of the blended rate
and under the ESRD PPS should be both the most recent and consistent
measurement available. We further explained that for CY 2011, the BSA
adjustment we calculated for the composite rate portion of the blended
payment used the BSA national average of 1.84, which reflected the
average among Medicare dialysis patients in 2002. However, the BSA
national average we used for computing the BSA under the ESRD PPS was
1.87, which reflected the national average among Medicare dialysis
patients in 2007. We did not realize that we had used 2 different
national averages in CY 2011, nor was it brought to our attention
during the comment period. For CY 2012 and in subsequent years, we
proposed to use one national average for computing the BSA under the
composite rate portion of the blended payment during the transition and
under the ESRD PPS.
In the CY 2004 PFS final rule (69 FR 66329), we explained that the
BSA factor was defined as an exponent equal to the value of the
patient's BSA minus the reference. For example, for a beneficiary with
a BSA of 1.94, using the CY 2011 national average of 1.84 under the
composite rate would yield a BSA adjustment factor of 1.0370. For the
same patient, using the national average of 1.87 used for the CY 2011
ESRD PPS BSA computation would yield a BSA adjustment factor of 1.0258.
A ratio or proportional difference of 1.0258 divided by 1.0370 equals
.9892 difference the between the two BSA adjustment factors. This
corresponds to a reduction of 1.08 percent (1-0.9892 = 0.0108) in the
composite rate payment for adult patients by increasing the BSA
reference value from 1.84 to 1.87.
In Table 3 of the proposed rule (76 FR 40512), we showed the impact
of increasing the composite rate BSA reference value from 1.84 to 1.87
for each year from 2011 to 2014, on facility payments for ESRD
facilities going through the transition. The impact on facility
payments are greatest in 2011, where the blended payment during the
transition period is weighted more

[[Page 70245]]

heavily towards the basic case-mix adjusted composite payment system,
and declines through 2014 when there is no impact on facility payments
under a fully implemented PPS.
Therefore, for CY 2012, we proposed to use the latest national
average (that is, 1.87) as the reference point for the computation of
the BSA adjustment for both the composite rate portion of the blended
payment and for the ESRD PPS (76 FR 40512). We also proposed to review
the BSAs on CY 2012 claims (and every 5 years thereafter) to determine
if any adjustment to the national average would be required in the
future. We sought comments on these proposals. The two comments we
received and our responses are set forth below:
Comment: One organization that represents small dialysis
organizations supported the proposals to use the 1.87 reference point
for computing the BSA and to review the BSA calculation every five
years. One independent ESRD facility opposed the change in the
reference point stating that it will negatively impact facilities that
opted to receive payment under the transition because it will reduce
the composite rate payment. The commenter referenced the table in the
proposed rule that displays the negative effect.
Response: We thank the national organization for its support of our
proposals and appreciate the concerns expressed by the ESRD facility.
We regret that we had not identified the discrepancy in the values used
in the CY 2011 ESRD PFS and CY 2011 ESRD PPS final rules. However, as
we indicated in the CY 2012 proposed rule, we believe the change is
necessary because the BSA national average used to compute the
composite rate portion of the blended payment and under the ESRD PPS
should be both the most recent and consistent measurement available.
After considering the public comments and for the reasons noted
above, in this final rule, for CY 2012, we are finalizing our proposal
to use the BSA national average of 1.87, which is the latest national
average, as the reference point for the computation of the BSA
adjustment for both the composite rate portion of the ESRD PPS blended
payment and for the ESRD PPS. We are also finalizing our proposal to
review the BSA national average on the CY 2012 claims and every 5 years
thereafter to determine if any adjustment to the national average will
be required in the future.
10. Revisions to the Outlier Policy
Section 1881(b)(14)(D)(ii) of the Act requires that the ESRD PPS
include a payment adjustment for high cost outliers due to unusual
variations in the type or amount of medically necessary care, including
variability in the amount of erythropoiesis stimulating agents (ESAs)
necessary for anemia management. In the CY 2011 ESRD PPS final rule, we
stated that for purposes of determining whether an ESRD facility would
be eligible for an outlier payment, it would be necessary for the
facility to identify the actual ESRD outlier services furnished to the
patient by line item on the monthly claim (75 FR 49142).
Medicare regulation Sec. 413.237(a)(1) provides that ESRD outlier
services include: (1) ESRD-related drugs and biologicals that were or
would have been, prior to January 1, 2011, separately billable under
Medicare Part B; (2) ESRD-related laboratory tests that were or would
have been, prior to January 1, 2011, separately billable under Medicare
part B; (3) medical/surgical supplies, including syringes used to
administer ESRD-related drugs, that were or would have been, prior to
January 1, 2011, separately billable under Medicare Part B; and (4)
renal dialysis service drugs that were or would have been, prior to
January 1, 2011, covered under Medicare Part D, excluding ESRD-related
oral-only drugs. Drugs, laboratory tests, and medical/surgical supplies
that we would recognize as outlier services were specified in
Attachment 3 of Change Request 7064, issued August 20, 2010 under
Transmittal 2033. Transmittal 2033 was rescinded and replaced by
Transmittal 2094, dated November 17, 2010. The replacement document
involved the (1) Deletion of several drugs; (2) identified drugs that
may be eligible for ESRD outlier payment; (3) provided a list of
laboratory tests that comprise the AMCC tests; (4) deleted several
laboratory tests; and (5) included the latest version of the ESRD
PRICER layout file. Transmittal 2094 was subsequently rescinded and was
replaced by Transmittal 2134 issued January 14, 2011. That transmittal
was issued to correct the subject on the transmittal page and made no
other changes.
Medicare regulations at Sec. 413.237(a)(2) through (a)(6), and (b)
specify the methodology used to calculate outlier payments. An ESRD
facility is eligible for an outlier payment if its actual or imputed
Medicare Allowable Payment (MAP) amount per treatment for ESRD outlier
services exceeds a threshold. The MAP amount represents the average
incurred amount per treatment for services that were or would have been
considered separately billable services prior to January 1, 2011. The
threshold is equal to the ESRD facility's predicted ESRD outlier
services MAP amount per treatment (which is case-mix adjusted) plus the
fixed dollar loss amount. In accordance with Sec. 413.237(c) of the
regulation, facilities are paid 80 percent of the per treatment amount
by which the imputed MAP amount for outlier services (that is, the
actual incurred amount) exceeds this threshold. ESRD facilities are
eligible to receive outlier payments for treating both adult and
pediatric dialysis patients.
In the CY 2011 ESRD PPS final rule, using 2007 data, we established
the outlier percentage at 1.0 percent of total payments (75 FR 49142
through 49143). We also established the fixed dollar loss amounts that
are added to the predicted outlier services MAP amounts. The outlier
services MAP amounts and fixed dollar loss amounts are different for
adult and pediatric patients due to differences in the utilization of
separately billable services among adult and pediatric patients (75 FR
49140).
a. Revisions Related to Outlier ESRD Drugs and Biologicals
Attachment 3 of Change Request 7064 issued August 20, 2010 under
Transmittal 2033, as modified by Transmittal 2094 issued November 17,
2010 and Transmittal 2134 issued January 14, 2011, specified the former
separately billable Part B drugs that are recognized as ESRD-related
eligible outlier services and, the former Part D drugs by National Drug
Code (NDC) for the three vitamin D analogues (calcitriol, paracalcitol,
and doxercalciferol) and levocarnitine that are recognized as eligible
outlier service drugs.
In the proposed rule (76 FR 40513), we indicated that we had
intended to update both the lists of former part B drugs and
biologicals and former part D drugs that are outlier services (75 FR
49138). However, we concluded that any CMS prepared lists of drugs and
biologicals recognized as outlier services may be difficult to keep up-
to-date. We recognized that this is attributed to the lag in the
receipt of claims data; changes in ESRD practice patterns; and
inadvertent omissions and oversights. Because the regulation defines
eligible outlier service drugs, we believe there is no need for CMS to
issue a list of former separately payable part B ESRD outlier services
drugs. Furthermore, because the list of drugs is

[[Page 70246]]

derived from paid ESRD claims, it would not be comprehensive,
completely represent drugs and biologicals furnished to ESRD patients,
accurate, or up-to-date. We noted that, consistent with current policy,
all composite rate drugs, as defined in the Medicare Benefit Policy
Manual, Pub. 100-02, chapter 11, section 30.4.1, would not be eligible
for an outlier payment, as these drugs would not have been separately
paid under Part B or Part D prior to January 1, 2011, and do not meet
the definition of outlier services. Consequently, we proposed to
eliminate the issuance of a list of former separately payable Part B
drugs and biologicals that would be eligible for outlier payments.
Accordingly, we solicited public comments on our proposal to eliminate
the issuance of a specific list of eligible outlier service drugs which
were or would have been separately billable under Medicare Part B prior
to January 1, 2011.
The comments on our proposal and our responses are summarized
below.
Comment: Two national associations supported the proposal to
eliminate the drug and biological list. Both commenters supported the
creation of a list through guidance. One commenter indicated that the
list would maintain transparency, but recognized that this would create
a rulemaking burden. The commenter further requested that CMS ensure
that process remains transparent and subject to input from
stakeholders.
Response: We thank the commenter's for their support of our
proposal. As we indicated, any CMS prepared lists of drugs and
biologicals recognized as outlier services may be difficult to keep up-
to-date due to the factors described above.
Because we are concerned that a failure to include a drug or
biological on the outlier services list will negatively impact ESRD
facilities by limiting the drugs eligible for the outlier policy, in
this final rule, we are finalizing the proposal to eliminate the
issuance of a specific list of eligible outlier service drugs which
were or would have been separately billable under Medicare part B prior
to January 1, 2011. However, under separate guidance, we plan to
continue to identify renal dialysis service drugs which were or would
have been covered under Part D for outlier eligibility purposes in
order to provide unit prices for calculating imputed outlier services.
With respect to the comment regarding transparency, we recognize
the need to be transparent and have sought input from stakeholders. We
believe that we have been transparent by the inclusion of proposed
changes to outlier drugs and biologicals under the ESRD PPS in the
proposed rule, (76 FR 40513 and 40514) and our request for comments.
Under current policy, antibiotics furnished in the home are
considered to be composite rate drugs and therefore, not eligible for
outlier payment. In the proposed rule (76 FR 40513), we discussed that
Pub. 100-02, chapter 11, section 30.4.1 lists the drugs covered under
the composite rate. The list includes a statement that antibiotics when
used at home by a patient to treat an infection of the catheter site or
peritonitis associated with peritoneal dialysis are considered
composite rate drugs. Because composite rate drugs and their
administration (both the staff time and the supplies) are covered under
the composite rate, antibiotics furnished in the patient's home used
for the reasons noted above may not be billed and paid separately.
However, antibiotics furnished in an ESRD facility are considered
separately payable in accordance the Medicare Claims Processing Manual,
Pub. 100-04, chapter 8, section 60.2.1.1.
We also noted that Pub. 100-02, chapter 11, section 50.9 states
that an antibiotic used at home by a patient to treat an infection of
the catheter site or peritonitis associated with peritoneal dialysis is
covered as home dialysis supplies included in the Method II (Direct
Dealing) payment cap for home dialysis supplies administered by the
Durable Medical Equipment (DME) Supplier. Prior to January 1, 2011,
under Method II, durable medical equipment suppliers received direct
payment from Medicare for furnishing dialysis services to home dialysis
patients. Effective January 1, 2011, as indicated in Sec. 413.210(b)
of the regulations, CMS does not pay any entity or supplier other than
ESRD facilities for covered items and services furnished to a Medicare
beneficiary. Therefore, payment to DME suppliers for antibiotics under
Method II can no longer be made. Additionally, under the ESRD PPS, the
dialysis facility is responsible for furnishing all renal dialysis
services, regardless of the site of service. Under the ESRD PPS, there
is no payment distinction made as to the site where a renal dialysis
service is provided (that is, in the home or in a facility).
Therefore, in the proposed rule, (76 FR 40513 and 40514), we
indicated that we did not believe that it would be appropriate to have
a distinction in which antibiotics administered in an ESRD facility,
used to treat an infection of the catheter or other access site, or
peritonitis associated with peritoneal dialysis, would be considered as
separately billable under the composite rate portion of the blended
payment and eligible for outlier payments under the ESRD PPS, while
antibiotics used at home by home patients for the same purpose would be
considered to be included in the composite rate and not eligible for
outlier payments. We proposed to eliminate the inclusion of antibiotics
when used in the home to treat an infection of the catheter site or
peritonitis associated with peritoneal dialysis as part of the
composite rate drugs, and allow them to be separately paid under the
composite portion of the blended payment for ESRD facilities receiving
payment during the transition. We also proposed that antibiotic drugs
used at home to treat catheter site infections or peritonitis
associated with peritoneal dialysis would be eligible as ESRD outlier
services. Antibiotics furnished in facility would continue to be
recognized as ESRD outlier services.
We solicited comments on our proposal. The comments and our
responses are summarized below.
Comment: One national association and one dialysis organization
agreed with the proposal that home antibiotics to treat catheter site
infections or peritonitis associated with peritoneal dialysis would
qualify as eligible for outlier payment.
Response: We thank the commenter for their support.
In this final rule, we are finalizing the proposal to recognize
antibiotics furnished in the home to treat catheter site infections or
peritonitis associated with peritoneal dialysis as eligible for outlier
payment. We believe the inclusion of antibiotics used by home dialysis
patients as outlier services will reduce confusion over drugs and
biologicals that are eligible outlier services and eliminate the
distinction in the eligibility of a drug for outlier eligibility based
on where it is furnished. As new drugs emerge, we intend to update the
HCPCS codes corresponding to new drugs and biologicals for billing
purposes, and to determine whether any of those drugs would have been
considered to be composite rate drugs. Drugs and biologicals which were
or would have been considered composite rate drugs are not eligible
ESRD outlier services under Sec. 413.237.
In the proposed rule (76 FR 40514), we proposed two modifications
to the computation of the separately billable MAP amounts used to
calculate outlier payments for the reasons described below. We
explained that subsequent to the publication of the CY 2011 ESRD PPS
final rule, our clinical review of the

[[Page 70247]]

2007 ESRD claims used to develop the ESRD PPS revealed that dialysis
facilities routinely used alteplase and other thrombolytic drugs for
access management purposes. Under the ESRD Benefit Policy Manual, Pub.
100-02, chapter 11, section 30.4.1, drugs used as a substitute for any
of the listed items, or are used to accomplish the same effect, are
covered under the composite rate. Because heparin is a composite rate
drug and could be used for access management, any drug or biological
used for the same purpose may not be separately paid. Because outlier
payments are restricted under Sec. 413.237(a) to those items or
services that were or would have been considered separately billable
prior to January 1, 2011, we proposed to recalculate the average
outlier services MAP amounts to exclude these composite rate drugs
(that is, we proposed to exclude thrombolytics from the computation).
We also explained in the proposed rule that in developing the
outlier service MAP amounts for 2011, we excluded testosterone and
anabolic steroids. We subsequently learned from discussions with
clinicians and ESRD facilities, that these drugs can be used for anemia
management. Because drugs used for anemia management in ESRD patients
were or would have been considered separately billable under Medicare
part B, these drugs would be considered outlier services under Sec.
413.237(a)(1). Consequently, we have recomputed the outlier service MAP
amounts for CY 2012 to include these drugs. As shown in Table 2, when
comparing the outlier service MAP amounts based on the current
definition of ESRD outlier services to the revised ESRD outlier
definition, the net effect of these two revisions (the exclusion of
thrombolytic drugs and inclusion of anabolic steroids) results in an
decrease to the outlier service MAP amounts by $4.00 for adult patients
and a decrease of $0.50 for pediatric patients.
We solicited comment on the two modifications to the computation of
the separately billable MAP amounts used to calculate outlier payments
we proposed. The comments received and our responses are set forth
below.
Comment: We received several comments opposing the proposal to
exclude thrombolytic drugs used for access management from the outlier
services MAP amounts and therefore, not eligible for outlier payments.
One national organization believes that there should be a longer
experience with the use of thrombolytics under a bundled system before
excluding them from outlier payments. The commenter stated that when
properly used, these agents may help avoid unnecessary (and expensive)
access procedures and interventions. The commenter further believes
that the outlier payment policy could adversely impact their proper use
and lead to greater vascular access procedures outside of the dialysis
unit and could be ``detrimental to patients' outcomes.''
Response: We do not understand the value that longer experience
with the use of thrombolytics under a bundled system before excluding
them from the outlier policy would provide. We believe that the
determination the furnishing of a drug should be based upon the
patient's needs and remain independent of the outlier policy. We
believe that maintaining vascular access is a renal dialysis service
and ESRD facilities would continue to be responsible for furnishing the
service. We also expect that ESRD facilities would refer patients to
another setting if medically necessary and we would not expect ESRD
facilities to address any and all vascular access complications if
doing so would be unsafe.
With regard to the comment about proper use of thrombolytics, the
efficacy or merit of thrombolytics is not in question with their
exclusion from the outlier policy. We believe that the ESRD PPS
provides an opportunity for ESRD facilities to make decisions based on
the medical need of patients and not on the basis of financial gain.
That is, under current policy, a facility may choose to use a
thrombolytic (alteplase) because those drugs are eligible under the
outlier policy, rather than using an anticoagulant (heparin) which is
not eligible. By no means are we implying that thrombolytics or any
access management drug should not be used when clinically indicated.
But rather, we are saying that payment policy is not intended to
dictate, determine, or influence clinical practice or favor one course
of treatment over another. It is intended to ensure that decisions are
not made solely on the basis of financial gain but based on clinical
judgment.
Finally, as we discussed above, the Medicare Benefit Policy Manual,
Pub. 100-02, chapter 11, section 30.4.1, states that drugs used as a
substitute for any of the listed items or are used to accomplish the
same effect are covered under the composite rate. Because heparin is
included in the composite rate and is used to ensure patency of an
access site and proper flow during the dialysis treatment, as we
discuss in greater detail below, we interpret this provision to mean
that any drug used to ensure patency of an access site and proper flow
during the dialysis treatment and, therefore, would be more properly
considered a composite rate drug.
Comment: An independent ESRD facility noted that alteplase was
separately billable under the composite rate and was not considered
``interchangeable with heparin''. The commenter further indicates that
alteplase had been included in the CY 2011 MAP. Finally, the commenter
indicated that the decision made by this facility to receive payment
under the transition was made in part because alteplase was separately
paid under the composite rate system and CMS included alteplase and
other thrombolytics under the outlier policy.
Response: The commenter is correct that alteplase was separately
billable under the composite payment system and was included in the CY
2011 MAP amounts for the outlier policy. Because we did not propose to
alter that policy with regard to the composite rate portion of the
blended payment and the policy was only discussed in the context of the
outlier policy, we do not believe it would be appropriate to make the
change at this time. Therefore, as indicated above, in CY 2012,
thrombolytics furnished by an ESRD facility will continue to receive
separate payment under the composite rate portion of the blended
payment.
While we acknowledge that in the development of the ESRD PPS,
alteplase was included in the computation of the MAP amounts and
eligible for outlier payments, we proposed to rectify this situation in
the proposed rule because we believe that making one access management
drug eligible for outlier payment while making another ineligible
should not exist. We also note that since heparin predated the use of
thrombolytics in dialysis access patency and management and heparin was
included in the composite rate, we believe that any drug or biological
including other anticoagulants, thrombolytics or any other type of drug
that may be used in the future for access patency and management would
also be considered a composite rate drug.
Comment: One pharmaceutical company indicated that it did not
promote the ``off-label'' use of alteplase in the dialysis setting. The
commenter expressed concern that the proposed change for outlier
payments for alteplase will provide a disincentive for appropriate
vascular access practices and management, resulting in a negative
effect on patients. The commenter stated that the manual cited in the
proposed rule includes a list of specific drugs, heparin is listed but
does not include alteplase or other thrombolytic. The

[[Page 70248]]

commenter further stated that the next section of the manual requires
separate billing for thrombolytics used to declot central venous
catheters. The commenter acknowledged that heparin and alteplase are
used for access management, but the commenter maintained that does not
mean that one substitutes for the other. One example provided by the
commenter is that heparin has been used for 30 years as an
anticoagulant to prevent the blood from clotting as it is being
filtered through the dialyzer and states that the substitute for
heparin flushing is saline, which may be contraindicated in the
dialysis population due to potential blood pressure effects. The
commenter further stated that alteplase is used as a salvage therapy
when a catheter becomes dysfunctional due to presumed thrombosis. The
commenter maintained that alteplase is the ``only thrombolytic
currently marketed that can help lyse a clot and potentially restore
blood flow to a poorly functioning catheter''. The commenter included
Kidney Dialysis Outcomes Quality Initiative (KDOQI) guidelines that all
catheters are ``locked'' with an anticoagulant such as heparin to
prevent thrombosis. The commenter provided the physiological response
to the heparin which they state could result in thrombus formation and
further stated that the guidelines recommend thrombolytic therapy
directed at salvaging the catheter before access replacement. The
commenter cited the pharmacological and indication differences between
the two drugs, as well as potential quality problems that they believe
will occur with the proposed change Finally, the commenter
distinguished between heparin and alteplase by indicating that patient
care technicians (PCTs) administer intravenous heparin while alteplase
is prescribed by a physician and cannot be administered by PCTs.
Response: We did not state in the proposed rule that alteplase was
sometimes used off-label in the dialysis setting; however, we believe
that the commenter may be referring to our statement that ESRD
facilities routinely used thrombolytic drugs for access management
purposes.
In the development of the ESRD PPS, we knew that alteplase and
heparin were pharmacologically different (that is, one is a
thrombolytic lysing clots and the other is an anticoagulant preventing
clots, respectively). However, we believe that both drugs enable the
catheter or graft to function either through clot prevention or clot
degradation and provide effective dialysis vascular access. We are
aware that heparins and thrombolytics have a different mode of action,
with heparin preventing thrombosis and thrombolytics lysing a thrombus
after it has formed. We are also aware that formation of a thrombus in
or around the tip of central venous catheters used for dialysis is one
reason for catheter dysfunction. Appropriate use of heparin by dialysis
facilities can prevent thrombus formation, thus reducing the likelihood
of catheter dysfunction. Heparin use in dialysis has long been part of
the ESRD composite payment system, is relatively inexpensive, and is
widely used as an effective technique for primary prevention of
hemodialysis catheter dysfunction. Thrombolytics (including alteplase),
can be used to lyse or dissolve thrombus, restoring catheter function
in some cases. These agents are very costly and, according to FDA
package insert information, can result in significant bleeding
complications. From the perspective of achieving a clinical result,
maintenance of hemodialysis catheter function, either inexpensive
primary prevention or costly intervention produces interchangeable
results. We believe that payment policy should encourage achievement of
the desired results in the most cost-effective manner, particularly
when the prevention approach reduces risk to Medicare beneficiaries. We
believe that the significant expenditures for thrombolytics suggests
that there are ESRD facilities that may not be adequately applying
established preventive methods (that is, use of heparin) to maintain
hemodialysis catheter access. Inclusion of thrombolytics in the
definition of outlier services and potentially making a facility
eligible for outlier payments supports the continuation of this
practice.
As for the statement about negative outcomes, we believe
maintaining vascular access is a renal dialysis service and therefore,
is included in the ESRD PPS. ESRD facilities are responsible for
furnishing the service. We expect that ESRD facilities would not refer
patients to another healthcare setting for the purpose of maintaining
vascular access. We expect patients to be referred to another setting
if medically necessary. We are not suggesting that ESRD facilities are
expected to address any and all vascular complications, if doing so
would be unsafe for the patient. Finally, as we indicated, we plan to
monitor whether ESRD facilities are continuing to maintain vascular
access as they currently perform.
With regard to the comment on the disincentive to use alteplase
properly, as we noted above, payment policy is not intended to dictate,
determine, or influence clinical practice. We believe that the policy
that any drug or biological used for access management would not be
considered eligible under the outlier policy (that is, excluding
thrombolytics from the outlier policy), would support decision-making
based on medical need and not based upon financial incentives. We
believe that continuing to recognize expensive thrombolytics as outlier
services for purposes of computing outlier payments for ESRD facilities
could create perverse financial incentives to underutilize clot
prevention techniques and overutilize clot lysis techniques in the
course of vascular access maintenance by ESRD facilities.
The commenter is correct that Medicare Benefit Policy Manual, Pub.
100-02, chapter 11, section 30.4.1, does not explicitly list alteplase
or other thrombolytics as composite rate drugs; however, it does state
that drugs used as a substitute for any of the listed composite items
or are used to accomplish the same effect (that is, access patency) are
covered under the composite rate. As we explained in previous
responses, we believe that alteplase and other thrombolytic drugs are
used for access management as is heparin, though we acknowledge that
the physiological action is different. As we explained above, we based
our decision to propose the elimination of thrombolytic drugs from
outlier eligibility because both thrombolytics and anticoagulants are
used to maintain the patency of the dialysis access site. We note that,
at this point, we are not aware of another ESRD-related drug category
which has some drugs covered under the composite while others in the
category are separately billable.
For example, for the category of bone and mineral metabolism, there
are various drugs that can be used. These drugs have the same outcome,
but have different physiological actions to accomplish bone integrity;
some are calcium or calcium analogues while others are phosphorus. The
difference in the bone and mineral metabolism category is that all of
the drugs were separately billable and therefore, eligible under the
outlier policy. Another example is antihypertensives. There are many
antihypertensive drugs which have the same clinical effect of lowering
blood pressure, but how the effect is achieved differs. Beta blockers
by blocking beta adrenergic receptors slow the heart rate and thereby
reduce the force in which the heart muscle contracts leading to a
decrease in blood pressure. Hydrochorothiazide increases the amount of
water removed from the

[[Page 70249]]

blood, causing a decrease in blood pressure. Ace inhibitors prevent the
conversion of ACE I and ACE II. ACE II causes the blood vessels to
constrict. By preventing the conversion, the blood vessels dilate and
lead to a decrease in blood pressure. Antihypertensives are in the
composite rate.
The commenter is also correct that the Medicare Benefit Policy
Manual, Pub. 100-02, chapter 11, section 30.4.2 does list thrombolytics
for declotting central venous catheters as being separately paid. We
cannot address why this payment distinction was made under the
composite rate payment system. However, we do not believe that allowing
some drugs in a drug category (that is, for access management) to be
eligible under the outlier policy while other drugs in the category are
not is sound payment policy. Because a drug was paid separately under
the composite rate system does not mean that it has to be eligible
under the outlier policy under the ESRD PPS. We are not saying that
thrombolytics should or should not be used as their use is a medical
determination. We are merely saying that as a result of classifying
drugs and biologicals into categories (for example, access management),
thrombolytics would no longer be eligible under the outlier policy
beginning January 1, 2012.
As we discussed earlier and in the CY 2011 ESRD PPS final rule (76
FR 49050), under the ESRD PPS, we did not provide a specific ESRD-
related drug list because we recognized that drugs and biologicals
change over time. That is the reason that we categorized drugs and
biologicals based on function, such as access management. In that
regard, heparin (and other clot prevention drugs) and thrombolytics
such as alteplase, despite their pharmacological differences, are all
categorized as access management drugs.). Because there may be other
drugs and biologicals that may be used for access management in the
future that may also have different physiological differences, we also
stated that any drug or biological furnished for the purpose of access
management will be considered a renal dialysis service under the ESRD
PPS. In other words, even if a new drug has a physiological action that
differs from anticoagulants (as heparin) or thrombolytics (as
alteplase), but is used to maintain access patency, we would not
consider such drug to be eligible under the outlier policy.
We disagree with the commenter's argument that patient care techs
(PCTs) can administer heparin as part of standing orders while
alteplase is prescribed by a physician implies that they should not be
considered in the same category. We believe that any medication or any
protocol used for dialysis is prescribed by a medical practitioner and
that differences in who may administer a drug is not an appropriate
distinction that should impact CMS payment determinations.. We are
monitoring access management and will continue to do so.
We have not been convinced by the commenters that we should not
implement the policy to exclude thrombolytic drugs from the outlier
policy. Therefore, in this final rule, we are finalizing our policy to
exclude thrombolytic drugs from the outlier policy and have recomputed
the outlier MAP amounts to reflect this policy change. However, because
we did not propose to exclude separate payment of thrombolytic drugs
under the composite rate portion of the blended payment, separate
payment will be made for thrombolytic drugs under the composite rate
portion of the blended payment in CY 2012.
Comment: One national organization opposed the inclusion of
testosterone and anabolic steroids in the anemia management category
citing that it is not recognized as the standard of care. The commenter
indicated that the forthcoming Kidney Disease: Improving Global
Outcomes (KDIGO) Clinical Practice Guidelines for Anemia and CKD makes
a strong (level 1B) recommendation that testosterone and anabolic
steroids not be used. The commenter further states that the use of
these drugs is not the recognized standard of care and the KDIGO
guidelines would discourage the financial incentives associated with
their use.
Response: We appreciate the concerns expressed by the commenter.
The determination to include drugs in or exclude drugs from a category
is made based on the overall effect of the drug. Standards of care and
appropriate use of any item or service is not within the scope of
payment policy. As we have indicated in responses to comments above, we
expect that ESRD facilities will make decisions based on patient need
and appropriateness of the items and services they furnish. That means
we would not expect that a drug would be furnished for financial
purposes but rather that the drug is medically necessary for the
patient. We expect that medical practitioners will make prescribing
decisions based on appropriate medical decision making. Finally, we
believe that the renal community will work towards achieving the best
medical practice. Nonetheless, we determined that such drugs were
included in the 2007 claims (though the dollar amount was small) and as
a result, proposed to modify the outlier policy.
Therefore, in this final rule, we are finalizing a policy to
include testosterone and anabolic steroids that are used for anemia
management as eligible outlier services and have recomputed the outlier
MAP amounts to reflect this policy change.
b. Exclusion of Automated Multi-Channel Chemistry (AMCC) Laboratory
Tests From the Outlier Calculation
Medicare regulations at Sec. 413.237 provide that ESRD-related
laboratory tests that were or would have been considered separately
billable under Medicare part B prior to January 1, 2011, are eligible
outlier services. Those laboratory tests were specified in Attachment 3
of Change request 7064 issued under Transmittal 2033, as modified by
Transmittals 2094 and 2134. In the CY 2011 ESRD PPS final rule (75 FR
49135 through 49138), we indicated that in order to compute the outlier
payment for laboratory tests, the 50 percent rule is required. In
addition, because the 50 percent rule is necessary to calculate the
composite rate portion of the blended payment during the transition
period, we retained the 50 percent rule to determine whether Automated
Multi-Channel Chemistry (AMCC) panel tests would be considered
composite rate or separately billable for the ESRD PPS portion of the
blended payment (75 FR 49137). The AMCC panel tests and an explanation
of the 50 percent rule are identified in Pub. 100-2, chapter 11,
section 30.2.2. ESRD laboratory billing rules can be found in Pub.
100.04, chapter 16, section 40.6.
The 50 percent rule provides that if 50 percent or more of covered
laboratory tests comprising a panel of AMCC tests are included under
the composite rate payment, then all submitted tests are included
within the composite rate payment and, therefore, none of the
laboratory tests are considered separately billable. Conversely, if
less than 50 percent of the covered panel tests are composite rate
tests, then all AMCC tests submitted for the date of service for that
beneficiary are considered separately billable. In addition, Pub. 100-
2, chapter 8, section 60.1 provides that an AMCC test that is a
composite rate test, but is furnished beyond the normal frequency
covered under the composite rate, is separately billable based on
medical necessity.
We explained in the CY 2012 ESRD PPS proposed rule (76 FR 40514 and
40515), that after publication of the CY 2011 ESRD PPS final rule, we
received

[[Page 70250]]

numerous requests to eliminate the 50 percent rule due to the
commenters' assertions that they were confused about its application.
Unlike specific drugs which are classified as either composite rate or
separately billable for purposes of eligibility under the outlier
policy as discussed above, AMCC laboratory tests may be classified as
either composite rate or separately billable depending upon the
application of the 50 percent rule or the frequency at which the
laboratory test is ordered. Therefore, the determination of ESRD-
related laboratory tests as eligible outlier services depends upon the
number of panel tests furnished or their subsequent classification
based on the application of the 50 percent rule.
Because the AMCC laboratory tests included as eligible under the
outlier policy are determined by the 50 percent rule, and in the
interests of administrative simplification and minimizing confusion, we
proposed to eliminate use of the 50 percent rule for the outlier policy
and exclude the 23 AMCC laboratory tests from the definition of ESRD
outlier services and from the computation of outlier payments. We
proposed that the elimination of the 50 percent rule for the AMCC panel
tests under the ESRD PPS outlier payment policy would result in the de
facto treatment of those tests as composite rate tests. Accordingly, we
proposed to revise Sec. 413.237(a)(1)(ii) of the regulations to
exclude these laboratory tests from the definition of ESRD outlier
services. The 50 percent rule would continue to apply, however, to AMCC
laboratory tests for classification as either composite rate or
separately billable for the purpose of computing the composite rate
portion of the blended rate for ESRD facilities that elected to receive
payments under the transition, because the transition period under the
ESRD PPS would be time limited, and would expire when the transition
period ends. This would occur because all in 2014 ESRD payments would
be based 100 percent on the ESRD PPS and there would no longer be a
need to maintain the distinction between composite rate and separately
billable laboratory services for purposes of applying the 50 percent
rule. The comments we received and our responses are set forth below:
Comment: Two commenters expressed support of the elimination of the
50 percent rule under the outlier policy. One renal dialysis
organization welcomed the elimination of the 50 percent rule. However,
the commenter indicated that, of the 23 AMCC tests, twelve were part of
the composite rate prior to January 1, 2011. The commenter believes
that the other eleven tests should not be considered part of the
composite rate as they are not routinely performed for evaluation of
ESRD. The commenter further explained that it is rare to see all eleven
tests ordered on one patient.
Response: We thank the commenters for their support of our proposal
to eliminate the 50 percent rule under the outlier policy. As we
discussed in the proposed rule (76 FR 40514 through 40515), all 23
laboratory tests were included on the outlier list for the purpose of
the 50 percent rule only. Under our proposal to eliminate the 50
percent rule from the outlier policy, the twelve composite rate
laboratory tests in the AMCC panel would no longer be considered
eligible under the outlier policy. Of the remaining 11 laboratory tests
in the AMCC panel, the majority would not be considered ESRD related.
Therefore, these tests are not eligible under the outlier policy.
Because we did not propose to alter that policy with regard to the
composite rate portion of the blended payment and the policy was only
discussed in the context of the outlier policy, we do not believe it
would be appropriate to make the change at this time. Therefore, in CY
2012, we are retaining the 50 percent rule and the 23 AMCC laboratory
tests for the composite rate portion of the blended payment during the
transition, because the transition period under the ESRD PPS would be
time limited, and will expire when the transition period ends.
In the preamble of the proposed rule (76 FR 40515), we proposed to
revise Sec. 413.237(a)(1)(ii) of the regulations to exclude these
laboratory tests from the definition of ESRD outlier services. However,
in the proposed regulation text of the proposed rule (76 FR 40550), we
proposed revisions to Sec. 413.237 by adding paragraph (a)(1)(v) to
exclude these laboratory tests from the definition of outlier services.
In this final rule, we are finalizing our proposal, but are finalizing
the revision of Sec. 413.237 by adding paragraph (a)(1)(v) to indicate
that as of January 1, 2012, the laboratory tests that comprise the AMCC
panel are excluded from the definition of outlier services.
c. Impact of Final Changes to the Outlier Policy
In the proposed rule (76 FR 40515 and 40516), we showed the impact
of the proposed changes in the outlier policy which were to: (1)
Exclude vascular access management drugs and include anabolic steroids
as eligible outlier service drugs; and (2) exclude the 23 AMCC
laboratory tests from the ESRD outlier services definition. In this
final rule, we are finalizing the revised ESRD outlier services
definition and changes to the outlier policy. The outlier services MAP
amounts and fixed dollar loss amounts included in the proposed rule
were based on 2009 data. In this final rule, we are updating the
outlier services MAP amounts and fixed dollar loss amounts based on
2010 data. The impact of this update is shown in Table 2, which
compares the outlier services MAP amounts and fixed dollar loss amounts
in the proposed rule with the updated estimates for this final rule.
All estimates in Table 2 were inflation adjusted to reflect projected
2012 prices for outlier services.

BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR10NO11.001

BILLING CODE 4120-01-C
Based on the use of updated data for 2010, the average outlier services
MAP per treatment amounts have decreased from $87.83 to $81.73 for
adult patients and slightly from $46.27 to $46.26 for pediatric
patients. These updates largely reflect changes in the utilization of
outlier services for adult and pediatric patients between 2009 and
2010. These changes result in a smaller outlier services MAP amount for
adult patients (decrease from $83.73 to $78.00) and very little change
in the outlier services MAP amount for pediatric patients.
Similarly, the fixed dollar loss amounts which are added to the
predicted MAP amounts per treatment to determine the outlier thresholds
are being updated from $145.25 to $141.21 for adult patients and from
$82.58 to $71.64 for pediatric patients. We estimate that the
percentage of facilities with patient months qualifying for outlier
payments under the current policy will be slightly lower for adult
patients (from 5.5 to 5.4 percent) and higher for pediatric patients
(from 5.0 to 5.7 percent) based on our use of 2010 data.
The update based on 2010 data has a somewhat greater impact on the
outlier policy for pediatric patients compared to adult patients. There
is generally greater sensitivity in the pediatric results due to the
relatively small number of pediatric Medicare dialysis patients overall
(approximately 800 patients nationally). This is especially the case
with the pediatric fixed dollar loss amounts, since the magnitude of
the pediatric fixed dollar loss amounts is basically determined by a
relatively small number of the highest cost pediatric patients. The
somewhat lower pediatric fixed dollar loss amounts based on data from
2010 (as compared with 2009), reflect the tendency to have somewhat
less extreme high cost cases for pediatric patients in the 2010 claims.
The expected result based on this update is that a somewhat larger
percentage of pediatric claims are expected to qualify for outlier
payments

[[Page 70252]]

based on 2010 data, but the average outlier payment among the pediatric
outlier cases will be somewhat lower.

D. Technical Corrections

1. Training Add-On
In the CY 2011 ESRD PPS final rule (75 FR 49062 through 49063), we
explained the rationale for costs associated with self-dialysis
training. On page 49063 of the CY 2011 ESRD PPS final rule, the correct
training add-on amount of $33.44 is listed in our response in column.
However, we inadvertently listed an incorrect training add-on amount of
$33.38 in the third column of page 49063. The correct training add-on
amount is $33.44. Therefore, we are correcting the training add-on
amount to $33.44 in the third column on page 49063 of the CY 2011 ESRD
PPS final rule, for costs associated with self-dialysis training on or
after January 1, 2011. The geographic wage index is applied to the
$33.44. As described in the CY 2011 ESRD PPS final rule (75 FR 49063),
the training add-on amounts after application of the wage index would
range from $20.03 to $45.84.
Although we did not propose any changes to the current training
add-on (other than noting the technical correction), we received 12
comments from patients and a home training organization. The comments
we received and our responses are set forth below:
Comment: Two commenters supported the technical correction to the
training add-on amount. Some comments recommended changes to the
training add-on which included updating the training add-on to keep
pace with inflation by applying the update directly to the training
add-on or by re-calculating the hourly nurses time using the
methodology employed in the CY 2011 ESRD PPS final rule. One commenter
stated that the training add-on is outside of the bundled base rate and
therefore, is not captured in the annual market basket update. One home
training organization stated that they were disappointed with home
training reimbursement. The commenter also indicated that the allowable
home training payments cannot be billed because of issues with the
submission requirements for the ESRD Medical Evidence form for new
patients. A home training organization, patients, families and a
national association believe that training treatments should be paid at
the prescribed frequency and not limited to three days per week, up to
the allowable number of days. One commenter maintained that her clinic
was losing money on training and therefore their time should be
compensated appropriately. Another commenter believes that the home
training add-on adjustment did not come close to capturing the costs of
training. Several commenters maintained that training should be for
more than one hour of nursing time. Several commenters believe that the
training add-on adjustment is inadequate.
Response: As we indicated in the proposed rule (75 FR 40516), we
were providing a technical correction to note the correct amount of
$33.44 for training treatments furnished on or after January 1, 2011.
We did not propose any change in the methodology or the training add-on
adjustment. Thus, the suggestions and comments received are beyond the
scope of this final rule. However, we will take these comments into
account in future rulemaking. Also note, the training add-on adjustment
is adjusted by geographic wage index to account for a nurse's salary
for one-hour of home dialysis training. This adjustment applies to both
hemodialysis and peritoneal dialysis home training and is paid in
addition to the ESRD PPS payment. That is, ESRD facilities receive a
per-treatment payment, that accounts for case-mix, geographic location,
low-volume and outlier payments, regardless if the patient receives
dialysis at home or in a facility, plus the training add-on. We also
note that staff time is included in the per treatment payment amount
and, the training add-on is in addition to that amount.
2. ESRD-Related Laboratory Test
In the proposed rule (76 FR 40516), we noted that we inadvertently
omitted an ESRD-related laboratory test from Table F: ESRD-Related
Laboratory Tests of the Appendix in the CY 2011 ESRD PPS final rule. We
explained that the ``Assay of protein by other source,'' which is
identified by the Current Procedural Terminology code 84157, was a
composite rate service under the basic case-mix adjusted composite
payment system and, consequently, is considered a renal dialysis
service under the ESRD PPS effective January 1, 2011. Therefore, the
``Assay of protein by other source'' should be furnished by the ESRD
facility, either directly or under arrangement by another entity, to
the ESRD patient and paid for under the ESRD PPS payment.
We did not receive any comments. In this final rule, we are
correcting Table F of CY 2011 ESRD PPS final rule by adding, ``Assay of
protein by other source'' identified by the Current Procedural
Terminology code 84157.

E. Clarifications to the CY 2011 ESRD PPS

1. ICD-9-CM Diagnosis Codes
In the proposed rule, we discussed the ICD-9-CM diagnosis codes
that are eligible for the co-morbidity payment adjustments (76 FR
40516). We provided the list of ICD-9-CM codes that are recognized for
purposes of the co-morbidity payment adjustments in Table E: ICD-9-CM
Codes Recognized for a Co-morbidity Payment Adjustment of the Appendix
of the CY 2011 ESRD PPS final rule (75 FR 49211). Although we discussed
ICD-9-CM coding to be used to identify co-morbidity conditions on ESRD
claims, we did not indicate that we would update the existing
diagnostic categories and ICD-9-CM codes on an annual basis.
We clarified that the ICD-9-CM codes are subject to the annual ICD-
9-CM coding changes that occur in the hospital inpatient PPS final rule
and effective October 1st of every year (76 FR 40516). We explained
that any changes that affect the categories of co-morbidities and the
diagnoses within the co-morbidity categories that are eligible for the
co-morbidity payment adjustments will be communicated to ESRD
facilities through sub-regulatory guidance. In the proposed rule, we
also explained that in response to comments we have received, we
believed that it was important to reiterate the discussion of co-
morbidities that was detailed in the CY 2011 ESRD PPS final rule (75 FR
49094 through 49107). Therefore, we explained that ESRD facilities
should continue to provide documentation in the patient's medical/
clinical record to support any diagnosis recognized for a payment
adjustment, because this is a requirement to receive the co-morbidity
payment adjustment. As we discussed in the proposed rule, we have been
and will continue to monitor the prevalence of any co-morbidity
diagnoses recognized for the co-morbidity payment adjustments under the
ESRD PPS as compared to the prevalence of these categories over the
past several years. Therefore, we would be able to identify any changes
in the prevalence of any of the co-morbidity diagnoses recognized for
purposes of the co-morbidity payment adjustment as compared to previous
trends. We are monitoring the co-morbidities eligible for payment
adjustment to determine if the co-morbidity adjustments need to be
refined in future rulemaking. We did not receive any comments on this
clarification.

[[Page 70253]]

2. Emergency Services to ESRD Beneficiaries
In the CY 2011 ESRD PPS final rule (75 FR 49056), we explained that
inpatient services, emergency services, and outpatient services
furnished in a hospital or in an ambulatory surgical center furnished
to ESRD beneficiaries were not included in the ESRD PPS base rate, and
none of these services are considered renal dialysis services for
inclusion in the ESRD PPS payment bundle. These services are reimbursed
under other Medicare payment systems. We also explained that certain
outpatient procedures necessary to maintain vascular access (that is,
those which cannot be addressed by the ESRD facilities using procedures
that are considered part of routine vascular access care), are excluded
from the definition of renal dialysis services and are not included in
the ESRD PPS payment. However, we consider the furnishing of certain
medications, such as those used to flush a vascular access site of an
ESRD patient, to fall within the definition of renal dialysis services.
As we discussed in the section on consolidated billing rules and
edits in the CY 2011 ESRD PPS final rule (75 FR 49168), the ESRD PPS
payment is an all-inclusive payment for renal dialysis services and the
ESRD facility is responsible for all of the ESRD-related services that
a patient receives. Payment for renal dialysis services under the ESRD
PPS, including those that were formerly paid separately under the basic
case-mix adjusted composite payment system, is no longer made to
entities other than the ESRD facility (such as laboratories and DME
suppliers).
In the proposed rule (76 FR 40517), we noted that after the
publication of the CY 2011 ESRD PPS final rule, we received requests
that we further clarify whether certain renal dialysis services
furnished in an emergency room or emergency department are considered
renal dialysis services covered under the ESRD PPS. Accordingly, we
further clarified that renal dialysis services defined at Sec. 413.171
of the regulations include diagnostic laboratory tests. In developing
the ESRD PPS base rate, we included payments for outpatient laboratory
tests billed on ESRD facility claims, as well as laboratory tests
ordered by monthly capitation payment (MCP) physicians and billed on
carrier claims (75 FR 49055), because we believe that these diagnostic
laboratory tests furnished by ESRD facilities and MCPs meet the
definition of renal dialysis services. We did not include laboratory
tests ordered for Medicare ESRD patients undergoing treatment in
hospital emergency departments or emergency rooms, because these tests
are usually administered as part of a patient's clinical assessment of
the condition requiring emergency room admission, which we believe are
not generally related to the treatment of ESRD. Therefore, laboratory
tests that are performed for Medicare ESRD beneficiaries in an
emergency situation in an emergency room or emergency department as
part of the general work-up of the patient, were excluded from the ESRD
PPS payment bundle, and would not be considered renal dialysis services
under the ESRD PPS.
We acknowledged in the proposed rule that laboratory tests that
could be used during dialysis and ordered for the treatment of ESRD
also may be ordered for ESRD patients in an emergency department or
emergency room for other reasons (that is, as part of the assessment of
the patient to obtain a diagnosis of the underlying condition which
required emergency intervention). Although such tests could also be
used in dialysis treatment and in the treatment of ESRD, because
laboratory tests ordered for ESRD patients treated in emergency
departments or emergency rooms are needed to arrive at a diagnosis of
the condition requiring emergency treatment, we did not consider the
laboratory tests as renal dialysis services under the ESRD PPS.
Accordingly, these laboratory tests were not used to develop the ESRD
base rate. We indicated that we would not expect that the laboratory
tests provided in that circumstance to be subject to consolidated
billing edits, resulting in denial of payment. That is, we would not
consider such tests to be renal dialysis services in those emergency
situation because they were not ordered for the treatment of ESRD, but
instead, furnished as part of the general work-up of the patient
necessary for diagnosis.
We further explained in the proposed rule that the exclusion of
laboratory tests ordered in hospital emergency rooms or emergency
departments from the consolidated billing edits did not mean that renal
dialysis facilities should attempt to circumvent the application of the
bundled ESRD PPS rate by directing patients to emergency rooms or
emergency departments for obtaining ESRD-related laboratory tests, or
the provision of other renal dialysis services. Because ESRD facilities
are financially responsible for all renal dialysis laboratory tests,
referring ESRD patients to the emergency room or emergency department
for ESRD-related laboratory tests would be inappropriate. We noted that
it would also be inappropriate for ESRD facilities to refer its
patients to the emergency room or emergency department for maintenance
of access sites (including treatment for access infections) which they
had treated prior to the ESRD PPS for the purpose of diverting costs of
providing renal dialysis services to their patients, or the
administration of drugs that are considered renal dialysis services
under the ESRD PPS. We also stated that we are monitoring the provision
of renal dialysis services to ESRD patients in emergency rooms or
emergency departments.
We did not solicit comments on emergency services to ESRD
beneficiaries; however, we received four comments from national
organizations. A summary of the comments we received and our responses
to comments are set forth below.
Comment: Several commenters representing hospital organizations
endorsed CMS' policy not to apply the consolidated billing rules to
items and services furnished to ESRD patients in hospital emergency
rooms or emergency departments for reasons other than the treatment of
ESRD. One commenter supported CMS's recognition that the ESRD PPS
consolidated billing rules do not apply to patients in the emergency
department. One commenter supported the exclusion of services provided
in an emergency room from the definition of renal dialysis services
under the ESRD PPS. One commenter appreciated the clarification
that''``legitimate'' non-ESRD laboratory tests in emergency rooms,
hospitals, and ambulatory care centers are not part of the ESRD PPS.
Another commenter agreed that hospital emergency department claims are
excluded from the ESRD consolidated billing edits. The commenter
suggested modeling specific guidance from the skilled nursing facility
(SNF) consolidated billing guidance. The commenter believed that that
medication administration should not be included in the ESRD PPS
consolidated billing stating that the administration of medications
other than EPO or Aranesp would be directly related to the emergency
condition. The commenter stated that the application of the AY modifier
is a huge operational burden for hospitals and often they are unaware
that patients have ESRD.
Response: We thank the commenters who supported our clarification
of consolidated billing under the ESRD PPS. However, some commenters
have misunderstood our clarification. In the proposed rule (76 FR
40517), we explained that we understood that laboratory tests that
could be used for dialysis could also be ordered for ESRD

[[Page 70254]]

patients in an emergency room or emergency department for reasons other
than the treatment of ESRD in order to arrive at a diagnosis. We stated
that we recognize that laboratory tests ordered for ESRD patients in
emergency room or emergency department that are needed to arrive at a
diagnosis would not be considered renal dialysis services under the
ESRD PPS and, therefore, would not be subject to consolidated billing.
We further explained that the exclusion of laboratory tests that are
ordered in an emergency room or emergency department and excluded from
consolidated billing edits does not mean that renal dialysis facilities
should attempt to circumvent the ESRD PPS bundled payment rate by
directing patients to the emergency room or emergency department for
ESRD-related laboratory tests.
We have not included drugs or any other renal dialysis item or
service in the consolidated billing rule exemptions when furnished in
an emergency room or emergency department. In other words, the only
services that we have excluded from the consolidated billing edits are
laboratory tests that are performed in an emergency room or emergency
department to determine a diagnosis. We are not discussing any other
outpatient setting other than an emergency room or emergency
department. We will consider the inclusion of renal dialysis drugs
(that is, drugs used for ESRD-related conditions) furnished in the
emergency room or emergency department exemption in future rulemaking.
With regards to the suggestion that we follow the SNF consolidated
billing guidelines, we will be issuing guidance on the consolidated
billing exemption of laboratory tests ordered in an emergency room or
emergency department for the purpose of establishing a diagnosis.
Finally, with regard to the comment on the burden of using an AY
modifier for non-ESRD-related items and services, we believe it is
important that we assure that duplicate payments are not being made for
items and services that have been included in the ESRD PPS bundled
payment. At the current time, the use of the AY modifier is the only
means that can be used in order to clearly identify items and services
that are not ESRD-related.

F. Miscellaneous Comments

Comment: One commenter expressed disappointment that CMS did not
remind ESRD facilities of the November 1, 2011 deadline to elect to be
excluded from the transition.
Response: We believe that the decision to receive a blended payment
under the transition or to receive payment under the ESRD PPS was a
very important business decision for ESRD facilities and that a
reminder was not necessary.
Comment: One national association urged CMS to consider the
concerns of facilities in the transition and make adjustments to the
proposed rule when it may impact their financial viability and ability
to provide quality patient care.
Response: We always assess the degree to which our proposed
policies negatively impact categories of ESRD facilities such as rural,
independent, pediatric, and transitioning ESRD facilities and are
committed to developing payment policies that are fair and lead to
increased payment accuracy under the ESRD PPS.
Comment: One independent ESRD facility did not believe that ESRD
facilities should be held to the one-time election if changes are made
annually. The commenter proposed that the one-time election be made on
an annual basis or for those facilities that will be
``disproportionately negatively impacted'' by the proposed changes. The
commenter further stated that the ability to rescind decisions made in
2010 should be made available.
Response: Section 1881(b)(14)(E)(ii) of the Act prohibits us from
allowing facilities to submit annual elections or to rescind elections.
Therefore, we are unable to allow changes to the election under any
circumstance. With regard to annual changes to the ESRD PPS, we did not
state that CMS would not make any changes to the composite rate portion
of the blended payment or to the ESRD PPS. We believe there are changes
finalized in this rule (such as eliminating a site of service
distinction with regard to separate payment for antibiotics used for
access infection and, eliminating the 50 percent rule under the outlier
policy) that will result in positive effects to transitioning
facilities.
Comment: One patient organization stated that bundling has already
negatively impacted patients. The commenter further states that
providers have in large part changed prescribed medications to the
detriment of patients. The commenter cited changing practices of
providing analog vitamin D and iron as examples.
Response: We are concerned about the comments made by this
organization. We expect that ESRD facilities through their
interdisciplinary teams and through the patient's nephrologist will
ensure that patients receive the care that they require. We are
monitoring many aspects of the ESRD PPS, including outcomes. We
encourage patients to contact their ESRD Network if they are concerned
about the care that they are receiving from their ESRD facilities.
Comment: Several commenters requested that the rate-setting and
impact files at the provider level be provided to allow for
transparency. The commenters indicated that they did not have the data
to evaluate the proposed rule and offer suggestions to improve the
bundled system. One commenter cited the need for the rate-setting file
to allow for evaluating the proposed changes to the low-volume
adjuster. The commenter further stated that their findings differed
from CMS and expressed concern that CMS may have overestimated the low-
volume adjuster in the standardization calculation leading to funds
being taken out of the payment system inappropriately. One dialysis
organization expressed their concern that small providers may not have
the resources to identify outliers and place them on claims. The
commenter urged CMS to show data that outlier payments were helping
small providers. The commenter further stated that if small providers
were not receiving outlier payments, then it may be best for funds
allocated for outliers be made part of the base rate. One commenter
stated that they remain concerned that some proposed policies continue
to result in a loss of funds from the ESRD program that exceeds the
Congressionally-mandated two percent for CY 2011.
Response: We do not agree with the assertions that CMS provided
inadequate data to evaluate and comment on the proposals described in
the proposed rule. We believe that the discussions and explanations in
the proposed rule are sufficiently detailed to provide an adequate
explanation as to how values were computed. In addition, we posted a
provider-level impact file on the ESRD Payment Web site which was used
to create the proposed impact analysis. We acknowledge that we may not
have provided sufficient notification that the files were available
and, therefore, in the future, we plan to provide a listserv
notification to inform stakeholders when these files are available on
the ESRD Payment Web site. As we did for CY 2011, we will post the
provider-level file that will allow further analysis of the impact of
the final outlier and wage index changes for CY 2012 on individual
providers.
We have not made the rate setting file available because the
release of patient identifiable data is not necessary to accomplish the
purpose of analyzing our proposals. Applicable Federal privacy laws and
regulations, including

[[Page 70255]]

the Privacy Act and HIPAA Privacy Rule only permit us to disclose
personal identifiable information when it is necessary to administer
the program, or for health care operations and payment.
We believe that some of the concerns raised by the commenters are
related to the assumptions we made in computing the final base rate for
CY 2011 where we standardized the base rate to account for the
projected payments for the ESRD PPS adjustments. These concerns are
beyond the scope of this final rule.
With regard to the commenters' claims that we had overstated the
low-volume adjustment in the standardization calculation leading to
funds being inappropriately taken out of the payment system, we
explained the low volume methodology in great detail in the CY 2011
ESRD PPS proposed rule (74 FR 49969 through 49978) and in the CY 2011
ESRD PPS final rule (75 FR 49117 through 49125). We did not propose to
change or modify the low-volume adjuster methodology for CY 2012. We
note that we are monitoring the extent to which the low-volume and
other ESRD PPS adjustments are consistent with the assumptions we made
in developing the ESRD PPS. We will address this issue in future
rulemaking.
We do not understand the comment that suggested that the proposed
policies continue to result in a loss of funds from the ESRD program
that exceeds the Congressionally-mandated two percent, because the two-
percent reduction only applied to CY 2011.
Comment: Some commenters provided comments on issues that were not
addressed in the proposed rule. These are summarized as follows. Some
commenters suggested that the extra costs associated with patient non-
compliance should be addressed. Some commenters advocated for inclusion
of their products in the ESRD bundled payment. Other commenters
believed that there should be a new technology adjustor and provided
suggestions such as including new pharmaceutical agents into the base
rate; providing for incremental payments for innovations that improve
clinical outcomes, but do not reduce costs to dialysis facilities
immediately; and a non-budget-neutral pass-through for new technology.
One commenter suggested that we include over-the-counter nutritional
support in the PPS as of January 1, 2012. Several commenters maintained
that oral drugs for long term residents with ESRD should be dispensed
by the Long Term Care pharmacy. Several commenters declared that CMS
provide a statement indicating that future updates to items and
services in the bundle will be made through rulemaking rather than
guidance and, requested that CMS specify how future changes to the
system will be handled. One commenter supported a race/ethnicity
adjuster and provided their rationale on its inclusion. Another
commenter urged CMS to examine time on machine, nutritional services,
social work services and nursing services. One commenter requested that
CMS explore broader ESRD bundles, such as integrated care models.
Several commenters expressed difficulty of documenting co-morbidities
and suggested that CMS provide the adjusters to the providers. Finally,
some commenters expressed concerns about the ESRD cost report and with
the anticipated funding of oral-only drugs.
Response: Because these comments were not in response to any
proposals or discussions in the proposed rule, they are beyond the
scope of this final rule. However, we refer the commenters to the CY
2011 ESRD PPS final rule where we believe that we addressed many of
these issues (75 FR 49030). We also note that we will review all of the
comments and may address them in future rulemaking.
Comment: One individual commenter supported the proposed rule. One
national association supported the case-mix adjusted PPS. Another
national association expressed their pleasure with the way in which CMS
has implemented the first year of the ESRD PPS and the agency's
willingness to work with the ESRD community.
Response: We thank the commenters for their support and willingness
to work with CMS in implementing the ESRD PPS.

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

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

For over 30 years, monitoring the quality of care provided to end-
stage renal disease (ESRD) patients and provider/facility
accountability have been important components of the Medicare ESRD
payment system. The ESRD Quality Incentive Program (QIP), required by
section 1881(h) of the Social Security Act (the Act), is the next step
in the evolution of the ESRD quality program that began more than three
decades ago. The first year for which the ESRD QIP payment reduction
will be implemented is PY 2012. The PY 2012 ESRD QIP was finalized in
two regulations: one that finalized the three performance measures (75
FR 49030, 49182 (August 12, 2010) (hereinafter referred to as the ``CY
2011 ESRD PPS final rule'')); and one that finalized other aspects of
the 2012 ESRD QIP such as the scoring methodology and payment reduction
scale (76 FR 628 through 646) (hereinafter referred to as the ``2012
ESRD QIP final rule''). Section 1881(h) of the Act, as added by section
153(c) of MIPPA, generally requires that the Secretary establish an
ESRD QIP by (i) Selecting measures; (ii) establishing the performance
standards that apply to the individual measures; (iii) specifying a
performance period with respect to a year; (iv) developing a
methodology for assessing the total performance of each provider/
facility based on the performance standards with respect to the
measures for a performance period; and (v) applying an appropriate
payment reduction to providers and facilities that do not meet or
exceed the established Total Performance Score.
As we have stated, the first year for which the ESRD QIP payment
reduction will be implemented is PY 2012, and we selected one measure
for the PY 2012 ESRD QIP of dialysis adequacy and two measures of
anemia management. The following are the three measures (finalized in
the CY 2011 ESRD PPS final rule) for the PY 2012 ESRD QIP:
Percentage of Medicare patients with an average hemoglobin
less than 10.0 g/dL (Hemoglobin Less Than 10 g/dL measure).
Percentage of Medicare patients with an average hemoglobin
greater than 12.0 g/dL (Hemoglobin Greater Than 12 g/dL measure).
Percentage of Medicare patients with an average urea
reduction ratio (URR) equal to or greater than 65 percent (URR
Hemodialysis Adequacy measure).
A full description of the methodologies used for the calculation of
the measures can be reviewed at: http://www.dialysisreports.org/pdf/esrd/public/Guide_to_the_PY_2012_ESRD_QIP_PSR.pdf (see the
``Inclusion Criteria'' and ``Calculation Process'' sections of the
document).
Other aspects of the 2012 ESRD QIP finalized in the PY 2012 ESRD
QIP final rule include the establishment of performance standards for
these measures (including applying the special rule under section
1881(h)(4)(E) of the Act) and establishing a scoring methodology for
calculating individual Total Performance Scores ranging from 0-30
points based on the three finalized measures. As part of our
methodology for calculating the provider/facility Total Performance
Score, we weighted the Hemoglobin Less Than 10 g/dL

[[Page 70256]]

Measure at 50 percent of the score, while the Hemoglobin Greater Than
12 g/dl measure and the URR Hemodialysis Adequacy measure were each
weighted at 25 percent of the score. We also finalized a policy under
which providers/facilities that did not meet or exceed a Total
Performance Score of 26 points would receive a payment reduction
ranging from 0.5 percent to 2.0 percent.

B. Summary of the Proposed Provisions and Responses to Comments on the
End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP) for PY
2013 and PY 2014

On July 8, 2011, a proposed rule entitled ``Medicare Program;
Changes to the End-Stage Renal Disease Prospective Payment System for
CY 2012, End-Stage Renal Disease Quality Incentive Program for PY 2013
and PY 2014; Ambulance Fee Schedule; and Durable Medical Equipment''
(76 FR 40498) (the ``proposed rule'') appeared in the Federal Register.
In the proposed rule, we expanded upon the PY 2012 ESRD QIP framework
by proposing to adopt new ESRD QIP requirements for PYs 2013 and 2014.
We received approximately 88 public comments on the proposed rule
that were related to the ESRD QIP. Interested parties that submitted
comments included dialysis facilities, national organizations
representing dialysis facilities, nephrologists, nurses, nutritionists,
home health agencies, dialysis corporations, clinical laboratories,
pharmaceutical manufacturers, hospitals and their representatives,
individual dialysis patients, advocacy groups, and the Medicare Payment
Advisory Commission (MedPAC). In this section of the final rule, we
provide a summary of each proposed requirement for the PY 2013 and PY
2014 ESRD QIP, a summary of the public comments received on those
requirements, our responses to these comments, and the final policies
that will apply to the PY 2013 and the PY 2014 ESRD QIP.
1. PY 2013 ESRD QIP Requirements
In the proposed rule, we outlined the proposed requirements for the
two proposed measures for the PY 2013 ESRD QIP. We proposed that ESRD
providers and facilities that do not meet these requirements would
receive a reduction, based on their Total Performance Score, to the
payments otherwise made under section 1881(b)(14) with respect to PY
2013 services, in accordance with section 1881(h)(1)(A) of the Act. We
proposed to calculate these payment reductions by assigning each
provider/facility a Total Performance Score, ranging from 0-30 points,
in accordance with its individual performance on the two proposed
measures. We proposed that a provider/facility that does not achieve a
Total Performance Score of 30 points would receive a payment reduction
in PY 2013 ranging from 1.0 percent to 2.0 percent, depending upon how
far below this minimum Total Performance Score its performance falls.
Our specific proposals, responses to comments, and finalized policies
based on comments, are discussed below.
a. Performance Measures for the PY 2013 ESRD QIP
Section 1881(h)(2)(A) of the Act requires that the measures
specified for the ESRD QIP include measures on anemia management that
reflect the labeling approved by the FDA for such management; measures
on dialysis adequacy; to the extent feasible, a measure or measures on
patient satisfaction; and such other measures that the Secretary
specifies, including (to the extent feasible) measures on iron
management, bone mineral metabolism, and vascular access, including
maximizing the placement of arterial venous fistula. In selecting
measures for the PY 2013 ESRD QIP, we examined whether it would be
feasible to propose to adopt any new measures for the program. In light
of our proposal to select CY 2011 as the performance period (discussed
more fully below), we determined that it is not feasible to adopt any
of the new measures mentioned above until the PY 2014 ESRD QIP. We also
carefully reexamined the three measures that we adopted for the PY 2012
ESRD QIP, and for the reasons discussed below, proposed to continue
including only two of them, (i) The Hemoglobin Greater Than 12 g/dL
measure and (ii) the URR Hemodialysis Adequacy measure, in the PY 2013
ESRD QIP measure set.
We also proposed to retire the Hemoglobin Less Than 10 g/dL measure
beginning with the PY 2013 ESRD QIP. As we explained in more detail in
the proposed rule (76 FR 40519), we have recently reassessed the
evidence for the use of erythropoiesis stimulating agents (ESAs) in
patients with kidney disease through a National Coverage Analysis (CAG-
00413N) and, while we did not seek to limit the coverage of these
agents at this time, we could not identify a specific hemoglobin lower
bound level that has been proven safe for all patients treated with
ESAs. In addition we believe that retiring the Hemoglobin Less Than 10
g/dL measure is reflective of the new labeling approved by the FDA for
the use of ESAs (http://www.fda.gov/Drugs/DrugSafety/ucm259639.htm). We
discussed with the FDA our proposal to retire the Hemoglobin Greater
Than 10 g/dL measure starting in PY 2013. Because this measure
encourages providers/facilities to keep hemoglobin above 10 g/dL, the
FDA agreed that retiring this measure is consistent with the new
labeling for ESAs approved by the FDA.
We proposed to maintain the Hemoglobin Greater Than 12g/dL measure
as a measure of anemia management. As we explained in more detail in
the proposed rule (76 FR 40519), the studies continue to show that
targeting hemoglobin levels above 12 g/dL through the use of ESAs can
contribute to adverse patient outcomes.\1\ This measure, consistent
with the requirement under section 1881(h)(2)(A)(i) of the Act, also
continues to reflect the labeling approved by the FDA for anemia
management.
---------------------------------------------------------------------------

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

We also proposed to retain the URR Hemodialysis Adequacy measure,
which assesses the percentage of Medicare patients with an average URR
equal to or greater than 65 percent. Section 1881(h)(2)(A)(i) of the
Act states that the measures specified under the ESRD QIP for a payment
year shall include measures on dialysis adequacy. We noted that, for
the reasons stated in the CY 2011 ESRD PPS final rule (75 FR 49182), we
believe that the URR Hemodialysis Adequacy measure is an appropriate
and accurate measure of hemodialysis adequacy.
The comments we received on these proposals and our responses are
set forth below. The comments on and the responses to the Hemoglobin
Greater Than 12 g/dL measure also apply to the proposal to include this
measure in the PY 2014 ESRD QIP.
Comment: Many commenters urged CMS to retire the URR Hemodialysis
Adequacy measure for PY 2013 in favor of a Kt/V measure because Kt/V is
widely accepted, is used extensively by the renal community as a
measure of dialysis adequacy, and is the basis for a measure endorsed
by the National Quality Forum (NQF). One commenter specifically noted
that there are situations in which patients may have a Kt/V within an
acceptable range, but not a URR equal to or greater than 65 percent.
One commenter suggested that, if CMS does retire the URR dialysis
adequacy measure for the PY 2013

[[Page 70257]]

ESRD QIP, the agency should consider allowing facilities to report
either URR or Kt/V.
Response: We thank the commenters for their input on this issue. We
agree that a Kt/V dialysis adequacy measure would more accurately
measure how much urea is removed during dialysis because the
calculation takes into account the amount of urea removed with excess
fluid. We asked providers/facilities to begin submitting Kt/V data on
July 1, 2010, and plan to incorporate measure(s) based on Kt/V as soon
as we can to ensure the validity and consistency of these data. In the
interim, for the reasons stated in the CY 2011 ESRD PPS final rule (75
FR 49182), we believe that the URR Hemodialysis Adequacy measure is,
overall, an appropriate and accurate measure of hemodialysis adequacy.
Comment: Many commenters voiced concern over CMS' proposal to
retire the Hemoglobin Less Than 10 g/dL measure. One commenter
specifically stated that CMS should consider the effects of retiring
this measure on pediatric patients. Commenters noted that without a
lower bound for hemoglobin in the ESRD QIP, the bundled payment system
financially incentivizes providers/facilities to provide less ESAs,
driving hemoglobin down. Commenters argued that decreased hemoglobin
will lead to a rise in transfusions, hospitalization, morbidity, and
mortality, endanger vascular access due to the need for additional
venipuncture, and decrease quality of life, appetite of patients, and
consistency of care, shifting care to hospitals and outpatient infusion
centers. Further, one commenter argued that dropping the hemoglobin
floor will increase the burden of ESRD patients because, as a result of
the negative consequences, it will require more appointments and travel
to receive transfusions; another commenter stated that retiring the
measure will have a ``chilling effect'' on the ability to pursue
innovation in the treatment of patients with chronic kidney disease
(CKD). Commenters also noted that a rise in transfusions could result
in worse transplant outcomes and a higher likelihood of infection. They
also argued that quality of life issues may cause individuals to be
less active and eat less nutritious foods, possibly resulting in
patients who are less healthy and need more care. Some commenters noted
that many of these consequences would be disproportionately suffered by
the African-American community and encouraged CMS to collect and
analyze data on health disparities.
Response: We thank commenters for their input. As we stated in the
proposed rule (76 FR 40519), we have recently reassessed the evidence
for the use of ESAs in patients with kidney disease through a National
Coverage Analysis (CAG-00413N), and we could not identify a specific
hemoglobin lower bound level that has been proven safe for all patients
treated with ESAs. We are also not aware of, nor did the comments note,
any studies that identify a specific hemoglobin level which should be
maintained to increase quality of life or minimize transfusions or
hospitalizations. However, if any new evidence or studies emerge, we
will take such evidence into consideration in adopting future measures
for the ESRD QIP. We have discussed our proposal to retire the
Hemoglobin Less Than 10 g/dL measure with the FDA and they concur that
retiring the measure is consistent with the new labeling for ESAs.
Factors that impact anemia management, including optimal iron stores,
dialysis adequacy, avoidance of infections, reduction of inflammation,
and other factors should be addressed by the health care team to
improve patient health. We urge patients and providers to work together
to achieve optimal hemoglobin levels for each individual patient. We
will continue to monitor and evaluate practice patterns and outcomes
for all segments of the Medicare ESRD population as we develop and
refine our measurement of the quality of anemia management.
Additionally, we note that pediatric patients are excluded from the
anemia management measures we have thus far adopted and are adopting in
this final rule for the ESRD QIP, so the retirement of this measure
does not directly affect the pediatric population.
Comment: As an alternative to retiring the measure, some commenters
argued that CMS should reduce the lower bound from 10 g/dL to 9 g/dL or
8 g/dL or decrease the financial penalty. Commenters also suggested
that the measure not be limited to those on ESAs because there are
other means of maintaining hemoglobin levels. Other commenters
suggested that the root cause of health issues related to high
hemoglobin is the overuse of ESAs, and, therefore, CMS should create an
anemia management measure monitoring ESA usage or other outcomes such
as transfusion avoidance rather than hemoglobin levels. One commenter
recommended that CMS set a range for hemoglobin of 10-11 g/dL, and, if
a patient's hemoglobin is higher than 11 g/dL, CMS should require the
ESA dosage to be decreased and not discontinued. One commenter proposed
that, in the event the Hemoglobin Less Than 10 g/dL measure remains in
the ESRD QIP, the weighting for this measure be decreased until an
accurate baseline is determined reflecting current medical evidence and
drug labeling. One commenter suggested that this weighting decrease to
zero. Commenters also asked CMS to continue to monitor hemoglobin
levels, perhaps through a reporting measure or as a condition for
coverage, and publicly report low hemoglobin levels even if the measure
is retired from the ESRD QIP.
Response: As we noted above, we did not find scientific evidence to
identify an appropriate and safe quality standard for a minimal
achieved hemoglobin level. Therefore, in the absence of this evidence,
we do not believe it is appropriate to simply decrease the lower bound.
Additionally, continuing to employ the measure in the program, but
decreasing its weight to zero may signal to beneficiaries that this
measure is valid, although less important, and that it is, therefore
based in scientific evidence. As noted above, we are actively
monitoring trends in anemia management as well as patient outcomes, and
we strongly encourage patients and providers to work together to
develop anemia management strategies appropriate for individual patient
circumstances. We note that the Hemoglobin Less Than 10 g/dL measure
results are currently reported on Dialysis Facility Compare, and that
we are exploring the options and feasibility of continuing to publicly
report anemia management trends.
We agree with commenters that we should consider anemia management
measures that apply to patients not on ESAs, and, under 42 CFR
494.180(h), we asked providers/facilities to begin providing data for
these patients on January 1, 2012. In addition, we are considering ways
to incorporate achieved hemoglobin levels, ESA usage, and other
important factors in our anemia measurement strategy for future years
of the ESRD QIP; we welcome community input and would like to encourage
measure development in this area.
Comment: Some commenters agreed with our proposal to retire the
Hemoglobin Less Than 10 g/dL measure. Commenters noted that such a
proposal reflects the new labeling approved by the FDA for the use of
ESAs, is consistent with the lack of scientific evidence for a lower
bound, and will allow providers more latitude, providing room for more
patient-centered care. Several commenters also suggested that, while
CMS should retire

[[Page 70258]]

the measure, the agency should also conduct additional clinical studies
to establish optimal dose strategies, targets, and the long term safety
of various ESA therapies, and reinstate a lower bound as soon as
possible.
Response: We thank commenters for their support. As we noted above,
we will continue to monitor practice patterns in the area of anemia
management and develop and evaluate additional measures for future
years of the ESRD QIP. We will also continue to work with our Federal
partners and external stakeholders to advance knowledge in this area.
Comment: One commenter suggested that the agency include text in
the ESRD QIP certificates to be posted in December 2011 to acknowledge
the changing guidance in anemia management so patients and caregivers
are aware that the data are dated and not necessarily relevant in
today's environment. Another commenter stated that CMS should develop
Performance Score Report (PSR) mechanisms to adjust for unusual patient
demographics and dialysis facility census.
Response: The PY 2012 ESRD QIP certificates will clearly state that
``the information communicated * * * is based on 2010 data.'' Our
regulations do not preclude providers/facilities from providing
patients with more explanatory detail, and we encourage providers/
facilities to engage patients in discussions of this information.
As we have stated, we continue to monitor the effects of the ESRD
QIP on all segments of the Medicare ESRD population, and we will
continue to evaluate our scoring and public reporting methodology for
any necessary modifications.
Comment: Some comments suggested that the Hemoglobin Greater Than
12 g/dL measure should be retired from the PY 2013 and PY 2014 ESRD QIP
measure set because some patients may benefit from a higher hemoglobin
level and there is a lack of scientific evidence for an upper
hemoglobin bound. Commenters argued that, generally, higher hemoglobin
leads to better quality of life and patients and doctors should be able
to weigh risks and benefits, leading to a more patient-centered
definition of quality. These commenters noted that CMS should only be
regulating those providers/facilities that are clear outliers. Some
commenters requested that, should CMS retain the measure, the bound be
raised to Greater Than 12.5 or Greater Than 13 g/dL. Another commenter
stated that, given recent clinical practice changes already addressing
the concern for high hemoglobin and high ESA doses, it may be
reasonable for CMS to decrease the weighting for the Hemoglobin Greater
Than 12 g/dL measure.
Response: Studies continue to show that targeting hemoglobin levels
above 12 g/dL through the use of ESAs can contribute to adverse patient
outcomes including an increased risk of myocardial infarction, stroke,
venous thromboembolism, thrombosis of vascular access, and overall
mortality, and, in patients with a history of cancer, tumor progression
or recurrence. Given the significance of these outcomes, we do not
believe it is appropriate either to retire the measure or reduce the
weight of the measure. In addition, as explained further below, this
measure is consistent with new labeling for ESAs approved by the FDA
that directs providers to reduce or interrupt the dose of ESAs if the
hemoglobin level approaches or exceeds 11 g/dL.
Comment: Some commenters argued that the only anemia management
measure should be Hemoglobin Greater Than 11 g/dL, replicating the FDA
guidelines. Commenters suggested that such a measure is consistent with
current scientific evidence, provides the best level of care for
patients, and lowers Medicare costs.
Response: New labeling approved by the FDA for the use of ESAs
addresses targeted hemoglobin levels while we measure achieved
hemoglobin levels. The achieved hemoglobin level is a function of the
target but also reflects patient factors such as the underlying causes
of anemia which determine how sensitive the patient is to ESAs and
whether the target is actually achieved. These patient factors can vary
unpredictably over time even within an individual patient which means
that patients will sometime exceed (or fall short of) the hemoglobin
level target despite clinician diligence. The FDA label recognizes this
hemoglobin variability and states that, if the hemoglobin approaches or
exceeds 11 g/dL, ESA dosing should be reduced or interrupted, but the
label does not state that hemoglobin levels should never exceed this
value. We believe that the current anemia measure allows for some
deviations of the achieved hemoglobin while highlighting that higher
hemoglobin targets can result in adverse patient outcomes.
Comment: Some commenters supported the Hemoglobin Greater Than 12
g/dL measure.
Response: We thank commenters for their support.
Comment: One commenter requested clarification on the meaning of
``on ESA,'' and another commenter requested that CMS explicitly state
that the Hemoglobin Greater Than 12 g/dL measure applies only to those
patients on ESAs. Specifically, one commenter inquired whether it is
applied based on one bill indicating ESA administration after 90 days
of dialysis and the submission of four bills for dialysis within a 12
month period for adult patients. In addition, the commenter asked how
patients with untreated Hemoglobin Greater Than 12 g/dL will be
identified and excluded from the measure calculation.
Response: We assume that the commenters are referring to data
extracted from claims. As outlined in the measure specification, ``on
ESA'' means that a patient is receiving ESAs during the month covered
by a claim, as identified by the presence of an ESA dose and hemoglobin
on the claim. This measure applies only to months for which a patient
has received an ESA agent. Patients are attributed to a facility only
after they have four months of eligible claims from that facility. To
be eligible for the Hemoglobin Greater Than 12 g/dL measure, among
other criteria, (i) The beginning date of the claim must have been at
least 90 days since the date of first ESRD service for the patient and
(ii) the claim must include a line item reporting the administration of
an ESA in that month. These inclusion criteria are unchanged from the
PY 2012 ESRD QIP. The measures specifications are available at http://www.dialysisreports.org/ESRDMeasures.aspx.
Comment: Some commenters believe that the Hemoglobin Less Than 10
g/dL measure should be retired from the PY 2012 measure set because it
would be unfair to penalize dialysis providers/facilities for their
nephrologists' interpretation of the medical literature. One commenter
argued that CMS knew of published studies in 2006 and 2009 which
signaled that no lower bound could be identified and noted that these
studies changed behavior in the industry. One commenter also stated its
belief that if CMS does not retire the measure for the PY 2012 ESRD
QIP, the public may erroneously conclude that the provider's/facility's
PY 2012 ESRD QIP total performance score reflects CY 2012 data, as
opposed to the data utilized for the performance period. Commenters
also argued that the legislative language requiring the Secretary to
reflect the FDA labeling applies to the labeling in the payment year
rather than the performance year.
Response: Based on the available evidence in 2006 regarding the
treatment of anemia in the ESRD population, we developed a consensus-
based measure which was endorsed by

[[Page 70259]]

the NQF in 2008 (NQF 0370). This measure formed the basis for
the Hemoglobin Less Than 10 g/dl measure which was adopted for the ESRD
QIP (76 FR 628). This measure remained consistent with clinical
practice guidelines and the labeling approved by the FDA for the use of
ESAs in effect until June 2011. In June 2011, new labeling for ESAs was
approved by the FDA. We will retire the Hemoglobin Less Than 10 mg/dL
measure beginning in PY 2013 in accordance with this new labeling.
Although measures are adopted for a specific payment year, we
evaluate performance on those measures during a performance period that
precedes the payment year so that we can collect and evaluate the data
for these measures and allow providers/facilities adequate time to
review their scores before payment reductions occur. Therefore, to the
extent that the anemia management measures under section
1881(h)(2)(A)(i) reflect the labeling approved by the FDA for such
management, we believe that those measures must reflect the labeling
and guidance in effect and the care provided during the performance
period which, with respect to the PY 2012 program, was CY 2010.
Finally, as we noted above, the PY 2012 ESRD QIP certificates state
that ``the information communicated * * * is based on 2010 data.''
For the reasons discussed above, for the PY 2013 ESRD QIP, we
finalize use of the following two measures previously adopted for the
PY 2012 ESRD QIP:
Hemoglobin Greater Than 12g/dL measure
URR Hemodialysis Adequacy measure
b. Performance Period and Case Minimum for the PY 2013 ESRD QIP
Section 1881(h)(4)(D) of the Act requires the Secretary to
establish a performance period with respect to a year, and for that
performance period to occur prior to the beginning of such year. In the
proposed rule, we discussed in detail the factors that we considered in
determining what performance period to select for the PY 2013 ESRD QIP
(76 FR 40519). We also noted that, in light of the new ESRD PPS, we
believe that it is important to assess the quality of care being
furnished to ESRD patients and that basing this assessment on a year of
data will provide an accurate and fair determination of whether a
provider/facility has met or exceeded the proposed performance
standards with respect to the proposed measures. Therefore, we proposed
to select all of CY 2011 as the performance period for the PY 2013 ESRD
QIP.
Consistent with what we finalized for the PY 2012 ESRD QIP, we also
proposed to require that providers/facilities have at least 11 cases
that meet the reporting criteria for a measure in order to be scored on
the measure.
The comments we received on these proposals and our responses are
set forth below.
Comment: Several commenters expressed concern that both the PY 2013
and PY 2014 programs will use data more than a year old and penalize
facilities that have since improved; commenters encouraged the use of
methodologies that recognize changes in performance over time and use
the most recently available data as comparison data. Another commenter
recommended that CMS establish CY 2012 as the performance year for PY
2013 because it would allow dialysis facilities and providers to gauge
their performance using clinically relevant, timelier, and prospective
data.
Response: For both PY 2013 and PY 2014, we have determined that
data derived from claims is the most appropriate source on which to
score providers/facilities. Claims data allows us to implement a
variety of measures which can be used to evaluate the greatest number
of facilities. In order to assure completeness of this claims data,
there is a lag between when the data is generated and when we are able
to use it in the ESRD QIP. This time period is lengthened because we
believe it is important to allow providers/facilities a period of time
to review their scores before the payment period. We are considering
how we might be able to shorten this timeline in the future, such as by
collecting data through CROWNWeb or by some other method, such as the
NHSN or electronic health records, and we will continue to take the
commenters concerns into account as we do so.
Comment: Several commenters argued that, under section
1881(h)(4)(C) of the Act, the ESRD QIP performance periods must be
prospective, but nearly all of the PY 2013 performance period will have
ended by the time the performance standards are finalized. Commenters
also argued that finalizing performance standards when the performance
period is nearly complete impermissibly creates a retroactive rule.
Comments also noted that a retrospective performance period does not
allow a provider/facility to change its practices to meet standards,
thereby increasing quality of care. Other commenters, however, voiced
support for the proposed PY 2013 performance period.
Response: We acknowledge that section 1881(h)(4)(C) of the Act
requires the Secretary to establish performance standards under
subparagraph (A) prior to the beginning of the performance period for
the year involved. However, we are establishing the performance
standard that will affect ESRD payments in PY 2013 in accordance with
section 1881(h)(4)(E), which does not impose the limitation suggested
by the commenters. We believe that setting a CY 2011 performance period
for the initial ESRD QIP will ensure that the performance scores are
based on a robust set of data, and will allow us sufficient time to
analyze that data, determine whether provider/facilities met the
performance standards, provide providers/facilities with an opportunity
to preview their performance scores and submit related inquiries, and
implement the applicable payment reductions for PY 2013. We also note
that, beginning with the PY 2014 program, we will set performance
standards under section 1881(h)(4)(A) of the Act.
Comment: Commenters voiced concerns about CMS' approach to
including low-volume facilities in the program because one patient
could significantly affect a score for reasons unrelated to quality of
care, such as patient comorbidities, and decrease the ability of a
provider/facility to score well on a measure. This scoring could, in
turn, affect patient volume if consumers judge facilities based on
their scores. Commenters suggested different minimum case thresholds
such as 20 cases or 25 cases or that providers with fewer cases be
scored differently; some commenters also noted that their studies
showed that the sample size rather than overall performance is driving
the results for facilities and requested that CMS raise the case
minimum to 20. Another commenter urged CMS to research the reliability
of a measure to set the minimum number of cases, publish minimum case
reliability data, and use this data to set a minimum number of cases
for all value-based purchasing programs. One commenter urged CMS to re-
consider its scoring methodology to analyze for statistical
significance. Another commenter stated its belief that the ESRD QIP
methodology does not appropriately account for low patient census,
unusual treatment setting, or patient case-mix, and recommended that
CMS develop a mechanism to adjust for circumstances in which facilities
with an unusual care setting, atypical case-mix, or small patient
census may be at high risk of incurring

[[Page 70260]]

penalties for failure to meet performance standards.
Response: We appreciate the commenters' concerns regarding the
potential impact of patient case mix on smaller providers/facilities.
The goal of the ESRD QIP is to accurately assess the quality of care
provided by a provider/facility. However, we recognize that a quality
measure score could be impacted by one or more factors unrelated to the
care furnished by the provider/facility, and that the potential of such
factors to greatly skew the calculation decreases as the number of
cases included in the measure increases. Similarly, a provider/facility
with a small number of patients could find that one patient's outcome
determined its score on a quality measure. Thus we proposed that a
provider/facility would need to have a minimum of eleven cases that
meet the eligibility criteria for a measure in order to be scored on
that measure. This eleven case minimum allows as many providers/
facilities as possible to participate in the program. This minimum case
number is also consistent with the reporting of these measures on
Dialysis Facility Compare. We will continue to closely monitor
beneficiary access to care, including evaluating the rate of facility
closures. We will also continue to assess the impact of the program on
facilities of all sizes, and we will change the methodology if we
believe it is necessary to ensure that the program adequately measures
quality. Additionally, we continue to monitor and evaluate the
reliability of all of our value-based purchasing programs; we note,
however, that each of these programs has its own set of requirements
which must be considered during any assessment of reliability.
Comment: One commenter expressed concern that new facilities
without a complete data set available for the measures will be unfairly
penalized.
Response: Like all ESRD QIP providers/facilities, new facilities
will only be included in the program if they have the requisite amount
of data. Any provider/facility must have adequate data to calculate
performance rates on both PY 2013 measures to be included in the PY
2013 ESRD QIP. For each of these measures, there must be at least
eleven cases each with four claims, regardless of whether the facility
is new or established.
Additionally, under the special rule in section 1881(h)(4)(E), we
will be setting the initial performance standard as the lesser of the
provider's/facility's performance during 2007 or the 2009 national
performance rates. If a provider/facility was not in existence in 2007,
we will assign a score of zero for purposes of assessing which of the
two standards applies to the provider/facility. The provider/facility's
performance in 2011 will then be compared against that initial
performance standard.
For the reasons discussed above, we are finalizing all of CY 2011
as the performance period for the PY 2013 ESRD QIP.
c. Performance Standards for the PY 2013 ESRD QIP
In the proposed rule, we discussed in detail what performance
standards we planned to select for the PY 2013 ESRD QIP. We noted that
comparing provider/facility performance over time based on data from
successive years would be beneficial as this method would allow the
public to most accurately gauge provider/facility improvement. As we
discussed above, we also noted that due to operational issues, it is
not feasible for us to establish performance standards prior to the
beginning of the proposed performance period, as is required if the
performance standards are established under section 1881(h)(4)(A).
Therefore, we proposed to continue using the performance standard under
section 1881(h)(4)(E) of the Act for the PY 2013 ESRD QIP. Under this
proposed standard, providers/facilities would be evaluated based on the
lesser of (i) the performance of the provider/facility in 2007, which
is the year selected by the Secretary under the second section of
section 1881(b)(14)(A)(ii), or (ii) a performance standard based on the
national performance rates for the measures in a period determined by
the Secretary. With respect to the second prong, we proposed selecting
CY 2009 because that is the most recent year-long period for which data
would be publicly available prior to the beginning of the proposed
performance period. At the time we published the proposed rule, the
2009 national performance rates for the Hemoglobin Greater Than 12 g/dL
measure and the URR Hemodialysis Adequacy measure were:
For the Hemoglobin Greater Than 12g/dL measure: 16
percent.
For the URR Hemodialysis Adequacy measure: 96 percent.
The comments we received on the proposed selection of this
performance standard and our responses are set forth below.
Comment: One commenter recommended rounding the average hemoglobin
to one decimal place because this method is the industry standard and
more decimal places exaggerates the precision of the laboratory tests.
One commenter also stated that CMS should allow rounding to the tenth
to address ``between instrument variability within a single
laboratory.''
Response: For Dialysis Facility Compare (DFC) and Dialysis Facility
Reports (DFR), we have traditionally not rounded the average patient
hemoglobin values or the values resulting from the hematocrit to
hemoglobin conversion. The final rule for the first year of the ESRD
QIP stated that we would calculate the hemoglobin measure rates as they
have been calculated for purposes of DFC and DFR in order to maintain
consistency (76 FR 629). In light of this comment, however, we have
concluded that beginning with the PY 2013 program, it is reasonable to
round the patient average hemoglobin value to one decimal place to
better reflect the precision of the original laboratory data prior to
determining performance on the measure. We will also round the
hematocrit to hemoglobin conversion to one decimal place. Using this
new rounding convention, the 2009 national performance rate for the
Hemoglobin Greater Than 12 g/dL measure using this new rounding
convention rate is 14 percent.
Comment: One commenter suggested that CMS use a baseline period of
2009 for the Hemoglobin Greater Than 12 g/dL measure because data from
2009 is the most currently available data. This commenter also argued
that, because of the change in FDA approved labeling and guidance from
the baseline period to the performance period, this measure will cause
confusion and not accurately measure quality and improvement.
Response: We proposed to use CY 2009 as the source of data for the
national comparative performance standard for scoring the PY 2013 ESRD
QIP measures. Although we recognize that the FDA-approved label for
ESAs changed in CY 2011, we note that this change did not directly
impact this measure. The Hemoglobin Greater Than 12 g/dL measure
reflects both the prior and new labels for ESAs.
Comment: One commenter requested that CMS employ the PY 2014
achievement and improvement scoring methodology for PY 2013. One
commenter voiced support for the change in methodology to equally
weight the measures in PY 2013. One commenter stated that performance
standards for PY 2013 should be less stringent to decrease the
incentive to game the system.
Response: As explained above, we are using the special rule for PY
2013. Under this standard, providers/facilities would be evaluated
based on the lesser

[[Page 70261]]

of (1) The performance of the provider/facility in 2007, which is the
year selected by the Secretary under the second section of section
1881(b)(14)(A)(ii), or (2) a performance standard based on the national
performance rates for the measures in a period determined by the
Secretary (for PY 2013, this is CY 2009). We do not believe that the
performance standards are too stringent; a provider/facility is scored
on the lesser of its own performance or the national performance rate.
We will be monitoring providers/facilities to assess any incentives to
game the system.
After considering the comments, and for the reasons stated above,
we are finalizing following performance standards. For the PY 2013 ESRD
QIP, providers/facilities will be evaluated based on the lesser of (i)
Their individual performance on the measures in 2007 or (ii) the
national performance rates for the measures in 2009. We also finalize
that we will round the values obtained when we convert hematocrit
values to hemoglobin values and the average patient hemoglobin values
used in the Hemoglobin Greater Than 12 g/dL measure to one decimal
place.
Based on our new rounding methodology and the most recent 2009
data, the 2009 national performance rates vary slightly from those in
the proposed rule. The national performance rate in 2009 for the
Hemoglobin Greater Than 12 g/dL measure is 14 percent, and the national
performance rate in 2009 for the URR Hemodialysis Adequacy measure is
97 percent.
d. Methodology for Calculating the Total Performance Score and Payment
Reduction for the PY 2013 ESRD QIP
Section 1881(h)(3)(A)(i) of the Act requires the Secretary to
develop a methodology for assessing the total performance of each
provider and facility based on performance standards with respect to
the measures selected for a performance period. Section
1881(h)(3)(A)(iii) of the Act states that the scoring methodology must
include a process to weight the performance scores with respect to
individual measures to reflect priorities for quality improvement, such
as weighting scores to ensure that providers/facilities have strong
incentives to meet or exceed anemia management and dialysis adequacy
performance standards, as determined appropriate by the Secretary.
For the PY 2012 ESRD QIP, we finalized a scoring methodology under
which we calculated the performance of each provider and facility by
assigning 0-10 points for each measure. The full rationale for this
scoring methodology is presented in detail in the PY 2012 ESRD QIP
final rule (76 FR 629 through 634).
For the PY 2013 ESRD QIP, we proposed to adopt the same methodology
for scoring provider/facility performance on each of the measures. We
noted that, we believe that it is important to provide a clear-cut
method for calculating scores initially while providers and facilities
are becoming familiar with the program. We proposed to calculate the
performance of each provider/facility on each measure by assigning
points based on how well it performed on the measure in CY 2011
relative to the proposed performance standard (discussed above). If a
provider or facility meets the performance standard for a measure, then
it would receive 10 points for that measure. If a provider/facility
does not meet the performance standard for a measure, we would award
points for each measure based on a 0 to 10 point scale and would
subtract 2 points for every 1 percentage point the provider or
facility's performance falls below the performance standard during CY
2011, the performance period for PY 2013.
For the PY 2013 ESRD QIP, we proposed to weight the Total
Performance Score for each provider/facility such that 50 percent would
reflect the Hemoglobin Greater Than 12g/dL measure and 50 percent would
reflect the URR Hemodialysis Adequacy measure. To be consistent with
the scoring methodology that we finalized for the PY 2012 ESRD QIP, we
proposed to award up to 30 points to a provider/facility based on its
performance on the proposed measures. However, because we only proposed
to adopt two measures for the PY 2013 ESRD QIP measure set, we proposed
to calculate a provider's/facility's Total Performance Score by
multiplying each measure score (0-10 points) by 1.5, adding both
measure scores together and rounding this number to the nearest integer
(with 0.50 rounded-up), resulting in a 0-30 point range.
Section 1881(h)(3)(A)(ii) of the Act requires the Secretary to
ensure that the application of the scoring methodology results in an
appropriate distribution of reductions in payments among providers and
facilities achieving different levels of Total Performance Scores, with
providers and facilities achieving the lowest Total Performance Scores
receiving the largest reductions.
For the PY 2012 ESRD QIP, we implemented a sliding scale of payment
reductions, setting the minimum Total Performance Score that providers/
facilities will need to achieve in order to avoid a payment reduction
at 26 points (76 FR 634). Providers/facilities that score between 21-25
points will receive a 0.5 percent payment reduction; between 16-20
points, a 1.0 percent payment reduction; between 11-15 points, a 1.5
percent payment reduction; and for a score between 0-10 points,
providers/facilities will receive the full 2.0 percent payment
reduction (76 FR 634).
To ensure that providers/facilities are properly incentivized to
provide quality care, we proposed to implement a more rigorous sliding
scale of payment reductions for the PY 2013 ESRD QIP and raise the
minimum Total Performance Score that providers/facilities would need to
achieve in order to avoid a payment reduction from 26 to 30 points. We
noted that providers/facilities that score between 26-29 points would
receive a 1.0 percent payment reduction; between 21-25 points, a 1.5
percent payment reduction; and between 0-20 points, providers/
facilities would receive the full 2.0 percent payment reduction (see
Table 3 below). We believe that applying a payment reduction of 2.0
percent to providers/facilities whose performance falls significantly
below the performance standards, coupled with applying two intermediate
payment reduction levels to providers/facilities based on lesser
degrees of performance deficiencies, will provide proper incentives for
all providers/facilities to improve the quality of their care.

[[Page 70262]]

[GRAPHIC] [TIFF OMITTED] TR10NO11.002

The comments we received on this proposed scoring, weighting, and
payment methodologies and our responses are set forth below.
Comment: Several commenters expressed concern that the PY 2013
scoring methodology and resulting payment reductions are too aggressive
and would overly penalize facilities, draining them of monetary
resources and morphing the ESRD QIP into a cost-cutting program.
Several commenters suggested either doubling the penalty or requiring
more points to avoid a penalty, but not both, stating that it is
unreasonable of CMS to expect facilities to improve so rapidly from PY
2012 to PY 2013. Commenters also argued that CMS should reassess its PY
2013 scoring because nearly all of the performance period will have
passed before the rule is finalized, not allowing providers/facilities
enough time to make the necessary adjustments, and a facility that does
not meet the performance standard for one measure may be significantly
and unduly penalized because the program only evaluates two measures.
Other commenters noted that many other quality programs have a broader
sliding scale which gives more incentive for improvement and suggested
that the PY 2012 payment scale of 0.5-2.0 percent also be used for PY
2013. This broader range was also suggested because it may take
patients a period of time to stabilize or larger penalties might result
from outliers, and the penalty structure should be more forgiving of
these patients. Other commenters also stated that, because of the
change in scoring from PY 2012, patients will be unable to compare
facilities' scores and note progress.
Response: We believe that providers/facilities should always be
striving to improve the quality of care they provide to patients.
Therefore, we believe it is appropriate, in the second year of the
program, to set a higher standard to further encourage improvement.
Because both of the measures that we adopted for the PY 2013 ESRD QIP
were included in the PY 2012 ESRD QIP measure set, we believe that it
is reasonable to expect providers/facilities to have implemented
practices to improve their performance on these measures. Additionally,
because we are using the special rule, providers/facilities will be
evaluated based on the lesser of two standards, which should help
alleviate the concerns expressed by the commenters.
We designed the scoring based on a scale similar to what we are
using for the PY 2012 ESRD QIP to make it easier for Medicare
beneficiaries to compare providers'/facilities' performance in PY 2012
and PY 2013. Although we are using one less measure and weighting the
measures differently in PY 2013, we believe that Medicare beneficiaries
will still be able to compare both the overall quality of provider/
facility performance (for example, whether the performance improved as
a whole from PY 2012 to PY 2013), and the degree to which provider/
facility performance on each of the two PY 2013 measures may have
changed (because the certificates will display individual measure
scores).
Comment: Some commenters voiced their support for the PY 2013
scoring methodology, including the more rigorous scale and the equal
weighting of the PY 2013 measures.
Response: We thank the commenters for their support. For the
reasons stated above, we are finalizing the proposed scoring,
weighting, and payment methodology for the PY 2013 ESRD QIP.
2. Proposed PY 2014 ESRD QIP
a. Proposed Performance Measures for the PY 2014 ESRD QIP
For the PY 2014 ESRD QIP, we proposed to continue using the
Hemoglobin Greater Than 12g/dL measure, adopt seven new measures (Kt/V
Dialysis Adequacy, Vascular Access Type (VAT), Vascular Access
Infections (VAI), Standard Hospitalization Ration (SHR)-Admissions,
National Healthcare and Safety Network (NHSN) Dialysis Event reporting,
Patient Experience of Care (ICH CAHPS) reporting, and Mineral
Metabolism reporting) and to retire the URR Hemodialysis Adequacy
measure. We also proposed to adopt measures under section
1881(h)(2)(A)(iii) of the Act. In specifying such measures, we
recognize that section 1881(h)(2)(B)(i) of the Act requires that they
must have been endorsed by the entity with a contract under section
1890(a) of the Act (that entity is currently the NQF) unless the
exception in clause (ii) applies. That provision provides that in the
case of a specified area or medical topic determined appropriate by the
Secretary for which a feasible and practicable measure has not been
endorsed by the entity with a contract under section 1890(a) of the
Act, the Secretary may specify a measure that is not so endorsed as
long as due consideration is given to measures that have been endorsed
or adopted by consensus organizations identified by the Secretary.
i. Anemia Management Measure
Section 1881(h)(2)(A)(i) of the Act requires that the measures
specified for the ESRD QIP include measures on anemia management that
reflect the labeling approved by the FDA for such management. For the
PY 2014 ESRD QIP, we proposed to retain the Hemoglobin Greater Than
12g/dL measure that we adopted for the PY 2012 ESRD QIP and are
finalizing in this final rule for the PY 2013 ESRD QIP. We made this
proposal for the same reasons that supported our proposal to retain
this measure for the PY 2013 ESRD QIP measure set.
The comments we received on this proposed measure are discussed
above in the section discussing the PY 2013 ESRD QIP. For the reasons
stated above, we finalize the Hemoglobin Greater Than 12 g/dL measure
for the PY 2014 ESRD QIP. The specifications for this measure can be
found at http://www.dialysisreports.org/pdf/esrd/public-measures/AnemiaManagement-HGB12-2013-2014-FR.pdf.
ii. Dialysis Adequacy Measure
Section 1881(h)(2)(A)(i) of the Act requires that the ESRD QIP
include measures on dialysis adequacy. For the PY 2014 ESRD QIP, we
proposed to retire the URR Hemodialysis Adequacy measure we adopted for
the PY 2012

[[Page 70263]]

ESRD QIP and are finalizing in this final rule to retain for the PY
2013 ESRD QIP. In its place, we proposed to adopt a measure of dialysis
adequacy based on Kt/V (K = dialyzer clearance, t = dialysis time, and
V = volume of distribution) for the PY 2014 ESRD QIP. Kt/V has been
advocated by the renal community as a more widely accepted measure of
dialysis adequacy. Specifically, Kt/V more accurately measures how much
urea is removed during dialysis, primarily because the Kt/V calculation
also takes into account the amount of urea removed with excess fluid.
Further, the proposed measure assesses Kt/V levels in both hemodialysis
(HD) patients (in-center and home (HHD)) and peritoneal dialysis (PD)
patients, and is based on two Kt/V measures of dialysis adequacy that
have been endorsed by the NQF (0249 \2\ and 0318
\3\). Specifically, the proposed measure assesses the percent of
Medicare dialysis patients (PD, HD and HHD) meeting the modality
specific Kt/V threshold. For hemodialysis patients (HHD and in-center
patients), we proposed to measure the percentage of adult (>= 18 years
old) Medicare patients dialyzing thrice weekly whose average delivered
dose of hemodialysis (calculated from the last measurements of the
month using the Urea Kinetic Modeling (UKM) or Daugirdas II formula)
was a Kt/V of at least 1.2 during the proposed performance period. For
PD patients, we proposed to measure the percentage of adult (>= 18
years old) Medicare patients whose average delivered PD dose was a
weekly Kt/V urea of at least 1.7 (dialytic + residual) during the
proposed performance period. The specifications for the proposed
measures exclude pediatric patients. The NQF has since endorsed a
separate pediatric hemodialysis adequacy measure (1423), and
we are considering how to best incorporate this measure into future
years of the QIP.
---------------------------------------------------------------------------

\2\ Note that in the proposed rule, we mistakenly referred to
this measure as 0250.
\3\ Note that in the proposed rule, we mistakenly referred to
this measure as 0321.
---------------------------------------------------------------------------

The comments we received on the proposed Kt/V measure and our
responses are set forth below.
Comment: Several commenters expressed concern that providers/
facilities use different methodologies to calculate Kt/V and asked CMS
to indicate which methodology should be used. Several commenters noted
that this disparity in formulas and specifications may lead to
disparate baseline standards and requested that CMS standardize
requirements for Kt/V values for performance standards instead and/or
wait until PY 2015 to implement the measure. Some commenters asked CMS
to acknowledge that Daugirdas II or UKM formulas should be used for
those patients receiving thrice weekly hemodialysis care. One commenter
urged CMS to rigorously validate comparison calculation methods to
assure that if different equations are used, they provide comparable
results for Kt/V. Another commenter suggested that it would be
extremely difficult, if not impossible, for the agency to correct the
lack of standardization in the base year and asked instead that CMS
take this into account in weighting this measure.
Response: Beginning January 1, 2012, we have asked providers and
facilities to report Kt/V values on claims using the Daugirdas II or
UKM formulas, which are also the formulas specified in the NQF-endorsed
hemodialysis adequacy measures based on Kt/V (CR 7460). We have also
stated that residual renal function should be included in the
peritoneal dialysis Kt/V value but not included in the hemodialysis Kt/
V value. We recognize the commenters' concerns and agree that it would
be difficult, if not impossible, to create accurate, comparable Kt/V
measure scores for providers/facilities that might not have used either
the Daugirdas II or UKM formula in their Kt/V reporting or that may
have incorporated residual renal function differently. In light of this
concern, we are not finalizing our proposal to adopt the Kt/V dialysis
adequacy measure for the PY 2014 ESRD QIP. We intend to propose to
adopt a Kt/V dialysis adequacy measure for future years of the ESRD QIP
and welcome public input as we proceed with this process.
We recognize that we are required under section 1881(h)(2)(A)(i) to
include measures on dialysis adequacy in the ESRD QIP. For this reason,
we are also not finalizing our proposal to retire the URR Hemodialysis
Adequacy measure for the PY 2014 ESRD QIP and will continue to include
this measure in the PY 2014 measure set. For the reasons stated in the
CY 2011 ESRD PPS final rule (75 FR 49182) we believe that the URR
Hemodialysis Adequacy measure continues to be an appropriate and
accurate measure of hemodialysis adequacy.
Comment: Many commenters strongly supported CMS' proposal to use
Kt/V to measure dialysis adequacy beginning with the PY 2014 ESRD QIP
because it is widely accepted, is used extensively by the renal
community as a measure of dialysis adequacy, and is the basis for
measures endorsed by the NQF. One commenter stated a belief that Kt/V
is a substandard measure as it does not adequately reflect the
patient's quality of life. One commenter noted that CMS should also
promote the understanding that minimal Kt/V levels may not be optimal
levels and should develop a method for assessing dialysis adequacy
across all modalities; another commenter argued that CMS should use the
last Kt/V value of the month for each patient to calculate the measure
rate because it is the best clinical indicator of the actual dialysis
dose delivered to a patient during the month. Some commenters stated
that the measure specifications excluding Kt/V values exceeding 2.5 for
patients receiving thrice weekly in-center nocturnal hemodialysis may
not be appropriate because many patients achieve such values and asked
that this exclusion be removed from the measure. Commenters also
suggested that adjustments should be made in the Kt/V measure for short
daily, more frequent, and nocturnal treatments. Commenters asked CMS to
exclude residual renal function (RRF) because it could result in
patients being under dialyzed, and it carries operational burdens such
as requiring patients to collect urine during a 48-hour period. Some
commenters, however, asked CMS to consider RRF in the calculation so
that the Kt/V measure does not cause over-treatment. One commenter
asked for clarification of the Kt/V specifications in two areas: (i)
For PD patients, (a) does CMS require that facilities report the
average of all available values for the year; (b) should the facilities
record Kt/V every 3 or 4 months; and (c) when should the RRF be
measured; and (ii) for both HD and PD, (a) What are the requirements
related to urea clearance; and (b) can facilities use creatinine
clearance as an alternative? Although not specific, some commenters
noted that some of the measure specifications were not clear or were
confusing and asked for clarification. One commenter suggested that the
proposed Kt/V dialysis adequacy measure be calculated as the average of
twelve months Kt/V values in an index year. One commenter questioned
the functionality of CROWNWeb to collect Kt/V measurements in CY 2012.
Response: For the reasons stated above, we will not finalize this
measure for the PY 2014 ESRD QIP but we intend to propose to adopt a
Kt/V dialysis adequacy measure for the program as soon as possible. We
will take the many comments regarding the use of Kt/V and questions
regarding the measure

[[Page 70264]]

specifications into account as we develop this future proposal.
Comment: Some commenters urged CMS to develop a dialysis adequacy
measure for hemodialysis patients who dialyze more or less than three
times per week, either at home or in a clinic.
Response: We agree with the commenter that a dialysis adequacy
measure for hemodialysis patients who dialyze more or less than three
times per week, either at home or in a clinic, is an important quality
indicator that should be part of the ESRD QIP. At this time there is no
consensus within the ESRD stakeholder community as to what the correct
formula or target value should be for this population. We are committed
to working with the stakeholder community to achieve consensus on the
correct formulas and target values for this population and to
developing measures for future years of the ESRD QIP that accurately
assesses the adequacy of hemodialysis for this population.
For the reasons stated above, we are not finalizing the proposed
Kt/V Dialysis Adequacy measure for the PY 2014 ESRD QIP. We are also
not finalizing our proposal to retire the URR Hemodialysis Adequacy
measure, but are instead finalizing that this measure will be included
in the PY 2014 ESRD QIP. The measure specifications for the URR measure
can be found at: http://www.dialysisreports.org/pdf/esrd/public-measures/DialysisAdequacy-URR65-2013-2014-FR.pdf.
iii. Vascular Access Type (VAT) Measure
Section 1881(h)(2)(A)(iii) of the Act states, in part, that the
measures specified for the ESRD QIP shall include other measures as the
Secretary specifies, including, to the extent feasible, measures on
vascular access, including for maximizing the placement of arterial
venous fistula. For the PY 2014 ESRD QIP, we proposed to adopt a VAT
measure. We noted that arteriovenous (AV) fistulae are the preferred
type of vascular access for patients on maintenance hemodialysis.
Because of the lower complication rates (including reduced infections),
decreased risk of patient mortality, and greater cost efficiency
associated with this type of vascular access for eligible
patients,^{4, 5} we proposed to adopt a VAT measure, based on
two measures that are endorsed by the NQF. These measures assess (i)
The percentage of a provider's/facility's patients on hemodialysis
using an autogenous AV fistula with two needles during the last HD
treatment of the month (NQF 0257); and (ii) the percentage of
a provider's/facility's patients on hemodialysis using an intravenous
catheter during the last HD treatment of the month that have had an
intravenous catheter in use for 90 days or longer (NQF 0256).
---------------------------------------------------------------------------

\4\ http://www.kidney.org/professionals/kdoqi/guideline_uphd_pd_va/va_guide2.htm.
\5\ http://www.fistulafirst.org/AboutAVFistulaFirst/History.aspx.
---------------------------------------------------------------------------

While catheter reduction and increased use of AV fistula are both
important steps to improve patient care, we recognized that these two
events are tightly interrelated and do not want to penalize providers/
facilities twice for related outcomes. We therefore proposed to combine
these two separate measures into one measure to contribute jointly to
the Total Performance Score. Because the rates and goals for each
subcomponent measure are very different, we proposed to calculate
separate measure rates for each measure, based on a provider's/
facility's performance on each subcomponent measure and to adopt a
different methodology (discussed below) for purposes of setting
performance standards and scoring providers/facilities on this measure.
As explained above, section 1881(h)(2)(B)(i) of the Act requires
that, unless the exception set forth in section 1881(h)(2)(B)(ii) of
the Act applies, the measures specified for the ESRD QIP under section
1881(h)(2)(A)(iii) of the Act must have been endorsed by the entity
with a contract under section 1890(a) of the Act (which is currently
the NQF). Under the exception set forth in section 1881(h)(2)(B)(ii),
in the case of a specified area or medical topic determined appropriate
by the Secretary for which a feasible and practical measure has not
been endorsed by the entity with a contract under section 1890(a) of
the Act, the Secretary may specify a measure that is not so endorsed as
long as due consideration is given to measures that have been endorsed
or adopted by a consensus organization identified by the Secretary. We
stated in the proposed rule that we believe that assessing the type of
vascular access used in hemodialysis patients is important because
clinical evidence has shown that proper vascular access reduces the
risk of adverse outcomes such as infections. We also noted that we
considered proposing to adopt the two NQF-endorsed measures noted above
(0256 and 0257); however, in order to ensure that
these measures fit the purposes of the ESRD QIP, we made modifications
to these NQF-endorsed measures. Accordingly, we proposed to adopt this
measure under section 1881(h)(2)(B)(ii) of the Act.
We noted in the proposed rule that since July 1, 2010, we have
asked dialysis providers/facilities to submit VAT data on ESRD claims
(CR 6782). We also proposed that hemodialysis patients with acute renal
failure, peritoneal dialysis patients, and patients under 18 years of
age would be excluded from this proposed measure. Finally, we stated
our belief that adoption of this measure would be consistent with the
efforts of the Fistula First initiative, which advances the use of
fistulas proven to reduce the risk of infection/morbidity and
mortality.\6\
---------------------------------------------------------------------------

\6\ See http://www.fistulafirst.org/ for further information
regarding this initiative.
---------------------------------------------------------------------------

The comments we received on this proposed measure and our responses
are set forth below.
Comment: Many commenters supported the proposed VAT measure, noting
the benefits of AV fistulas and the problems with catheters. Many
commenters also stated that they support CMS' decision to exclude
hemodialysis patients with acute renal failure, PD patients, and
patients under age 18 from this proposed measure.
Response: We thank commenters for their support.
Comment: Some commenters applauded CMS for proposing to adopt a VAT
measure but noted certain ``flaws.'' Commenters noted that the measure
(i) ignores grafts, which are preferable to catheters and are available
to some patients who are not candidates for fistulas; (ii) is limited
to Medicare beneficiaries; (iii) could prejudice facilities with new
patient populations who do not yet have a permanent access type and
those with patients who refuse or are not eligible for fistulas,
causing an access to care issue; and (iv) because of the 90 day
requirement for the catheter measure, will provide less than a year's
worth of data on which facilities will be evaluated.
Response: We thank commenters for their insights and will address
each issue in turn. As we have noted previously, VAT is critical to
patient care. Catheters are undesirable due to their high rate of
complications, such as infections, and we discourage their use through
the proposed catheter submeasure. The preferred type of vascular access
is an AV fistula due to lower rates of complications, which we promote
through the fistula submeasure. Although grafts do decrease the risk of
infections and complications when compared to catheters, grafts do not
decrease these risks as much as fistulae. We, therefore, do not believe
that grafts

[[Page 70265]]

are either beneficial enough to be specifically rewarded or harmful
enough to be specifically penalized.
We agree that it would be beneficial to measure vascular access
type for all ESRD patients, but, at this time, we are unable to collect
the needed data through Medicare claims. We believe that when CROWNWeb
becomes available as a data collection vehicle for all providers/
facilities, we will be able to collect data on all patients, and we
anticipate proposing in future rulemaking to change this measure when
these events occur. We are actively monitoring access to care and
issues associated with ``cherry-picking,'' and it is our intent to
engage the community as we monitor these issues.
Finally, we will be able to measure 1 year of catheter data despite
the 90 day pre-requisite. The proposed measure specifications state
that the catheter submeasure assesses the percentage of hemodialysis
patients in whom (i) A catheter was in use at the last hemodialysis
treatment of the month and for each of the prior 90 days; and (ii) a
catheter was the only means of vascular access (that is, patient did
not have an AV fistula or AV graft reported at any time during the 90
days).\7\ The measure specifications state that patients with a
catheter for at least 90 days will be counted in this measure. For
example, if a patient was treated at a facility for all of October,
November, and December of 2011 and has a catheter for these months,
this catheter would be counted in January 2012.
---------------------------------------------------------------------------

\7\ See http://www.dialysisreports.org/pdf/esrd/public-measures/
VascularAccess-Fistula-2014-FR.pdf and http://www.dialysisreports.org/pdf/esrd/public-measures/ VascularAccess-
Catheter-2014-FR.pdf.
---------------------------------------------------------------------------

Comment: One commenter recommended that CMS: (i) Consider
developing adjusters for unusual patient factors, facility census, and
overall case-mix to discourage ``cherry-picking''; and (ii) develop a
mechanism to more effectively engage, and hold accountable, vascular
surgeons in creating successful vascular access. Another commenter
suggested that the measure be modified to only include patients with
catheters for at least 6 months.
Response: We do not agree that only those patients who have
catheters 6 months or longer should be included in the measure. We note
that the proposed catheter submeasure is based on an NQF-endorsed
measure (0256) which includes patients with a catheter longer
than 90 days.\8\ It is important to allow facility's some flexibility
without underplaying the risks associated with catheter infections. We
believe that 90 days allows facilities a window of time to stabilize
patients and obtain a functional arteriovenous fistula. We appreciate
the role that vascular surgeons play in obtaining vascular access, and
we would expect providers/facilities and their staff to work closely
together to ensure that proper care is furnished. We note, however,
that the ESRD QIP applies only to providers/facilities.
---------------------------------------------------------------------------

\8\ See http://www.kidney.org/professionals/ kdoqi/pdf/12-50-
0210_JAG_DCP_ Guidelines-VA_Oct06_SectionC_ofC.pdf; http://www.qualityforum.org/WorkArea/
linkit.aspx?LinkIdentifier=id...67692.
---------------------------------------------------------------------------

As we noted above, we are actively monitoring access to care and
issues associated with ``cherry-picking,'' and will consider proposing
additional policies in future rulemaking should we conclude that they
would improve the overall quality of the ESRD QIP.
Comment: One commenter suggested that CMS develop a measure to
monitor fistula flow.
Response: We thank the commenter for the suggestion. We continue to
work on developing measures appropriate for the ESRD QIP.
Comment: One commenter asked for clarification of the VAT measure
specifications, including the following: (i) What are the blood flow
requirements through the AV fistula; (ii) when in the month is the
access type to be reported; and (iii) are Medicare only patients
counted? The commenter also asked for clarification of the following
catheter submeasure specifications: (i) Are Medicare only patients
counted; (ii) do facilities count catheters even if there is another
access in place; and (iii) how should facilities report the ``90 day''
requirement if the V-codes do not match this criterion? Some commenters
generally commented that the measure specifications are unclear and
confusing and asked for clarification.
Response: The proposed VAT measure specifications for the AV
fistula submeasure do not contain a blood flow requirement but rather
require that the dialysis was performed with two needles. We do not
require blood flow because we assume that, if a fistula is used for
dialysis treatment, the blood flow achieved is adequate to meet
treatment goals. Since July 1, 2010, providers/facilities have been
asked to report the access that was used for dialysis during the last
dialysis session of the month covered by the claim (CR 6782). These
instructions were updated, effective January 1, 2012 (CR 7460), to
state that, if an AV fistula/AV graft is used (both must be used with
two needles to be reported), but the patient still has a catheter in
use providers/facilities should report the presence of both the
catheter and the AV fistula/AV graft. Accordingly, for purposes of the
measure calculation during the performance period, in instances where
an AV fistula or AV graft is reported along with a catheter, we will
only count the AV fistula or AV graft as the patient's access type. For
purposes of the measure calculation during the baseline period, we
exclude any claims reporting more than one access type because we
assume this was reported in error since the guidance did not indicate
that more than one access type should be reported. Only Medicare
patients are included in the proposed VAT measure because we will be
calculating it using Medicare claims data. The specifications for the
catheter submeasure exclude catheters present for less than 90 days
during calculation of the catheter measure rate in order to allow time
to establish another form of vascular access. All catheters must be
reported regardless of duration of use, the 90 day exclusion will be
applied at the time of measure rate calculations.
We thank commenters for requesting clarification, and we would
clarify in this final rule that, for the catheter submeasure, a patient
will only be attributed to a facility if he or she was at that facility
for the 90 days during which he or she had a catheter so that
providers/facilities have adequate time to facilitate placement of a
permanent access and are not penalized for care provided prior to the
patient receiving care at the facility. Because claims do not specify
the access type for each patient at every dialysis session, we also
clarify that, if the last session of a month indicates only a catheter,
we consider that patient to have had the catheter for the entirety of
that month.
We further clarify that we will use a patient-month methodology
calculating the submeasure rates for the VAT measures (i.e. each
patient's value for each month will be included in the measure rate
\9\).The NQF measures which we referred to in the proposed rule are
calculated for a one month time period; however, our measure
specifications stated that the VAT measure can be calculated in a
manner similar to the PY 2012 ESRD QIP measures which are calculated as
a percent of patients (i.e. each patient's mean or median value is
calculated for the year at the facility and then the patient is
classified as meeting the

[[Page 70266]]

requirement or not). We believe that patient-months would provide a
more accurate picture of the care provided to a patient by weighting
the VAT by the number of months that access was present. For instance,
if a patient had a catheter for seven months out of the year and an AV
fistula for 5 months, the patient's ``average'' access would be a
catheter and the facility would get no credit for the presence of an AV
fistula. By using patient-months, we can more accurately assess these
patients by counting seven of 12 months towards the catheter submeasure
and five of 12 months towards the AV fistula submeasure. This would
also weight each patient's contribution to the facility measure rate by
the amount of time a patient received care in that facility.\10\
---------------------------------------------------------------------------

\9\ For example, if one patient was treated every month, his/her
claim inputs would account for twelve, individual inputs for
calculating the measure rate. Whereas a patient that is only seen
for four months would be counted as four inputs.
\10\ For example, if one patient was treated every month, his/
her claim inputs would account for twelve, individual inputs for
calculating the measure rate. Whereas a patient that is only seen
for four months would be counted as four inputs.
---------------------------------------------------------------------------

After considering the comments, we finalize the VAT measure for the
PY 2014 ESRD QIP with the clarifications and changes discussed above.
This measure is comprised of two submeasures, one of which measures
catheters and one of which measures AV fistulas. The VAT measure
specifications can be found at http://www.dialysisreports.org/pdf/
esrd/public-measures/ VascularAccess-Fistula-2014-FR.pdf and http://www.dialysisreports.org/ pdf/esrd/public-measures/ VascularAccess-
Catheter-2014-FR.pdf.
iv. Vascular Access Infections (VAI) Measure
We proposed to measure dialysis access-related infection rates by
assessing the number of months in which a monthly hemodialysis claim
reports a dialysis access-related infection using HCPCS modifier V8,
and we noted that since July 1, 2010, we have asked dialysis providers/
facilities to code all Medicare claims for dialysis access-related
infections using this modifier (CR 6782). As discussed more fully in
the proposed rule, we proposed to adopt this measure under section
1881(h)(2)(B)(ii) of the Act.
The public comments we received on the VAI measure and our
responses are set forth below.
Comment: Many commenters commended CMS for moving towards measuring
infections. However, some commenters noted that infections should not
be measured through claims because claims data are unable to provide
precise identification of healthcare-associated infections (HAIs), nor
do they provide information in a timely manner to effectively drive
quality improvement. Additionally, several commenters noted or asked
for clarification regarding whether claims can result in duplicative
counting of a patient with a recurrent infection, penalizing a facility
twice (or more) for the same event. Commenters also stated that CMS has
not issued specific guidance for uniformity in reporting the V8/V9
modifiers and requested a workable definition of VAI to account for
cases where it is difficult to accurately identify the source of
infection. One commenter argued that infection measures should not be a
composite so that facilities can individualize areas of concern. Some
commenters noted the measure's lack of precedent and NQF endorsement,
suggesting instead that CMS use the NHSN-endorsed measure (NQF
1460) (which would also prevent redundancy) or change the
measure to a reporting measure only.
Response: We agree that reducing vascular access infections is
critical to improving quality of care because infections are one of the
leading causes of morbidity and mortality among the Medicare ESRD
population. Furthermore, many of these infections can be prevented
through evidence-based practices. However, in response to these
comments, we reassessed our proposal and concluded that the claims-
based data that we proposed to use to calculate this measure is not
detailed enough and, as a result, could lead to inaccurate assessments
and comparisons of quality. In addition, we are also proposing that
providers/facilities begin reporting similar information via the CDC
NHSN Dialysis Event reporting system and recognize the burden that may
result from requiring reporting to two separate systems for purposes of
the ESRD QIP. We note that commenters were much more supportive of the
CDC infection tracking system and the associated NHSN-based blood
stream infection measure which is NQF-endorsed (1460) and upon
which we based the NHSN Dialysis Event reporting measure. Given the
overall quality of the data obtained through the NHSN system and the
general support expressed by the ESRD community, we believe that
patients' needs will be best served if providers/facilities focus
efforts on reporting infection data via the CDC NHSN system. We
recognize that the proposed PY 2014 NHSN Dialysis Event reporting
measure would not be calculated using actual infection data, but we
will consider incorporating a measure which is calculated based on the
substance of the data collected through the NHSN Dialysis Event
reporting system for future years if the data indicates a need for
financial incentives to drive improvement.
Comment: One commenter argued that, because of the prevalence and
costs associated with catheter related infections, catheter measures
should be in the PY 2012 ESRD QIP and, because the ESRD QIP can only
penalize a facility by up to two percent, a new program should be
implemented to penalize facilities further for catheter infections.
Additionally, this commenter stated that ESRD facilities should be
required to educate patients on appropriate homecare and supplies to
help prevent infection.
Response: We thank the commenter for the input and concern. CMS
continues to consider programs within its statutory authority which
will lead to an increase in the quality of care provided to Medicare
ESRD beneficiaries. The PY 2012 ESRD QIP, however, has been finalized,
and we have calculated and will shortly be implementing the resulting
payment reductions. We note that the ESRD Conditions for Coverage
require that the patient be included as a member of the dialysis
multidisciplinary team, and that providers/facilities educate patients
and promote appropriate patient care (for example 42 CFR
494.90(d)).\11\
---------------------------------------------------------------------------

\11\ We also encourage providers/facilities to utilize other
clinical practice guidelines regarding patient education. See, for
example, http://www.kidney.org/professionals/kdoqi/pdf/12-50-0210_JAG_DCP_Guidelines-VA_Oct06_SectionC_ofC.pdf.
---------------------------------------------------------------------------

For the reasons discussed above, we are not finalizing the VAI
measure for use in the PY 2014 ESRD QIP. We will consider proposing in
future rulemaking to adopt a CDC NHSN-based clinical measure that
assesses infection rates related to dialysis.
v. Standardized Hospitalization Ratio (SHR)-Admissions Measure
In the proposed rule, we proposed to adopt the SHR-Admissions
measure to measure hospitalizations for Medicare dialysis patients. We
proposed to adopt this measure under section 1881(h)(2)(A)(iii) of the
Act. The proposed SHR-Admissions measure is a risk-adjusted measure of
hospitalizations for Medicare dialysis patients. The data needed to
calculate the proposed SHR-Admissions measure is based on claims and
has been regularly reported to DFR since 1995 (previously known as
Unit-Specific Reports). We noted that the measure is an ``all-cause''
measure, meaning that

[[Page 70267]]

hospitalizations related to other medical conditions outside of ESRD
are included in the measure. We refer readers to the proposed rule for
further information on this proposed measure (76 FR 40524).
The public comments we received on the SHR-Admissions measure and
our responses are discussed below.
Comment: Many commenters voiced concern that the SHR-Admissions
measure does not reflect issues that dialysis facilities can control,
may lead to untimely or inappropriate care, and is not adequately
transparent in its calculation. Commenters also stated that the measure
may lead to ``cherry-picking'' of patients based on their risk of
hospitalizations, causing access to care issues for patients with more
severe illness. Commenters suggested that, instead, CMS measure
hospitalizations resulting from the care, or lack of care, provided by
ESRD facilities. Other commenters disapproved of the SHR-Admissions
measure because there is currently no mechanism either for correcting
or updating patient comorbidity data on CMS' Medical Evidence Reporting
Form 2728, and these comorbidities affect the calculation of the
measure. Another commenter stated that, because patients in nursing
homes are more likely to have a greater number and severity of
comorbidities, the metrics for independent living patients and nursing
home patients should be compared to determine if the established goals
place nursing homes at a disadvantage in achieving such goals. Another
commenter suggested that, because of the issues mentioned above, if CMS
retains the measure, it should weight it less than the other clinical
measures. Some commenters suggested that CMS use a longer baseline
period, such as four years.
Response: After reviewing these comments, we have decided, for the
reasons articulated by commenters, to not finalize our proposal to
adopt the SHR-Admissions measure for the PY 2014 ESRD QIP. We recognize
concerns that this measure may not promote improved patient care and
may not accurately reflect hospitalizations which can be controlled by
dialysis facilities, and we are concerned about the potential for
``cherry-picking.'' We are additionally concerned that we do not yet
have the necessary data to more accurately risk-adjust the measure.
Therefore, after considering the comments, we agree that the measure as
proposed should not be included in the PY 2014 ESRD QIP. We intend,
however, to work to develop a measure for future years of the ESRD QIP
that does not raise the issues identified by the commenters, and we
welcome public input on the composition of such a measure.
Comment: One commenter supported tracking hospitalization rates
among dialysis clinic patients. Another commenter suggested that the
SHR-Admissions measure could be used as a balancing measure once CMS
retires the Hemoglobin Less Than 10 g/dL measure to ensure that
patients do not experience hospitalizations due to hemoglobin levels
that are too low.
Response: We thank the commenters for their support, but, for the
reasons stated above, we will not include this measure in the program
at this time. While the SHR-Admissions measure would include
hospitalizations due to anemia, the SHR-Admissions is an all-cause
measure, and it is uncertain how sensitive it would be in detecting
practice changes and patient outcomes related to anemia management
alone. As we have stated, we will continue to work with the ESRD
community to develop appropriate measures reflecting hospitalizations
and will specifically consider measures which account for
hospitalizations related to inappropriate anemia management.
For the reasons discussed above, we are not finalizing the SHR-
Admissions measure for use in the PY 2014 ESRD QIP. We intend to work
with the community to adopt a measure for future years of the program
that more accurately measures quality of care in this area.
vi. Minimum Case Number for Clinical Measures and Other Considerations
We proposed that a provider/facility would need to report a minimum
number of eleven cases for a proposed clinical performance measure in
order to receive a score on that measure (76 FR 40533). As stated
above, we believe that this minimum threshold will help reduce the
possibility that a small number of poor outcomes artificially, and for
reasons unrelated to the quality of care, skew a small provider's/
facility's performance score.
The comments we received regarding this proposal and our responses
are set forth below. We also address other comments regarding the
measures we proposed to adopt for the PY 2014 ESRD QIP below.
Comment: Commenters voiced concerns about CMS' approach to
including low-volume facilities in the program because one patient
could significantly affect a score for reasons unrelated to quality of
care, such as comorbidities. This scoring could, in turn, affect
patient volume if patients and their care-givers judge facilities based
on their scores. Commenters suggested different minimum case thresholds
such as 20 cases or 25 cases, or that providers with fewer cases be
scored differently; some commenters also noted that their studies
showed that the sample size rather than overall performance is driving
the results for facilities and requested that CMS raise the case
minimum to 20. Another commenter urged CMS to research the reliability
of a measure to set the minimum number of cases, publish minimum case
reliability data, and use this data to set a minimum number of cases
for all value-based purchasing programs. One commenter urged CMS to re-
consider its scoring methodology to analyze for statistical
significance. Another commenter stated the belief that the ESRD QIP
methodology does not appropriately account for low patient census,
unusual treatment setting, or patient case-mix, and recommended that
CMS develop a mechanism to adjust for circumstances in which facilities
with an unusual care setting, atypical case-mix, or small patient
census may be at high risk of incurring penalties for failure to meet
performance standards.
Response: We appreciate the commenters' concerns regarding the
potential impact of patient case mix on smaller providers/facilities.
One goal of the ESRD QIP is to accurately assess the quality of care
provided by a provider/facility. However, we recognize that a quality
measure score could be impacted by one or more factors unrelated to the
care furnished by the provider/facility, and that the potential of such
factors to greatly skew the calculation decreases as the number of
cases included in the measure increases. Similarly, a provider/facility
with a small number of patients could find that one patient's outcome
determined its score on a quality measure. Thus we proposed that a
provider/facility would need to have a minimum of eleven cases that
meet the eligibility criteria for a measure in order to be scored on
that measure. This eleven case minimum allows as many providers/
facilities as possible to participate in the program. This minimum case
number is also consistent with how we have traditionally reported
measures on Dialysis Facility Compare. We will continue to closely
monitor beneficiary access to care, including evaluating the rate of
facility closures.
We recognize, however, that we are introducing new measures and
scoring methodologies for the PY 2014 program. As additional data
becomes available for these measures, we will conduct additional
analysis to assess our case

[[Page 70268]]

minimum. If we determine that a different threshold is more
appropriate, we will propose an alternative scoring approach in future
rulemaking for the ESRD QIP to ensure that smaller or low-volume
facilities are not unfairly penalized.
Comment: One commenter urged CMS to use only NQF-endorsed measures
for the ESRD QIP because of the NQF's high level of review. Because
none of the PY 2014 measures are NQF-endorsed, this commenter does not
support their adoption.
Response: We believe that, when evaluating measures for the ESRD
QIP, it is important to consider measures endorsed by NQF and other
consensus-based entities and we have based our measures on available
endorsed measures where possible. We note, however, that under Section
1881(h) of the Act, the Secretary has discretion to adopt measures that
are not NQF-endorsed in certain circumstances. We refer readers to our
discussions of our rationale for adopting the individual measures,
above.
Comment: Commenters noted that the same data sent to multiple
laboratories can yield different results from each laboratory. They
noted that this variability, rather than the actual care delivered, may
affect provider's/facility's rates and, ultimately, their Total
Performance Scores. These commenters suggested that CMS incorporate an
acceptable standard deviation value into the measure rate calculations
in order to mitigate this variability. One commenter also stated that
CMS should allow rounding to the tenth to address ``between instrument
variability within a single laboratory.''
Response: The proposed PY 2014 scoring methodology allows
providers/facilities some latitude to account for issues such as
laboratory variability. For example, as further explained below,
providers/facilities need not score at the performance standard for
each measure in order to avoid a payment reduction. We believe that
such flexibility mitigates concerns about details such as laboratory
variability. We do agree that it is important to account for the
precision of the data that we use to calculate rates and scores, and,
as explained above with regard to the Hemoglobin Greater Than 12 g/dl
measure, we will specify the number of decimal places for measure
calculations to reflect the precision of the data submitted by
providers/facilities.
Comment: One commenter requested clarification that the PY 2014
measures do not apply to providers/facilities that only treat patients
receiving peritoneal dialysis (PD).
Response: Two of the measures apply to PD patients and, therefore,
PD-only facilities will be evaluated on these measures. According to
the specifications, adult PD patients would be included in the
calculations for the following measures: Hemoglobin Greater Than 12 g/
dL, and the Mineral Metabolism reporting measure. Pediatric PD patients
qualify for the mineral metabolism reporting measure.
For the reasons stated above, we are finalizing our proposal that a
provider/facility must have a minimum of eleven cases for a measure,
each with four claims, in order to receive a score for that measure.
vii. National Healthcare Safety Network (NHSN) Dialysis Event Reporting
Measure
As we noted in the proposed rule, healthcare-associated infections
(HAI) are a leading cause of preventable mortality and morbidity across
different settings in the healthcare sector, including dialysis
facilities. In a national effort to reduce this outcome, Department of
Health and Human Services agencies, including CMS, are partnering with
the Centers for Disease Control and Prevention (CDC) to encourage
providers to report to the NHSN as a way to track and facilitate action
for reducing HAIs.
The NHSN is currently a secure, Internet-based surveillance system
that integrates patient and healthcare personnel safety surveillance
systems managed by the Division of Healthcare Quality Promotion at the
CDC. NHSN has been operational since 2008 with acute care hospitals,
long term acute care hospitals, psychiatric hospitals, rehabilitation
hospitals, outpatient dialysis centers, ambulatory surgery centers, and
long term care facilities. We believe that reporting dialysis events to
the NHSN by all providers/facilities would support national goals for
patient safety, and particularly goals for the reduction of HAIs.
Accordingly, for the PY 2014 ESRD QIP we proposed to adopt a measure
that would assess whether providers/facilities enroll and report
dialysis event data to the NHSN.
We stated our belief that, by measuring only whether providers/
facilities report dialysis event data to the NHSN, providers/facilities
would be given time to become familiar with the NHSN reporting process.
We also noted our intention in the future to propose to adopt a measure
that would score providers/facilities based on actual dialysis events
reported to the NHSN if necessary. Specifically, we proposed that
providers/facilities: (i) Enroll in the NHSN and complete any training
required by the CDC; and (ii) submit three or more consecutive months
of dialysis event data to the NHSN.
Section 1881(h)(2)(B)(i) of the Act requires that unless the
exception set forth in section 1881(h)(2)(B)(ii) applies to the Act,
the measures specified for the ESRD QIP under section
1881(h)(2)(A)(iii) of the Act must have been endorsed by the entity
with a contract under section 1890(a) of the Act (which is currently
the NQF). Section 1881(h)(2)(B)(ii) of the Act states that, in the case
of a specified area or medical topic determined appropriate by the
Secretary for which a feasible and practical measure has not been
endorsed by the entity with a contract under section 1890(a) of the
Act, the Secretary may specify a measure that is not so endorsed as
long as due consideration is given to measures that have been endorsed
or adopted by a consensus organization identified by the Secretary.
Although a measure calculated using NHSN Dialysis Event data is
currently endorsed by the NQF, the measure for reporting purposes only
has not been NQF-endorsed. We noted that because HAIs are a significant
patient safety concern, we intend to propose to adopt one or more
measures that assess actual dialysis event rates in the future if
necessary.
The public comments we received on the proposed NHSN Dialysis Event
reporting measure and our responses are discussed below.
Comment: Many of the commenters voiced general approval of the
proposed NHSN reporting measure, but voiced concern that the required
training, enrolling, and reporting will unduly burden many facilities,
diminishing the amount of time staff can focus on patients. One
commenter suggested that CMS more clearly study and define what is
needed of staff before moving forward with the measure. Other
commenters noted that CROWNWeb will be collecting similar data upon its
implementation, leading to redundancy in reporting and further
burdening providers/facilities, and requested that CMS delay an
infection reporting measure until it can be recorded via CROWNWeb.
Commenters also noted that this measure is redundant because it
captures data already being captured by other measures. Other
commenters expressed concern that the CDC does not have infrastructure
to be able to support the high volume of new reports and facilities
will not have the necessary reporting mechanisms in place to submit
these reports. They suggested that providers/facilities only be scored
on enrolling and training for PY 2014, delaying actual reporting of

[[Page 70269]]

data to allow providers/facilities to prepare to meet the NHSN
requirements and the NHSN to prepare for receiving these reports. One
commenter noted that the CDC reporting requires manual entry which can
lead to data entry error and suggested the CMS arrange an alternative
mechanism for collection; another commenter suggested that this
mechanism be CROWNWeb.
Response: The CDC has informed us that it is preparing for the
additional volume of new system enrollees and data reporting that will
result from the ESRD QIP and is enhancing the NHSN's technical
infrastructure. Additionally, our proposal that providers/facilities
submit, at a minimum, only three consecutive months of data in CY 2012
is expected to lessen the demand on the NHSN's infrastructure. Thus, we
believe that the CDC will be able to accommodate the additional data
that will be reported to the NHSN as a result of this measure.
Furthermore, we do not believe that this reporting requirement will
unduly burden providers/facilities. For facilities that are currently
enrolled in the NHSN, CDC has studied what is required of staff in
order to comply with this reporting. In addition, we believe that this
reporting requirement will not be burdensome because, reporting this
data will only take five to ten minutes per patient, or a total of two
hours and ten minutes, of staff time per month for a facility of
average size. Although we stated in the proposed rule that we believed
that enrolling and training would take a total of 48 hours per facility
(76 FR 40540), based on data we have since received from the CDC, we
have revised that analysis in the final rule and now believe that both
enrolling and training, each a one-time event, will take approximately
8 total hours, spread across a period of several weeks, to complete.
Although the NHSN currently requires manual entry of data, CDC is
moving towards an electronic system that will further reduce the time
required for data entry and reduce the opportunity for error.
Finally, we, as we noted above, we agree with this measure's
possible redundancy and we are no longer adopting the VAI measure for
PY 2014. Thus, the NHSN measure will be the only measure related to
infections. Furthermore, we do not intend to require reporting of the
same data elements to both the NHSN and CROWNWeb. It is our intent to
require providers/facilities to report dialysis event data to only one
system.
Despite our belief that this measure will not unduly burden
providers/facilities, to decrease any perceived burden and to further
align our reporting requirements with those of NHSN, we will allow all
facilities until March 31, 2013 at 11:59 EST to report these data as
allowed by the NHSN system.
Comment: One commenter suggested that, if CMS requires this
burdensome reporting, CMS should increase its base rate for dialysis
care. Another commenter noted that this measure does not increase
quality because it only requires reporting.
Response: Section 1881(h) of the Act does not authorize the
Secretary to increase the base rate for dialysis care. Furthermore, we
do not agree that this measure does not incentivize quality. In order
for providers/facilities to successfully report at least 3-consecutive
months of data to the NHSN, the provider/facility must either have or
must implement processes to record dialysis infection events. This
implementation will require providers/facilities to begin monitoring
dialysis events and could draw their attention to areas in need of
improvement. In future years of the ESRD QIP, we will consider
incorporating a measure based on providers'/facilities' infection
rates.
For the reasons stated above, we are adopting the NHSN reporting
measure for the PY 2014 ESRD QIP.
viii. Patient Experience of Care Survey Usage Measure
Section 1881(h)(2)(A)(ii) of the Act states that the measures
specified for the ESRD QIP shall include, to the extent feasible, a
measure (or measures) of patient satisfaction as the Secretary shall
specify. Information on patient experience with care at a facility is
an important quality indicator to help providers/facilities improve
services to their patients and to assist patients in choosing a
provider/facility at which to seek care. We proposed to adopt a measure
for the PY 2014 ESRD QIP that assesses provider/facility usage of the
In-Center Hemodialysis (ICH) Consumer Assessment of Healthcare
Providers and Systems (CAHPS) Survey. The intent of including this
reporting measure is to assess the degree to which providers/facilities
are providing their patients with a voice in the quality of their
hemodialysis care.
We proposed to measure whether a provider/facility administers the
survey, but we did not propose to measure a provider's/facility's
actual performance based on the survey results. We expect to adopt such
a measure for the ESRD QIP in future rulemaking. For purposes of
reporting this proposed measure for the ESRD QIP, we stated that we
will consider the ICH CAHPS survey to have been administered if the
provider/facility administered it in accordance with the current
specifications for the survey. These specifications can be accessed at:
https://www.cahps.ahrq.gov/content/products/ICH/PROD_ICH_Intro.asp?p=1022&s=222.\12\
---------------------------------------------------------------------------

\12\ In order to successfully field the survey, the facility/
provider must follow the recommendations found at: https://www.cahps.ahrq.gov/CAHPSkit/files/53_Fielding_the_ICH_Survey.pdf.
---------------------------------------------------------------------------

We proposed to measure whether a provider/facility has attested
that it successfully administered the ICH CAHPS survey during the
performance period for the PY 2014 program. We proposed that providers/
facilities would be required to submit this attestation through
CROWNWeb (which will be implemented nationally in 2012) by January 30,
2013 at 11:59 p.m. EST.
The public comments we received regarding the proposed ICH CAHPS
reporting measure and our responses are discussed below.
Comment: Many of the commenters were generally supportive of a
patient experience measure, but stated that the ICH CAHPS survey is too
burdensome for patients to complete and for providers/facilities to
implement. Several of these commenters suggested that, instead, either
providers/facilities be allowed to field any type of patient experience
survey or CMS adopt a more simplistic patient experience measure. Other
commenters suggested that the 57 question survey be split into three
independently verified domains, each given to one-third of the patient
population and each including a set of core questions, to lessen
patient burden and prevent incomplete surveys. One commenter believes
the survey should more adequately address the range of care a patient
may receive and suggested that CMS develop a process measure to allow
patients to voice individual dialysis experiences. Some commenters
asked CMS to implement a survey that is validated across all treatment
modalities and settings; another commenter asked CMS to clarify whether
the survey applies to PD and HHD. One commenter also noted that this
measure alone is not sufficient because it requires providers/
facilities to attest to administration of the survey, but it does not
base payment reductions upon the results of these surveys.
Response: We thank commenters for their support and suggestions. As
we noted in the proposed rule (76 FR 40525), we believe empowering
patients to voice their concerns is a critical part of quality
improvement. Patient surveys can, and should, draw provider/facility

[[Page 70270]]

attention to insights that can only be provided by those receiving
care. Given the importance of this survey, we do not believe the burden
to patients or providers/facilities outweighs the importance of this
measure. Many of the concerns the commenters voiced can be mitigated
without decreasing the number of questions on the survey or how the
survey is administered. For example, as the specifications
indicate,\13\ patients may take a break during the administration of
the survey or take the survey in multiple sittings if they feel that
the number of questions is too great to answer at one time.
Additionally, the survey requires third-party administration, taking no
additional dialysis staff time.
---------------------------------------------------------------------------

\13\ See https://www.cahps.ahrq.gov/content/products/ICH/PROD_ICH_Intro.asp?p=1022&s=222.
---------------------------------------------------------------------------

We note that the ICH CAHPS survey was developed through the study
of surveys used by dialysis providers. The CAHPS tool went through
extensive testing during development including focus groups and one-on-
one patient sessions. Thus, we believe that this survey is the best
method available at this time to measure patient experience. We also
note that we intend to develop a measure that evaluates providers/
facilities based on patient responses to the ICH CAHPS survey and use
of a uniform survey tool will allow us to more accurately compare
providers/facilities in future years of the program.
Furthermore, we disagree that this reporting measure does not
improve quality. In order to successfully report the measure,
providers/facilities must attest that they have successfully
administered the ICH CAHPS survey. The results of these surveys will be
reported to the provider/facility by the third-party administrator, and
these results can draw providers'/facilities' attention to areas in
need of improvement.
Finally, we thank commenters for their suggestions in developing
new measures. The ICH CAHPS survey was developed for adult in-center HD
patients and this measure therefore does not apply to HHD, PD, or
pediatric patients. Further, at this time, we are not aware of a tool
which allows patients to rate their experiences for every dialysis
experience. We continue to evaluate opportunities to accurately capture
patient experience for all modalities.
Comment: Some commenters expressed concern that CROWNWeb will not
be available or will be unreliable for submitting the ICH CAHPS survey
attestations. These commenters, however, also thought that a paper
attestation would be overly burdensome. They encouraged CMS to work
with the community to offer an alternative solution.
Response: CROWNWeb is on schedule for national release in CY 2012
which will allow providers/facilities to report their attestations by
the January 2013 deadline. We do recognize, however, that unanticipated
delays may occur. Therefore, if CROWNWeb will not be available in time
for the January 30, 2013 attestation deadline, we will adopt an
alternative, electronic mode of attestation and notify providers/
facilities of this method through the ESRD Networks.
Comment: One commenter noted discrepancies between the ICH CAHPS
specifications and the proposed regulation, including (i) ICH CAHPS
requires survey administration to all or a random sample of patients
(depending on how many patients the facility serves), whereas the
proposed regulation requires surveying in-center hemodialysis patients,
and (ii) ICH CAHPS recommends using third-party survey administrators,
whereas the proposed regulation seems to expect facilities to survey
their own patients. This commenter noted concern that requiring a
third-party survey administrator will unequally burden small clinics.
Another commenter requested that facilities be allowed to administer
their own surveys, provided that those fielding the surveys are not
center staff.
Response: As outlined in the specifications,\14\ the ICH CAHPS
survey was developed for adult, in-center hemodialysis patients and,
therefore, this is the population to which it must be administered.
Specifically, it must be administered to all patients meeting these
criteria or, if a facility cares for over 200 such patients, a random
sample of 200. This administration must be completed by a third-party;
https://www.cahps.ahrq.gov/content/products/ICH/PROD_ICH_Intro.asp?p=1022&s=222. Even if the surveys were not administered by
staff with whom the patient had a direct relationship, a patient could
still feel pressure to refrain from responding candidly. It is crucial
that patients feel comfortable answering honestly and openly, and,
therefore, it is vital that this survey be administered by a third-
party. As we noted above, although we are aware of the burden
associated with this administration, we do not believe it outweighs the
importance of recognizing patients' experience of care. For the reasons
discussed above, we are finalizing the use of the ICH CAHPS reporting
measure in the PY 2014 ESRD QIP.
---------------------------------------------------------------------------

\14\ https://www.cahps.ahrq.gov/content/products/ICH/PROD_ICH_Intro.asp?p=1022&s=222.
---------------------------------------------------------------------------

ix. Mineral Metabolism Reporting Measure
Section 1881(h)(2)(A)(iii) of the Act states that the measures
specified for the ESRD QIP shall include other measures as the
Secretary specifies, including, to the extent feasible, measures of
bone mineral metabolism. Abnormalities of bone mineral metabolism are
exceedingly common and contribute significantly to morbidity and
mortality in patients with advanced CKD. Numerous studies have
associated disorders of mineral metabolism with morbidity, including
fractures, cardiovascular disease, and mortality. Overt symptoms of
these abnormalities often manifest in only the most extreme states of
calcium-phosphorus dysregulation, which is why we believe that routine
blood testing of calcium and phosphorus is necessary to detect
abnormalities.\15\
---------------------------------------------------------------------------

\15\ Kidney Disease: Improving Global Outcomes (KDIGO) CKD-MBD
Work Group. KDIGO clinical practice guideline for the diagnosis,
evaluation, prevention, and treatment of chronic kidney disease-
mineral and bone disorder (CKD-MBD). Kidney International 2009; 76
(Suppl 113): S1-S130.
---------------------------------------------------------------------------

The Kidney Disease: Improving Global Outcomes (KDIGO) 2009
guideline recommends that the serum phosphorus level in a dialysis
patient generally be lowered toward the normal range, but does not
recommend a specific target level that would apply to all patients.\16\
The guideline also recommends that therapy to correct for abnormal
levels be administered based on the health needs of the individual
patient. Accordingly, we noted in the proposed rule that we do not feel
it is appropriate at this time to propose to adopt a measure that would
penalize providers/facilities if they did not achieve a specific target
serum phosphorus level in all patients. We also noted that there is
currently no NQF-endorsed measure dealing with the achievement of
specific target phosphorus levels. In the time since this rule was
proposed, the NQF has endorsed a mineral metabolism measure based on
calcium levels (NQF 1454) which we will consider proposing for

[[Page 70271]]

future years of the ESRD QIP.\17\ We also noted that the NQF has
previously endorsed phosphorus and calcium monitoring measures (NQF
0261 and NQF 0255) and, in 2008, we adopted serum
calcium and serum phosphorus monitoring as CPMs (http://www.dialysisreports.org/ESRDMeasures.aspx). Despite the current lack of
consensus on specific target ranges for both phosphorus and calcium
levels in dialysis patients, we stated our belief that there is
consensus that monthly monitoring of calcium and phosphorus is
important for early detection of abnormalities.
---------------------------------------------------------------------------

\16\ Kidney Disease: Improving Global Outcomes (KDIGO) CKD-MBD
Work Group. KDIGO clinical practice guideline for the diagnosis,
evaluation, prevention, and treatment of chronic kidney disease-
mineral and bone disorder (CKD-MBD). Kidney International 2009; 76
(Suppl 113): S1-S130.)
\17\ See http://www.qualityforum.org/Projects/e-g/End_Stage_Renal_Disease_2010/End_Stage_Renal_Disease_2010.aspx for more
information regarding the National Voluntary Consensus Standards for
ESRD.
---------------------------------------------------------------------------

Section 1881(h)(2)(B)(i) of the Act requires that unless the
exception set forth in section 1881(h)(2)(B)(ii) of the Act applies,
the measures specified for the ESRD QIP under section
1881(h)(2)(A)(iii) of the Act must have been endorsed by the entity
with a contract under section 1890(a) of the Act (which is currently
the NQF). Under the exception set forth in section 1881(h)(2)(B)(ii) of
the Act, in the case of a specified area or medical topic determined
appropriate by the Secretary for which a feasible and practical measure
has not been endorsed by the entity with a contract under section
1890(a) of the Act, the Secretary may specify a measure that is not so
endorsed as long as due consideration is given to measures that have
been endorsed or adopted by a consensus organization identified by the
Secretary.
Although we gave due consideration to the NQF-endorsed measures on
phosphorus and calcium level monitoring in dialysis patients, we noted
that it is not feasible for us to propose to adopt either of them at
this time as we do not currently collect data on whether these levels
are checked for each patient each month to allow calculation of the
measure rates. We are also not aware that any other consensus building
entity has endorsed or adopted measures on this topic. Therefore, we
proposed to adopt a Mineral Metabolism reporting measure that is based
on the two NQF-endorsed measures, but requires providers/facilities to
attest to compliance with monthly monitoring, and we proposed to adopt
it under section 1881(h)(2)(B)(ii) of the Act.
We proposed that providers/facilities would be required to submit
an attestation through CROWNWeb that they have conducted the
appropriate monitoring. We further proposed that this reporting must be
electronically submitted by January 30, 2013 at 11:59 p.m. E.S.T.
We also noted that we anticipate adopting, for future years of the
ESRD QIP, one or more mineral metabolism clinical measures in addition
to or in replacement of the proposed Mineral Metabolism reporting
measure.
The public comments regarding the proposed Mineral Metabolism
reporting measure and our responses are discussed below.
Comment: Several commenters expressed support for this measure, but
requested that CMS also develop an outcomes measure for phosphorus for
submission to the NQF for endorsement as soon as feasible. Several
commenters urged CMS to also adopt a parathyroid hormone (PTH) measure
in order to encompass all areas of bone mineral metabolism. One
commenter noted the morbidity and mortality risks associated with
extreme PTH values and stated that it is important to monitor the
number of patients with PTH below 100 pg/mL and above 400 pg/mL who are
not on therapy. Another commenter suggested that CMS consider the
addition of a statement in the attestation to indicate that a treatment
plan is in place for any abnormalities in bone mineral metabolism; one
commenter also expressed concern that the reporting measure alone would
not improve quality.
Response: We do not agree that this measure does not incentivize
quality. In order to successfully report the measure, providers/
facilities must attest that they have monitored calcium serum and
phosphorous serum at least once a month for each Medicare ESRD patient,
and to do that, the provider/facility must either have or implement
processes to collect and monitor this data. This monitoring could draw
provider/facility attention to areas in need of improvement and mineral
metabolism concerns for individual patients.
We continue to explore new measures in the area of bone mineral
metabolism; we will consider commenters' suggestions for additional
measures for future years of the ESRD QIP, including outcomes-based
bone mineral metabolism measures and measures that indicate whether a
treatment plan is in place for identified abnormalities.
Comment: One commenter agreed that the Mineral Metabolism measure
should be a reporting measure only and discouraged CMS from instituting
a clinical measure unless and until studies prove a causal relationship
between certain values and morbidity and mortality.
Response: We thank this commenter for the support. We will consider
commenters' suggestion as we develop a mineral metabolism measure for
future years of the ESRD QIP.
Comment: Some commenters expressed concern that CROWNWeb will not
be available or will be unreliable for submitting the Mineral
Metabolism attestations. These commenters, however, also thought that a
paper attestation would be overly burdensome. They encouraged CMS to
work with the community to offer an alternative solution.
Response: CROWNWeb is on schedule for national release in CY 2012
which will allow providers/facilities to report their attestations by
the January 2013 deadline. We do recognize, however, that unanticipated
delays may occur. Therefore, if CROWNWeb will not be available in time
for the January 30, 2013 attestation deadline, we will provide an
alternative, electronic mode of attestation and notify providers/
facilities of this method through the ESRD Networks.
For the reasons discussed above, we are finalizing the Mineral
Metabolism reporting measure for the PY 2014 ESRD QIP. We note that, as
we proposed, a provider/facility must attest that it measured the
calcium and phosphorous of each Medicare ESRD patient at least once per
month.
3. Performance Period for the PY 2014 ESRD QIP
Having decided to propose to adopt all of CY 2011 as the
performance period for the PY 2013 ESRD QIP, we examined what
performance period would be most appropriate for the PY 2014 ESRD QIP.
We noted that we believe that a 12-month performance period is most
appropriate for the ESRD QIP at this point in the program. We also
noted that a period of a year accounts for seasonal variations, but
also provides a timely incentive and feedback for providers/facilities,
as well as timely performance information for Medicare beneficiaries.
We have also determined that CY 2012 is the first feasible period
during which we can collect sufficient performance period data for all
of the proposed measures. Therefore, we proposed to select all of CY
2012 as the performance period for the PY 2014 ESRD QIP.
The comments we received on the proposed selection of CY 2012 as
the performance period and on the use of shorter performance periods in
future years, and our responses are set forth below.
Comment: Commenters applauded CMS for adopting a prospective

[[Page 70272]]

performance period of CY 2012 for the PY 2014 ESRD QIP and noted their
disapproval of any performance period of less than a full year.
Response: We thank commenters for their support of the proposed PY
2014 performance period. We also believe that it is most appropriate
and helpful for providers/facilities to be scored on a full year of
data at this point in the program.
For the reasons stated above, we are finalizing CY 2012 as the
performance period for all of the finalized measures for the PY 2014
ESRD QIP.
4. Performance Standards and the Methodology for Calculating the Total
Performance Score for the PY 2014 ESRD QIP
Section 1881(h)(3)(A)(i) of the Act requires the Secretary to
develop a methodology for assessing the total performance of each
provider and facility based on the performance standards with respect
to the measures selected for the performance period.
The final rule entitled, ``Medicare Programs; Hospital Inpatient
Value-Based Purchasing Program,'' appeared in the Federal Register on
May 6, 2011 (76 FR 26490) and set forth our view that value-based
purchasing represents an important step in revamping how we pay for
care and services, allowing CMS to move increasingly toward rewarding
better value, outcomes, and innovations instead of merely paying for
volume (76 FR 26491). The final rule also set forth principles guiding
the development of performance scoring methodologies, including:
Providers should be scored on their overall achievement
relative to national or other appropriate benchmarks. In addition,
scoring methodologies should consider improvement as an independent
goal.
Measures or measurement domains need not be given equal
weight, but over time, scoring methodologies should be more weighted
towards outcome, patient experience, and functional status measures.
Scoring methodologies should be reliable, as
straightforward as possible, and stable over time and enable consumers,
providers, and payers to make meaningful distinctions among providers'
performance.
For the PY 2014 ESRD QIP, we proposed to adopt a new performance
scoring methodology to replace the methodology we are using for the PY
2012 and are finalizing in this final rule for the PY 2013 ESRD QIP. We
believe that this scoring methodology will more accurately reflect a
provider's/facility's performance on the measures proposed for the PY
2014 ESRD QIP because it will enable us to differentiate between
providers/facilities that simply meet the performance standards, those
that exceed the performance standards by varying amounts, and those
that fall short of the performance standards. We further believe that
the proposed methodology will better incentivize providers and
facilities to both achieve high Total Performance Scores and improve
the quality of care they provide.
i. Performance Standards for the PY 2014 ESRD QIP
For the PY 2014 ESRD QIP, we proposed to establish performance
standards under section 1881(h)(4)(A) of the Act. This section of the
Act generally provides that, subject to subparagraph (E), the Secretary
shall establish performance standards with respect to measures selected
for the ESRD QIP for a performance period with respect to a year.
Furthermore, under section 1881(h)(4)(B) of the Act, the performance
standards established under subparagraph (A) must include levels of
achievement and improvement, as determined appropriate by the
Secretary. To establish performance standards under section
1881(h)(4)(A) of the Act, the Secretary must also comply with section
1881(h)(4)(C) of the Act, which requires the Secretary to establish
performance standards prior to the beginning of the performance period
for the year involved.
With respect to the anemia management and dialysis adequacy
measures, we proposed to set the achievement performance standard under
section 1881(h)(4)(A) of the Act as the national performance rate on
each measure during a proposed baseline period. We proposed that the
national performance rate for each measure would be calculated at the
national aggregate level as the number of Medicare patients for whom
the measure was achieved divided by the total number of Medicare
patients eligible for inclusion in the measure. We also proposed to set
the improvement performance standard as the national performance rate
on each measure during the same proposed baseline period. We noted that
our goal is to incentivize providers/facilities to achieve these
national performance rates, whether they do so by attaining achievement
points or improvement points under our proposed scoring methodology (76
FR 40527). We proposed to use a baseline period from July 1, 2010 to
June 30, 2011 to calculate the national performance rate. We stated our
belief that this baseline period would enable us to calculate national
performance rate values for these proposed clinical measures before the
beginning of the performance period. We indicated that we would specify
these values in the final rule.
With respect to the proposed VAT measure, we proposed to set
performance standards using the same methodology and baseline period
that we proposed to use for the other proposed clinical measures;
however, we proposed to set performance standards for each of the
subcomponent measures rather than for the overall combined measure.
We proposed to establish the achievement performance standard for
the proposed NHSN Dialysis Event reporting measure as the successful
completion by providers/facilities of: (i) Enrollment in the NHSN and
completion of the required training during the performance period (as
verified by a digital certificate obtained from CDC), or, in the case
of providers/facilities that have previously enrolled, continued
enrollment throughout the entirety of the performance period; and (ii)
submission to the NHSN of at least three-consecutive months of dialysis
event data gathered during the performance period.
We proposed to establish the achievement performance standard for
the ICH CAHPS reporting measure as an attestation by the provider/
facility that it successfully administered the ICH CHAPS survey during
the performance period.
We proposed to establish the achievement performance standard for
the proposed Mineral Metabolism reporting measure as whether a
provider/facility submitted an attestation stating that it measured the
serum calcium and serum phosphorus levels of Medicare patients treated
by the provider/facility at least once within the month throughout the
duration of the performance period.
As noted above, section 1881(h)(4)(B) of the Act provides that the
performance standards established under section 1881(4)(A) of the Act
must include levels of achievement and improvement, as determined
appropriate by the Secretary. We determined that an improvement
performance standard is not appropriate for the proposed reporting
measures because it is not feasible to measure improvement on these
measures at this time because we do not have any existing data we can
use to compare provider/facility performance.
We also noted that we do not interpret section 1881(h)(1)(B) of the
Act to require that providers/facilities meet or

[[Page 70273]]

exceed the performance standards we establish with respect to each
individual ESRD QIP measure. Rather, we proposed to implement a scoring
methodology that enables a provider/facility to avoid a payment
reduction as long as it achieves a minimum Total Performance Score
that, as discussed more fully below, is equal to the Total Performance
Score it would have received if it had met the performance standards
for all of the proposed measures.
Additionally, we noted that, beginning in PY 2015, we intend to
propose to establish floors for performance such that performance
standards would never be lower than those set for the previous year,
even if provider/facility performance fails to improve, or even
declines, over time. We also noted that, although we would consider
continuing to set the national performance rate as the achievement and/
or improvement performance standard, we would also consider
establishing future performance standards that reflect performance
goals widely recognized by the ESRD medical community as demonstrating
high quality care for ESRD patients, should such a consensus be
reached.
ii. Setting Performance Benchmarks and Thresholds
Under the proposed scoring methodology for the PY 2014 ESRD QIP, a
provider's/facility's performance on each of the finalized clinical
measures would be determined based on the higher of (i) an achievement
score or (ii) an improvement score. In determining the achievement
score, we proposed that providers/facilities would receive points along
an achievement range, defined as a scale that runs from the achievement
threshold to the benchmark. We proposed to define the achievement
threshold for each of these proposed measures as one standard deviation
below the achievement performance standard for the measure (which we
proposed to set as the national performance rate on the measure during
the baseline period). We stated our belief that this achievement
threshold will provide an incentive for providers/facilities to
continuously improve their performance while not reducing the payments
made to providers/facilities that score at or above the national
performance rate. We proposed to define the benchmark as the mean of
the top decile of provider/facility performance during the baseline
period because it represents a demonstrably high but achievable
standard of excellence that the best performing providers/facilities
reached during the baseline period.
In determining an improvement score for the clinical measures, we
proposed that providers/facilities would receive points along an
improvement range, defined as a scale running between the provider's/
facility's performance on the measure (the improvement threshold)
during the twelve-month baseline period and the benchmark. The
provider/facility's improvement score would be calculated by comparing
its performance on the measure during the performance period (CY 2012)
to its performance on the measure during the baseline period (July 1,
2010-June 30, 2011).
iii. Scoring Provider and Facility Performance on Clinical Measures
Based on Achievement
We proposed to award between 0 and 10 points for achievement for
all of the clinical measures except the VAT measure based on where a
provider's/facility's performance falls relative to the achievement
threshold and the benchmark for that measure. The following formula is
used when the provider's/facility's performance rate is equal to or
greater than the achievement threshold (but below the benchmark). Using
this formula, a provider/facility would receive a score of 1 to 9
points based on a linear scale disturbing all points proportionately
between the achievement threshold and the benchmark so that the
interval in performance between the score needed to receive a given
number of achievement points and one additional achievement point is
the same throughout the range of performance from the achievement
threshold to the benchmark.

[9* ((Provider's performance period rate--achievement threshold)/
(benchmark--achievement threshold))] + .5.

We proposed that all achievement points would be rounded to the nearest
integer, with 0.5 rounded up). If a provider's/facility's score was:
Equal to or greater than the benchmark, the provider/
facility would receive 10 points for achievement
Less than the achievement threshold (that is, the lower
bound of the achievement range), the provider/facility would receive 0
points for achievement.
iv. Scoring Provider/Facility Performance on Clinical Measures Based on
Improvement
We proposed that providers/facilities would earn between 0 and 9
points for all of the clinical measures except the VAT measure based on
how much their performance on the measure during the performance period
improved from their performance on the measure during the proposed
individual facility baseline period. A unique improvement range for
each measure would be established for each provider/facility. The
following formula is used when the provider's/facility's performance
rate is equal to or greater than the improvement threshold (but below
the benchmark). Using this formula, the provider/facility would receive
a score of 0 to 9 improvement points based on equally spaced intervals
between the improvement threshold and the benchmark.

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

We proposed that all improvement points be rounded to the nearest
integer, with 0.5 rounded up). If a provider's/facility's score on the
measure during the performance period was equal to or lower than its
baseline period score on the measure, the provider/facility would
receive 0 points for improvement.
v. Calculating the VAT Measure Score
We proposed to calculate the VAT measure score by first calculating
the measure rate according to measure specifications for each of the
two measure subcomponents. We proposed that these two rates would then
be converted into separate achievement and improvement scores, using
the above methodology, for each subcomponent using achievement and
improvement ranges specific to each subcomponent measure. The higher of
the achievement or improvement score for each measure component would
then be averaged to produce one overall score for the VAT measure. We
believe that this method of calculating this measure stresses the
importance of both vascular access sub-measures without penalizing
providers/facilities for two similar measures or unduly weighting a
provider's/facility's Total Performance Score in favor of VAT measures.
vi. Calculating the NHSN Dialysis Event Reporting Measure, Patient
Experience Survey Usage Reporting Measure and Mineral Metabolism
Reporting Measure Scores
We proposed to adopt a different scoring methodology for the
proposed NHSN Dialysis Event reporting measure,

[[Page 70274]]

Patient Experience Survey Usage reporting measure, and Mineral
Metabolism reporting measure.
With respect to the proposed NHSN Dialysis Event Reporting measure,
we proposed to assign providers/facilities a score of 0, 5, or 10
points as follows:
Providers/facilities that enrolled in the NHSN during or
before the performance period, completed the required training, and
successfully reported at least three-consecutive months of dialysis
event data to the NHSN before January 30, 2013, for the period of
January 1, 2012-December 31, 2012 would receive 10 points.
Providers/facilities that enrolled in the NHSN and
completed the required training during or before the performance
period, but did not report at least 3-consecutive months of dialysis
event data to the NHSN before January 30, 2013, for the period January
1, 2012 through December 31, 2012, would receive 5 points.
Providers/facilities that failed to enroll in the NHSN
and/or complete the required training during or before the proposed
performance period would receive 0 points.
We proposed to assign providers/facilities a score of 10 points if
they attest that they successfully administered the ICH CAHPS survey
during the performance period according to the specifications
referenced above. Providers/facilities that did not provide such an
attestation would receive 0 points.
We proposed to assign providers/facilities that measured the serum
calcium and serum phosphorus levels of all Medicare ESRD patients
treated by the provider/facility at least once within the month
throughout the duration of the proposed performance period a score of
10 points, while providers/facilities that did not do so would receive
0 points. We will measure this by requiring a facility to furnish an
attestation at the end of the performance period. Those facilities that
do not provide this attestation will receive 0 points.
vii. Weighting of the PY 2014 ESRD QIP Measures and Calculation of the
PY 2014 ESRD QIP Total Performance Score
Section 1881(h)(3)(A)(iii) of the Act provides that the methodology
for assessing provider/facility total performance must include a
process to weight the performance scores with respect to individual
measures to reflect priorities for quality improvement, such as
weighting scores to ensure that providers and facilities have strong
incentives to meet or exceed anemia management and dialysis adequacy
performance standards, as determined appropriate by the Secretary.
In determining how to appropriately weight the PY 2014 ESRD QIP
measures for purposes of calculating Total Performance Scores, we
considered a number of criteria. Specifically, we considered the number
of measures we have proposed to include in the PY 2014 ESRD QIP as well
as CMS and HHS quality improvement priorities. We stated our belief
that weighting the finalized clinical measures equally will incentivize
providers/facilities to improve and achieve high levels of performance
across all of the measures, resulting in overall improvement in the
quality of care provided to ESRD patients. For these reasons, we
proposed to assign equal weight to the five proposed clinical measures,
with those equal weights adding up to 90 percent of the Total
Performance Score. We stated our belief that, while the reporting
measures are valuable, the clinical measures measure actual patient
outcomes and therefore, justify a combined weight of 90 percent. We
proposed that the remaining 10 percent of the Total Performance Score
would be comprised of the proposed reporting measures, with each
measure weighted equally. We recognize that reporting is an important
component in quality improvement, and that this type of measure should
also be included in the ESRD QIP, although at a substantially lower
weight.
We also considered whether and how we could award a Total
Performance Score to providers/facilities that do not report data on at
least eleven cases with respect to one or more of the finalized
clinical measures. As we stated above, we proposed that this minimum
number of cases must be reported with respect to each clinical measure
in order for the provider/facility to receive a score on that measure.
We stated that because we are proposing to adopt additional measures,
we believe that it is appropriate to calculate Total Performance Scores
for all providers/facilities. In the case of a provider/facility that
has sufficient data from the performance period, but lacks sufficient
data from the baseline period, we proposed to only calculate its
achievement score, because it would not be possible to calculate its
improvement score. We believe that this approach is necessary to ensure
that as many providers/facilities receive a score as possible. We
proposed that the combined weight of the clinical measures that are
scored would still be equal to 90 percent of the Total Performance
Score, but only those measures for which providers/facilities report a
minimum of eleven cases or more would be included in determining this
score, with each such measure being weighted equally. We stated our
belief that this approach achieves that goal of including as many
providers/facilities as possible, while ensuring the reliability of the
measure scores.
Similarly, we proposed to assign equal weight to the proposed NHSN
Dialysis Event reporting measure, Patient Experience Survey reporting
measure, and Mineral Metabolism reporting measure, with those equal
weights adding up to 10 percent of the Total Performance Score.
Applying the proposed weighting criteria to a provider/facility that
receives a score on all of the proposed measures, we proposed to
calculate the provider/facility Total Performance Score using the
following formula:

Total Performance Score = [(.18 * Hemoglobin Greater Than 12g/dL
Measure) + (.18 * Kt/V Dialysis Adequacy Measure) + (.18 * Vascular
Access Type Measure) + (.18 * Vascular Access Infection Measure) + (.18
* SHR-Admissions Measure) + (.0333 * NHSN Reporting Measure) + (.0333 *
Patient Experience Survey Reporting Measure) + (.0333 * Mineral
Metabolism Reporting Measure)] * 10.

We proposed that the Total Performance Score be rounded-up to the
nearest integer (and any individual measure values ending in .5 would
be rounded-up).
We solicited public comment on the proposed performance scoring
methodology as detailed above. The comments we received and our
responses are summarized below.
Comment: One commenter urged that CMS should give greater weight to
those measures over which facilities have the greatest control and
asked for clarification of the process that will be used to weight
measures in future years of the ESRD QIP. Another commenter suggested
that CMS weight measures that detect underutilization of services more
than those that detect overutilization. Another commenter suggested
that CMS weight each measure based on its potential to improve quality.
Response: We believe, at this time, that it is appropriate to
weight all of the clinical measures equally and all of the reporting
measures equally in order to equally incentivize quality in all of
these areas of care. Additionally, we believe that providers/facilities
can, overall, impact the outcomes of these measures by providing high-
quality,

[[Page 70275]]

patient-centered care in accordance with the specified measures.
Finally, we do not believe it is appropriate to penalize
underutilization more than overutilization. Whether care is substandard
due to underutilization or overutilization, it is still substandard
care and should be recognized as such. We seek to be as transparent as
possible in all aspects of the ESRD QIP, and we will outline the
weighting methodology for future years of the program through
rulemaking.
Comment: Several commenters argued that the clinical measures
should not be weighted equally. Some commenters suggested that the VAT
catheter submeasure comprise a larger weight in the final VAT measure
score because of the literature suggesting that a reduction in
catheters will also reduce infections and mortality. One commenter
voiced support for CMS' proposal that the clinical measures compose 90
percent of the Total Performance Score, but argued that, because of the
importance of vascular access to overall health and cost reduction, the
VAT measure should be weighted at 50 percent with the other clinical
measures comprising the equally weighted remainder of the clinical
measure score. One commenter suggested that CMS weight the VAT measure
less than the other clinical measures. Other commenters suggested that,
if CMS retains the VAT measure, the catheter submeasure be weighted
greater than the fistula submeasure, perhaps at a 2:1 ratio. Some
commenters also suggested that the Patient Experience Survey measure be
weighted half as much as the other reporting measures because of the
greater clinical impact of the Mineral Metabolism and NHSN reporting
measures.
Response: We believe that all of the clinical measures improve care
and are important to the program. For the measures finalized for PY
2014, we do not believe any one area of care should be promoted over
another, and we believe that providers/facilities should be equally
incentivized to achieve high standards in all of the areas evaluated by
the clinical measures. Thus, although we have finalized only three of
the five proposed clinical measures, we still believe that is
appropriate to evenly weight the clinical measures. Additionally, we
continue to believe that the clinical measures are vital to improving
care and should be weighted more substantially than those measures
which to not score providers/facilities based upon actual outcomes. We
also believe that appropriate VAT is critical to ensuring optimal
patient outcomes. Thus, we do not agree that we should weight this
measure less than the other clinical measures. Furthermore, we do not
believe it is in the best interest of patients to weight the fistula
VAT submeasure more than the catheter VAT submeasure because of our
goal to promote fistula use. Although we agree that catheters pose a
greater risk to patients, we do not believe this necessitates weighting
the catheter subcomponent measure twice as much as the AV fistula
subcomponent measure as both are equally important in promoting the
best clinical practices with respect to VAT. Therefore, as stated
below, we finalize that the three clinical measures will be weighted
equally to comprise 90 percent of a providers/facilities Total
Performance Score.
As we have also stated, we believe that the Patient Experience
Survey is one of the most important tools in impacting clinical
practices because it is the only measure that gives patients a voice
that may otherwise go unrecognized. Therefore, we do not believe the
ICH CAHPS measure should have a lesser weight than the other reporting
measures.
Comment: One commenter expressed concern that new facilities
without a complete data set available for the measures will be unfairly
penalized.
Response: Like all ESRD QIP providers/facilities, new facilities
will only be included in the program if they have the requisite amount
of data. For each of the clinical measures, there must be at least
eleven cases each with four claims, regardless of whether the facility
is new or established, in order for such measure to be included in the
Total Performance Score. For the reporting measures, however, we
acknowledge that we did not specify any data requirements, and we
recognize that new facilities may be unfairly penalized if they do not
have a sufficient amount of time to fulfill the requirements for the
reporting measure.
Accordingly, we finalize that a provider/facility that receives a
new CCN on or after July 1, 2012 will have the option to not be scored
on the reporting measures. We believe that these new providers/
facilities need a reasonable amount of time to put the necessary
infrastrucure into place in order to be able to satisfy these measures.
For example, with respect to the ICH CAHPS patient survey experience
measure, a new facility would need to, at a minimum, hire a third party
vendor, treat at least one in-center hemodialysis patient for 3 months,
and field the survey (which, depending on the responsiveness of the
patient, could take an additional period of months). For these new
providers/facilities, that do not successfully satisfy the requirements
for the reporting measures, their Total Performance Score will be
calculated based solely on the applicable clinical measures that apply
to them.
However, we also recognize that under our scoring methodology, a
provider/facility's score on a reporting measure could help it achieve
the minimum Total Performance Score needed to avoid a payment reduction
that it would otherwise receive based solely on its clinical measure
score(s). In order to balance these competing concerns, we will allow a
new provider/facility (defined above as one that receives a new CCN on
or after July 1, 2012) the option to report one or more of the
reporting measures. If the new provider/facility chooses to take
advantage of this option by successfully satisfying the reporting
requirement for one or more of these measures, we will score the new
provider/facility on those measures and include those scores in the
calculation of that provider/facility's Total Performance Score.
We believe that we should include as many providers/facilities in
the program as possible. In the proposed rule, we proposed to calculate
Total Performance Scores for all providers/facilities and did not
specifically state any minimum number of clinical and reporting
measures a provider/facility would need to receive a Total Performance
Score. Thus, we clarify in this final rule that a provider/facility
will receive a Total Performance Score for PY 2014 if it is eligible
for at least one measure. We finalize that, if a provider/facility is
eligible for at least one clinical measure and at least one reporting
measure, the clinical measures will be equally weighted to sum 90
percent of the Total Performance Score, and the reporting measures will
be equally weighted to sum 10 percent of the Total Performance Score.
If a provider/facility is only eligible for clinical but not reporting
measures or vice versa, we will compute its Total Performance Score
based solely on the measures for which it is eligible.
Comment: Some commenters commended CMS for proposing measures,
proposing timeframes, and proposing the weight each measure would have
in the PY 2014 program within one regulation.
Response: We thank commenters for their support.
Comment: Commenters noted that establishing the achievement
threshold as one standard deviation below the national performance rate
might lead to inappropriate achievement thresholds as a result of
skewed performance distributions. Some commenters

[[Page 70276]]

suggested that, instead, CMS base performance standards on the median
performance of providers/facilities, with the achievement threshold
being at the 15th percentile. Other commenters urged CMS to establish
the achievement threshold as the mean performance of facilities
performing in the lowest third.
Response: In the proposed rule, we defined the performance
standards as the national performance rate, the achievement threshold
as one standard deviation below the achievement threshold, and the
benchmark as the mean of the top decile of providers/facilities. After
receiving public comment, we have found that the distribution of
facility performance on several measures is skewed, we have determined
that the median is a better measure of central tendency, which was our
original intent for these standards. If the measures had had a more
even distribution, one standard deviation below the mean would have
been calculated to be at approximately 35 percentage points below the
mean or the 15th percentile. Thus, we agree with the commenters who
suggested that the performance standard should be set at the median
performance of providers/facilities during the baseline period. In
order to more accurately access the achievement threshold, we will set
the performance standards (both achievement and improvement) as the
median of facility/provider performance and establish the achievement
threshold at the 15th percentile because the 15th percentile represents
approximately one standard deviation below the median had the
distributions been even.
Comment: Several commenters argued that the performance standards
must be published and commenters must be allowed to comment on these
standards and the related scoring methodology before the beginning of
the performance period.
Response: Our proposal set forth the performance standards that
would apply to the PY 2014 clinical measures and assigned example
numerical values to each of those proposed measures using data from
July 1, 2010 through November 30, 2010, which was the most current data
that was available at the time that overlapped with the proposed
performance period. Because of data limitations related to the claims
verification process which allows providers/facilities a period of time
to review and contest claims, we are able in this final rule to
finalize the performance standards that will apply to the PY 2014 ESRD
QIP but cannot yet assign actual numbers to those finalized standards
based on a full year of data. However, we will post these numbers on
the following Web site: http://www.dialysisreports.org/pdf/esrd/public-measures/UpdatedBaseline-2014-FR.pdf. We are publishing in this final
rule numbers based on data from July 1, 2010 through March 30, 2011, or
nine of the 12 months of baseline data. We will publish numbers based
on 12 months, July 1, 2010 through June 30, 2011, on or before January
31, 2012 at the following Web site: http://www.dialysisreports.org/pdf/esrd/public-measures/UpdatedBaseline-2014-FR.pdf. We do not anticipate
that the final numbers will differ substantially from these numbers.
We believe that this approach complies with section 1881(h)(4) of
the Act, including the requirement in subparagraph (C) that the
Secretary establish performance standards under subparagraph (A) prior
to the beginning of the performance period. However, we recognize that
providers/facilities are very interested in these numbers and have a
legitimate need to learn what they will be with respect to a payment
year as soon as possible. Although we are not able to provide them in
this final rule for the reasons discussed above, we anticipate that
beginning with the PY 2015 ESRD QIP, we will be able to select a
baseline period that ends early enough to make these numbers available
in the final rule that applies to that program. The estimated actual
values that apply to the PY 2014 performance standards, based on nine
of the twelve months of baseline data, are shown in Table 5 below.
Comment: One commenter suggested that CMS modify the payment
reduction scale to encourage providers to perform well on all of the
measures.
Response: As we noted in the proposed rule, we do not interpret
section 1881(h)(1)(B) of the Act to require that providers/facilities
meet or exceed the performance standards we establish with respect to
each individual ESRD QIP measure. Rather, we believe that our proposed
approach best balances the goal of incentivizing providers/facilities
to provide quality care across all of the measures while still
recognizing the higher quality of care provided by those providers/
facilities that exceed the performance standards on certain measures.
Additionally, we believe that this approach will give providers/
facilities the flexibility they need to become familiar with the new
scoring methodology.
Comment: Several commenters commended CMS for recognizing both
achievement and improvement in its scoring methodology. Some commenters
suggested that CMS implement a methodology to ensure that improvement
standards do not diminish incentives for achievement (for example,
facilities should be required to meet minimum thresholds prior to
having improvement rewarded). Commenters noted that CMS should adjust
its scoring methodology to ensure that facilities performing
consistently above the achievement threshold are not penalized. Under
the proposed scoring system, these facilities would not be eligible for
improvement points and could perform worse in the long run than those
who performed less well in baseline years. These commenters suggested
that CMS establish a consistency multiplier. Another commenter proposed
that CMS set a fixed achievement threshold in order to prevent
penalizing facilities that have improved (that is, improvement will
raise the standard which will cause the achievement threshold to rise
which will cause the provider to have to improve more). One commenter
stated that the performance standards for both PY 2013 and PY 2014
should be less stringent to decrease the incentive to game the system.
Response: We believe that the scoring methodology we are finalizing
for the PY 2014 ESRD QIP provides appropriate incentives to providers/
facilities to both achieve and improve. We acknowledge that under the
methodology, it might be possible for a provider/facility to attain a
lower measure rate on one or more measures than the measure rate
attained by other providers/facilities but receive more points overall
in the form of improvement points. However, we believe it is
appropriate to incentivize lower-achieving facilities to continue to
improve, even if their measure rates do not meet the achievement
threshold and even if their improvement points would be higher than
their achievement points. For these providers/facilities, our scoring
methodology allows us to reduce the amount of a payment reduction that
they might otherwise receive because they have improved over their
baseline rates. Additionally, because providers/facilities can score 1-
10 points for achievement and only 0-9 points for improvement,
providers/facilities can always be rewarded more for achieving at
higher levels. We agree with the commenters that the performance
standard will likely continue to rise if we continue to utilize this
scoring methodology in future years, and we will take these comments
into consideration as we gain experience with the ESRD QIP.
Additionally, we do not believe that the performance standards for
PY 2013 or PY 2014 are too stringent. For PY

[[Page 70277]]

2014, the performance standard is at the midpoint of providers'/
facilities' performance. Thus, this standard has been achieved by half
of all facilities. To begin scoring achievement points, providers/
facilities need only be at or above the 15th percentile. Thus, we
believe that the performance standards have been and will continue to
be attainable. We will be monitoring outcomes and practice patterns in
the ESRD setting to determine whether any ESRD QIP policies might be
encouraging activities that could be described as ``gaming,'' and, to
the extent necessary, we will make changes to the ESRD QIP to lessen
the potential that such activities occur.
Comment: Some commenters suggested that there was an error in CMS'
proposed scoring methodology because, if a facility does not improve at
all, it is possible for that facility to receive a negative improvement
score; these commenters asked CMS to clarify that facilities with the
same or lower improvement score compared to their baseline score will
have an improvement score of zero.
Response: Under the proposed scoring methodology, scores would be
rounded to the nearest integer, with a score of 0.5 rounded up to the
next highest integer. Accordingly, the lowest improvement score a
provider/facility could receive is (-) 0.5, and this score would be
rounded to zero. The commenter is correct in that the lowest score a
facility can receive for both improvement or achievement is zero.
Comment: One commenter expressed concern that, by setting the
benchmark score at the mean of the top decile of provider/facility
performance, many facilities will be unfairly penalized and requested
that CMS set a benchmark closer to the national performance rate.
Response: As noted, one of the goals of the ESRD QIP is to
incentivize the highest quality care. However, we agree that the
benchmark should be lowered to reflect a more attainable standard, and
because we are changing the achievement threshold to a fixed point, we
also believe it is appropriate to modify our methodology for
calculating the benchmark. To more accurately represent the top of all
performers, we will calculate the benchmark at the 90th percentile
instead of as the mean of the top decile of performers; while the mean
of the top decile will vary depending upon the rates of the top ten
percent of performers for each measure, the 90th percentile is a fixed
place on all measure performance distributions, thus allowing a more
consistent calculation throughout various distributions for all
measures. We believe that this change conforms the benchmark to the new
performance standards and achievement threshold while still
accomplishing the benchmark's intent to incentivize providers/
facilities to provide the highest achievable level of care.
For the reasons discussed above, we are finalizing the PY 2014 ESRD
QIP scoring methodology to score each clinical measure rate as the
higher of the measure's achievement or improvement score, as explained
above. We are also finalizing the proposed scoring methodology for
calculating the reporting measure scores and the requirement that a
provider/facility must have received a CCN on or before July 1, 2012 in
order to automatically be scored on the reporting measures. We note
that, as discussed above, for the NHSN Dialysis Event measure, we will
now allow providers/facilities until March 31, 2013 at 11:59 EST to
report the required three consecutive months of data from the
performance period. We are also finalizing our proposal to calculate
the VAT measure score as the average of the submeasure scores.
Based on public comments, we are not finalizing the proposed
definition of performance standards, achievement thresholds, or
benchmarks which were based on means and standard deviations. Due to
skewed distributions of facility performance, we are finalizing the
performance standards (both achievement and improvement) as the median
(50th percentile), the achievement threshold as the 15th percentile,
and the benchmark as the 90th percentile. We agree with commenters that
this better reflects the central tendency and spread of these
performance distributions.
We are finalizing the proposed baseline period of July 1, 2010-June
30, 2011. We are also finalizing our proposal that providers/facilities
that do not have enough data in the baseline period to calculate a rate
for a measure but do have enough data to calculate a measure rate in
the performance period will receive a score on that measure based
solely on achievement. We also finalize that the clinical measures for
which a provider/facility is eligible will be equally weighted to
comprise 90 percent of its Total Performance Score, and the reporting
measures for which a provider/facility is eligible will be equally
weighted to comprise 10 percent of its Total Performance Score. If a
provider/facility is only eligible for one type of measure, the
provider's/facility's Total Performance Score will be calculated based
on that measure(s) alone.
Because of the data limitations explained above, we are unable at
this time to assign final numbers to the performance standards,
achievement thresholds, and benchmarks. We will publish these numbers
at the following Web site: http://www.dialysisreports.org/pdf/esrd/public-measures/UpdatedBaseline-2014-FR.pdf on or before January 31,
2012. Below, in Table 4 and 5, we have provided estimates based upon
data from July 1, 2010 through March 30, 2011. We do not believe that
these estimates will vary significantly from our finalized numbers.
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BILLING CODE 4120-01-C
vii. Examples for 2014 ESRD QIP Performance Scoring Model
Below, we provide examples to illustrate the performance scoring
model. Figures 1-4 illustrate the scoring for a clinical measure.
Figure 1 shows Facility A's performance on the URR measure. The example
benchmark (90th percentile) calculated for this measure in this case is
100 percent, while the example achievement threshold (15th percentile)
is 91 percent. Facility A's performance rate of 100 percent during the
performance period meets or exceeds the benchmark, so Facility A would
earn 10 points (the maximum) for achievement for this measure.
(Because, in this example, Facility A has earned the maximum number of
points possible for this measure, its improvement score is irrelevant.)

[[Page 70279]]

[GRAPHIC] [TIFF OMITTED] TR10NO11.005

Figure 2 and 3 show the scoring for another facility, Facility B. As
illustrated below, the facility's performance on the URR measure went
from 80 percent in the baseline period to 95 percent during the
performance period.
[GRAPHIC] [TIFF OMITTED] TR10NO11.006

Applying the achievement scale, Facility B would earn 5 points for
achievement, calculated as follows:

9 * [(95 - 91)/(100 - 91)] + .5 = 4.5, which is rounded to 5 points.

However, because Facility B's performance during the performance
period is also greater than its baseline period performance (but
Facility B's performance period score is less than the benchmark), it
would be scored based on improvement as well, as shown by Figure 3,
below.

[[Page 70280]]

[GRAPHIC] [TIFF OMITTED] TR10NO11.007

Applying the improvement scale, based on Facility B's period-to-period
improvement, from 80 percent to 95 percent, Facility B would earn 7
improvement points, calculated as follows:

10 * [(95 - 80)/(100 - 80)] - .5 = 7.5 - .5 = 7.0, which would be
rounded to 7 points.

Because the higher of the two scores is used for determining the
measure score, Facility B would receive 7 points for this measure.
In Figure 4 below, Facility C's performance on the URR measure
drops from 80 percent in the baseline period to 75 percent in the
performance period, a decline of 5 percent.
[GRAPHIC] [TIFF OMITTED] TR10NO11.008

[[Page 70281]]

Because Facility C's performance during the performance period
falls below the achievement threshold of 91 percent, it would receive
zero points for achievement. Facility C would also receive zero points
for improvement because its performance during the performance period
was lower than its performance during the baseline period. In this
example, Facility C would receive zero points for the URR Measure.
The method illustrated above would be applied to each clinical
measure in order to obtain a score for each measure. Scores for
reporting measures are calculated based upon the methodology as
proposed.
Applying the weighting criteria to a provider/facility that
receives a score on all finalized measures, we calculate the
provider's/facility's Total Performance Score using the following
formula:

Total Performance Score = [(.300 * Hemoglobin Greater Than 12g/dL
Measure) + (.300 * URR Hemodialysis Adequacy Measure) + (.300 *
Vascular Access Type Measure) + (.0333 * NHSN Reporting Measure) +
(.0333 * Patient Experience Survey Reporting Measure) + (.0333 *
Mineral Metabolism Reporting Measure)] * 10.

The Total Performance Score be rounded to the nearest integer (and any
individual measure values ending in .5 would be rounded to the next
higher integer)).

However, if, for example, a provider/facility did not receive a
score on the proposed VAT measure, the provider's/facility's Total
Performance Score would be calculated as follows:

Total Performance Score = [(.4500 * Hemoglobin Greater Than 12g/dL
Measure) + (.4500 * URR Hemodialysis Adequacy Measure) + (.0333 * NHSN
Reporting Measure) + (.0333 * Patient Experience Survey Reporting
Measure) + (.0333 * Mineral Metabolism Reporting Measure)] * 10, (the
Total Performance Score will be rounded to the nearest integer (and any
values ending in .5 would be rounded to the next higher integer)).

Finally, if, for example, a provider/facility qualified for two of
the reporting measures,\18\ the provider's/facility's Total Performance
Score would be calculated as follows:
---------------------------------------------------------------------------

\18\ This could occur, for example, if a provider/facility is a
pediatric and/or peritoneal facility only.

Total Performance Score = [(.300 * Hemoglobin Greater Than 12g/dL
Measure) + (.300 * URR Hemodialysis Adequacy Measure) + (.300 *
Vascular Access Type Measure) + (.05 * NHSN Reporting Measure) + (.05 *
Mineral Metabolism Reporting Measure)] * 10.
6. Payment Reductions for the PY 2014 ESRD QIP
Section 1881(h)(3)(A)(ii) of the Act requires the Secretary to
ensure that the application of the scoring methodology results in an
appropriate distribution of payment reductions across providers and
facilities such that providers and facilities achieving the lowest
Total Performance Scores receive the largest payment reductions. We
have adopted a sliding scale of payment reductions for the PY 2012 ESRD
QIP (76 FR 634) and have finalized a sliding scale in this final rule
for PY 2013 ESRD QIP. In developing a payment reduction scale for the
PY 2014 ESRD QIP, we sought to create an approach that would retain
aspects of the tiered sliding scale selected for the PY 2012 ESRD QIP,
but also reflect the change in provider/facility scores under the new
scoring methodology. Under the proposed approach, a provider/facility
would not be required to meet or exceed the performance standards with
respect to each of the finalized measures in order to avoid receiving a
payment reduction under the ESRD QIP. Rather, even if a provider/
facility failed to meet or exceed the performance standards with
respect to one or more of these measures, the provider/facility could
avoid a payment reduction if it achieved a minimum Total Performance
Score that is equal to or greater than the minimum Total Performance
Score it would receive if it had met the performance standards for each
finalized measure, or, in the case of the VAT measure, for the two
subcomponent measures. At the time we issued the proposed rule, we were
unable to calculate the minimum Total Performance Score because we did
not have the data for the baseline period. We estimated, however, that
the minimum Total Performance Score that a provider/facility would have
to achieve to avoid a payment reduction would be 60 points, and we
stated that we would specify the exact number in the final rule. We
proposed to implement at least a 1.0 percent payment reduction for all
providers/facilities that fail to meet or exceed this minimum Total
Performance Score.
To ensure that the proposed payment reduction methodology complies
with the section 1881(h)(3)(A)(ii) requirement that providers and
facilities achieving the lowest Total Performance Scores receive the
largest payment reductions, we proposed to increase the payment
reduction from 1.0 percent to 1.5 percent for all providers/facilities
that fail to achieve a Total Performance Score that is 10 points below
the minimum Total Performance Score (described above). Additionally, we
proposed to increase the payment reduction to 2.0 percent for all
providers/facilities that fail to achieve a Total Performance Score
that is 20 points below the minimum Total Performance Score (described
above). We stated our belief that such a sliding scale will incentivize
providers/facilities to meet the performance standards and continue to
improve their performance because even if a provider/facility fails to
achieve the minimum Total Performance Score, such provider/facility
will still be incentivized to strive for, and attain, better
performance in order to reduce the amount of its payment reduction.
The comments we received on the proposed payment reductions are set
forth below.
Comment: One commenter opposed the elimination of the 0.5% payment
reduction level and suggested that there be at least five tiers in the
payment reduction scale because, in addition to allowing comparisons
between years, five-tiers in the payment reduction scale is more
consistent with the literature supporting value-based purchasing
programs.
Response: We agree with the commenter's concern and will include
the 0.5 percent payment reduction level as an additional level in the
PY 2014 ESRD QIP payment reduction scale. Thus, the payment reductions
for PY 2014 will range on a sliding scale from 0.5 percent to 2.0
percent with the provider/facility moving down a tier for every ten
points its Total Performance Score falls below the minimum Total
Performance Score. We are finalizing new measures, a new scoring
methodology, and rigorous performance standards which are not familiar
to the community. We believe that including this additional payment
reduction level will allow time for us as well as providers/facilities
to become familiar with this new structure.
Comment: One commenter disapproved of setting 10 points as a
threshold for each reduction in payment for PY 2014 when CMS cannot yet
estimate the minimum Total Performance Score because the distribution
in payment reductions is not yet known and will not be known until the
performance period has ended. Instead, the commenter suggested that CMS
allow for a sufficient period of

[[Page 70282]]

time for the quality measure scores to be made publicly available and
data to be collected to assess the potential impact of the QIP on the
facilities. Another commenter suggested that CMS score the PY 2014
measures on a 30 point scale consistent with PY 2012 so that facilities
and consumers can meaningfully compare performance from year to year.
Response: We appreciate the commenter's concern regarding how we
establish the minimum Total Performance Score and each successive
payment reduction level. Although we will not know the distribution of
payment reductions based on the minimum Total Performance Score until
we have the data at the end of the performance period, given our
current estimates of the data, we believe that, the payment reductions
will be appropriate to incentivize providers/facilities to improve
patient care. We have calculated these estimates based on the data
currently available to us, as further explained in the Regulatory
Impact Statement, and they are similar to the reductions for PY 2012
and our estimates for PY 2013. However, in light of the commenter's
concern, we will further adjust how we set the minimum Total
Performance Score. Rather than set the minimum Total Performance Score
as the score a provider/facility would receive if it had met the
performance standards for each finalized measure, we will define the
minimum Total Performance Score as the score a provider/facility would
receive if it had met the performance standards for each of the
finalized clinical measures. Recognizing many commenters' concerns
regarding the new reporting measures, and our lack of data on which to
approximate likely provider/facility performance, we will exclude them
from the calculation of the minimum Total Performance Score. We believe
this policy will balance our desire to appropriately incentivize
improvements in clinical quality while ensuring that providers/
facilities are not unduly penalized.
Based on our analysis of the data from July 1, 2010 through March
30, 2011, we estimate that the PY 2014 minimum Total Performance Score
will be 56 points. We will publish the final minimum Total Performance
Score at the following Web site: http://www.dialysisreports.org/pdf/esrd/public-measures/UpdatedBaseline-2014-FR.pdf on or before January
31, 2012.
Additionally, although we generally believe that the ESRD QIP
should provide a means for patients to evaluate their providers/
facilities over time, we do not believe that, even if we set
performance on a 30 point scale, PY 2014 would be comparable to
previous years of the ESRD QIP because of the significant changes to
scoring methodology and measures. We believe a 100 point scale will
accommodate a growing number of measures that may be adopted in future
years of the QIP and plan to consistently use the 100 point scale going
forward.
Based on the public comments we received, we are finalizing most of
the payment reduction methodology that we proposed; however, we are
adding an additional payment reduction level of 0.5 percent, with the
scale now ranging from 0.5 percent to 2.0 percent. For every ten points
a provider/facility's Total Performance Score falls below the minimum
Total Performance Score, it will receive an additional 0.5 percent
reduction. We are modifying our definition of the minimum Total
Performance Score to be equal to the score a provider/facility would
receive if it performed at the performance standards for each of the
clinical measures.
As noted above, we are unable to publish a finalized minimum Total
Performance Score until we assign a final number to each finalized
performance standard. We will publish a finalized minimum Total
Performance Score at the following Web site: http://www.dialysisreports.org/pdf/esrd/public-measures/UpdatedBaseline-2014-FR.pdf on or before January 31, 2012. Based upon the performance
standard examples we provided above, we estimate that the minimum Total
Performance Score will be 56. We do not anticipate that this estimate
will substantially change. Using this estimation, the payment reduction
scale would be as detailed below in
[GRAPHIC] [TIFF OMITTED] TR10NO11.009

7. Public Reporting Requirements
Section 1881(h)(6)(A) of the Act requires the Secretary to
establish procedures for making information regarding performance under
the ESRD QIP available to the public, including information on the
Total Performance Score (as well as appropriate comparisons of
providers and facilities to the national average with respect to such
scores) and performance scores for individual measures achieved by each
provider and facility. Section 1881(h)(6)(B) of the Act further
requires that a provider or facility have an opportunity to review the
information to be made public with respect to that provider/facility
prior to such information's publication.
In addition, section 1881(h)(6)(C) of the Act requires the
Secretary to provide each provider and facility with a certificate
containing its Total Performance Score to post in patient areas within
the facility. Finally, section 1881(h)(6)(D) of the Act requires the
Secretary to post a list of providers/facilities and performance-score
data on a CMS-maintained Web site.
For both the PY 2013 and PY 2014 ESRD QIP, we proposed no change in
the implementation of these statutory provisions (section 1881(h)(6)(A)
through section 1881(h)(6)(D) of the Act) from the proposals finalized
in the 2012 ESRD QIP final rule (76 FR 636 through 639), wherein we
finalized the establishment of procedures for providers/facilities to
review the information to be made public and the procedures for
informing the public through facility-posted certificates.

[[Page 70283]]

The comments we received on the public reporting proposals are set
forth below.
Comment: Some commenters noted that information reported to the
public should be meaningful and requested that CMS include language on
the ESRD QIP certificates stating (i) The date range of the performance
period; (ii) the date ranges used to compute the performance standards;
and (iii) a statement that the data may not reflect current medical
standards or facility/provider performance.
Response: The certificates for PY 2012 will indicate the year of
the performance period. We will monitor whether beneficiaries find the
certificates to be effective in conveying performance, and we will
continue to evaluate the information they should include for PY 2013
and PY 2014. We believe that the intent of the certificates is to
convey information about facility performance in an understandable,
clear, and concise manner. We do not believe that details about the
baseline data used to compute the performance standards, or disclaimers
about the limitations of the data, are required to convey this basic
message, but we encourage providers/facilities to discuss these
certificates with their patients and provide any further explanatory
information they feel is necessary.
Comment: Several comments requested that CMS address procedural
issues related to facility Performance Score Reports.
Response: Performance Score Reports (PSRs) are distributed to
providers/facilities for their review after the end of the performance
period but before payment reductions are assessed. For PY 2012, PSRs
were sent to providers/facilities in July 2011, and provider/facilities
were permitted to preview the reports and ask us any questions. We are
currently reviewing our PSR process, and we will consider commenters'
suggestions as we develop the PSRs for PY 2013 and PY 2014.
For the reasons set forth above, we are finalizing the public
reporting requirements as proposed.
8. Future QIP Measures
As part of our effort to continuously improve the ESRD QIP, we are
working to adopt additional robust measures that provide valid
assessments of the quality of care delivered to ESRD beneficiaries. To
that end, we are developing measures that apply to all modalities
(including home and in-center dialysis) and the pediatric population.
We also sought public comment on the inclusion of iron management
measures, serum calcium management measures, and serum phosphorus
management measures for future years of the ESRD QIP. Specifically, we
sought public comment on:
Measurement of Serum Calcium Concentration.
Measurement of Serum Phosphorus Concentration.
Assessment of Iron Stores.
These measures are currently collected through CROWNWeb as part of
the CPM set. The full specifications for these measures may be accessed
at: http://www.dialysisreports.org/ESRDMeasures.aspx.
The comments we received on future measures are set forth below.
Comment: Many commenters suggested measures and/or domains for
future ESRD QIP payment years. These suggestions included (i) Iron
measures, perhaps measuring trends in ferritin; (ii) upper serum
phosphorus limit measures; (iii) hypercalcemia measures (e.g. NQF
1454); (iv) PTH measures; (iv) albumin measures; (v)
immunization measures; (vi) fluid management measures; (vii) quality of
life measures; (x) measures focusing upon the nurse-patient
relationship; (viii) measures assessing the number of HHD and PD
patients; (ix) blood pressure measures; and (x) standardized mortality
rate measures. Other commenters suggested that we make the reporting
measures clinical measures as soon as feasible. Commenters also
encouraged us to consider domains and measures in which the pediatric
community, HHD patients, and PD patients can more actively participate.
Response: We thank commenters for these suggestions. We continue to
monitor measure development and valid and available data sources and
look forward to working with the ESRD community to choose future
measures which drive quality of care.
Comment: One commenter stated a belief that that CMS should not
adopt any current or future measures that do not indicate a causal
relationship between the measure and morbidity and mortality and
requested that CMS conduct more scientific tests on these measures.
Therefore, this commenter believes that an iron stores measure should
be a reporting measure only until further scientific evidence can be
obtained. This commenter also expressed concern that a ``one size fits
all'' system will lead to ``cherry-picking.''
Response: We thank the commenter for the input. We continue to
analyze and develop measures that we believe best reflect quality in
care. We also continue to monitor access to care issues and will adjust
the ESRD QIP to address these issues in future rulemaking, as needed.
Comment: One commenter suggested that the ESRD QIP should focus
more on mitigating patient non-compliance.
Response: We thank the commenter for the suggestion and will
consider it as we further develop measures and policies for the ESRD
QIP. We also note that there are mechanisms currently in place under
the ESRD Conditions for Coverage that require that providers/facilities
educate patients and promote appropriate patient care (e.g. 42 CFR
494.90(d)).
Comment: Some commenters urged CMS to require reporting of the ESRD
QIP measures for all applicable patient populations, including both
Medicare and non-Medicare populations, because providers will then have
a better understanding of their overall performance.
Response: We intend to propose to require reporting of measure data
on all ESRD patient populations after the launch of CROWNWeb. We have
thus far not required reporting on all patient populations because our
measures have been claims-based and have thus been restricted to
Medicare patients. We adopted claims-based measures to reduce the
burden of reporting for providers/facilities in the initial years of
the program.
Comment: Some commenters requested that we clearly provide the
criteria which we will use to select future measures and their weight
and suggested that measures be ``phased-in.'' Commenters also suggested
the CMS use criteria similar to that used by the NQF to adopt measures
and employ the feedback of the Measure Applications Partnership in
selecting measures appropriate for the program.
Response: We believe that we have outlined the criteria we used to
select measures and their weights for the ESRD QIP, and we will
continue to do so in the future. We will also consider NQF criteria, as
well as feedback of other consensus-based entities, such as the
Measures Application Partnership, as we select measures for the ESRD
QIP. We also believe that, in some cases, it might be appropriate to
``phase-in'' measures, and we will continue to consider the best
methods of introducing measures to the program.
Comment: One commenter suggested that CMS impose a method for
ensuring that the data provided by facilities/providers is accurate.
Response: We currently have the ability to cross check the accuracy
of some of the data reported via CROWNWeb. If a provider/facility
reports information via CROWNWeb,

[[Page 70284]]

we can see if this information reflects that submitted for the ESRD
QIP. We will continue to monitor provider/facility compliance with the
ESRD QIP reporting requirements, and we will propose to implement a
validation methodology in future rulemaking if we conclude that this
would be appropriate for the program.
Comment: Some commenters encouraged CMS to implement a program or
conduct demonstration programs for incentive bonus payments rather than
payment reductions. These commenters suggested that these bonuses could
be funded by the money saved in payment reductions under the ESRD QIP.
Another commenter suggested that CMS make more of the payment amount
contingent upon quality, and one commenter urged CMS to encourage
innovation in the ESRD field.
Response: Section 1881(h) does not provide us with the authority to
issue bonus payments to providers/facilities based on their performance
under the ESRD QIP or to make reductions of more than 2.0 percent. We
have conducted quality incentive ESRD demonstration projects in the
past, and we intend to do so in the future; we will consider
commenters' suggestions as we develop future projects. We believe that
the ESRD QIP will encourage innovation in the ESRD field as providers/
facilities seek to reach the highest quality standards through better
and more efficient methods of care.
9. Process of Updating Measures
Section 1881(h)(2)(C) of the Act enables the Secretary to establish
a process for updating the measures specified under subparagraph (A) in
consultation with interested parties. Occasionally there are changes in
science or new issues arise related to patient safety that may impact
the measures that have been adopted through the rulemaking process.
Therefore, for such cases where new information is available that
specifically relates to patient safety concerns, we proposed that we
would post a notice of the updates we intend to make to the measure(s)
in the Federal Register. We proposed to specify in the notice a time
period during which we would accept comments from the public. We also
proposed to consider these comments and post a notice in the Federal
Register finalizing any updates that we make to the measure(s). We
stated our belief that this process will enable us to make necessary
updates to the ESRD QIP measures to ensure that the measures are based
on the best available scientific data.
Comment: Some commenters requested that CMS use the rulemaking
process to update and/or modify measures.
Response: We believe that the measure updating process that the
Secretary establishes under section 1881(h)(2)(B) can be a
subregulatory process, as long as it is established in consultation
with interested parties. We also believe that we have met this
statutory requirement by proposing in rulemaking to implement a process
to update measures. Generally, we will use the rulemaking process as
often as possible to updated and/or modify measures. But the process we
proposed to adopt balances our need, in some circumstances, to
expeditiously update measures to address changes in science or issues
related to patient safety while still allowing the public to express
its critiques, concerns, and approval of such updates.
After considering the comments, we are finalizing our process for
updating measures as proposed.

III. Ambulance Fee Schedule

A. Summary of Proposed Provisions

In the CY 2012 ESRD PPS proposed rule (76 FR 40535 through 40536),
we proposed to revise the regulations at Sec. 414.610 to conform with
section 106 of the Medicare and Medicaid Extenders Act of 2010 (MMEA),
and to incorporate a technical correction.
1. Section 106 of the Medicare and Medicaid Extenders Act of 2010
(MMEA)
a. Amendment to Section 1834(l)(13) of the Act
Section 146(a) of the Medicare Improvements for Patients and
Providers Act of 2008 (Pub. L. 110-275) (MIPPA) amended section
1834(l)(13)(A) of the Act to specify that, effective for ground
ambulance services furnished on or after July 1, 2008 and before
January 1, 2010, the ambulance fee schedule amounts for ground
ambulance services shall be increased as follows:
For covered ground ambulance transports which originate in a rural
area or in a rural census tract of a metropolitan statistical area, the
fee schedule amounts shall be increased by 3 percent.
For covered ground ambulance transports which do not originate in a
rural area or in a rural census tract of a metropolitan statistical
area, the fee schedule amounts shall be increased by 2 percent.
Sections 3105(a) and 10311(a) of the Affordable Care Act further
amended section 1834(l)(13)(A) of the Act to extend the payment add-ons
described above for an additional year, such that these add-ons also
applied to covered ground ambulance transports furnished on or after
January 1, 2010 and before January 1, 2011. In the CY 2011 physician
fee schedule final rule (75 FR 73385 and 73386, 73625), we revised
Sec. 414.610(c)(1)(ii) to conform the regulations to this statutory
requirement.
Subsequently, section 106(a) of the MMEA again amended section
1834(l)(13)(A) of the Act to extend the payment add-ons described above
for an additional year, such that these add-ons also apply to covered
ground ambulance transports furnished on or after January 1, 2011 and
before January 1, 2012. In the CY 2012 ESRD PPS proposed rule (76 FR
40535), we proposed to revise Sec. 414.610(c)(1)(ii) to conform the
regulations to this statutory requirement. This statutory requirement
is self-implementing. A plain reading of the statute requires only a
ministerial application of the mandated rate increase, and does not
require any substantive exercise of discretion on the part of the
Secretary. For further information regarding the extension of these
payment add-ons, please see Transmittal 706 (Change Request 6972) dated
May 21, 2010 and the CMS Web site, http://www.cms.gov/AmbulanceFeeSchedule/02_afspuf.asp.
b. Amendment to Section 146(b)(1) of MIPPA
Section 146(b)(1) of the MIPPA amended the designation of rural
areas for payment of air ambulance services. This section specified
that any area that was designated as a rural area for purposes of
making payments under the ambulance fee schedule for air ambulance
services furnished on December 31, 2006, shall continue to be treated
as a rural area for purposes of making payments under the ambulance fee
schedule for air ambulance services furnished during the period July 1,
2008 through December 31, 2009.
Sections 3105(b) and 10311(b) of the Affordable Care Act amended
section 146(b)(1) of MIPPA to extend this provision for an additional
year, through December 31, 2010. In the CY 2011 physician fee schedule
final rule (75 FR 73385 through 86, 73625 through 26), we revised Sec.
414.610(h) to conform the regulations to this statutory requirement.
Subsequently, section 106(b) of the MMEA amended section 146(b)(1) of
MIPPA to extend this provision again through December 31, 2011.
Therefore, in the CY 2012 ESRD PPS proposed rule (76 FR 40536), we

[[Page 70285]]

proposed to revise Sec. 414.610(h) to conform the regulations to this
statutory requirement. This statutory requirement is self-implementing.
A plain reading of the statute requires only a ministerial application
of a rural indicator, and does not require any substantive exercise of
discretion on the part of the Secretary. Accordingly, for areas that
were designated as rural on December 31, 2006, and were subsequently
re-designated as urban, we have re-established the ``rural'' indicator
on the ZIP Code file for air ambulance services through December 31,
2011.
For further information regarding the extension of this MIPPA
provision, please see Transmittal 706 (Change Request 6972) dated May
21, 2010 and the CMS Web site, http://www.cms.gov/AmbulanceFeeSchedule/02_afspuf.asp.
c. Amendment to Section 1834(l)(12) of the Act
Section 414 of the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (MMA) added paragraph (12) to section 1834(l)
of the Act, which specified that in the case of ground ambulance
services furnished on or after July 1, 2004, and before January 1,
2010, for which transportation originates in a qualified rural area (as
described in the statute), the Secretary shall provide for a percent
increase in the base rate of the fee schedule for such transports. The
statute requires this percent increase to be based on the Secretary's
estimate of the average cost per trip for such services (not taking
into account mileage) in the lowest quartile of all rural county
populations as compared to the average cost per trip for such services
(not taking into account mileage) in the highest quartile of rural
county populations. Using the methodology specified in the July 1, 2004
interim final rule (69 FR 40288), we determined that this percent
increase was equal to 22.6 percent. As required by the MMA, this
payment increase was applied to ground ambulance transports that
originated in a ``qualified rural area''; that is, to transports that
originated in a rural area included in those areas comprising the
lowest 25th percentile of all rural populations arrayed by population
density. For this purpose, rural areas included Goldsmith areas (a type
of rural census tract).
Sections 3105(c) and 10311(c) of the Affordable Care Act amended
section 1834(l)(12)(A) of the Act to extend this rural bonus for an
additional year through December 31, 2010. In the CY 2011 physician fee
schedule final rule (75 FR 73385 through 73386 and 73625), we revised
Sec. 414.610(c)(5)(ii) to conform the regulations to this statutory
requirement.
Subsequently, section 106(c) of the MMEA again amended section
1834(l)(12)(A) of the Act to extend the rural bonus described above for
an additional year, through December 31, 2011. Therefore, as directed
by the MMEA, we are continuing to apply the rural bonus described above
(in the same manner as in previous years), to ground ambulance services
with dates of service on or after January 1, 2011 and before January 1,
2012 where transportation originates in a qualified rural area.
This rural bonus is sometimes referred to as the ``Super Rural
Bonus'' and the qualified rural areas (also known as ``super rural''
areas) are identified during the claims adjudicative process via the
use of a data field included on the CMS supplied ZIP Code File.
In the CY 2012 ESRD PPS proposed rule (76 FR 40536), we proposed to
revise Sec. 414.610(c)(5)(ii) to conform the regulations to the
statutory requirement set forth at section 106(c) of the MMEA. This
statutory requirement is self-implementing. The statute requires a one-
year extension of the rural bonus (which was previously established by
the Secretary), and does not require any substantive exercise of
discretion on the part of the Secretary. For further information
regarding the extension of this rural bonus, please see Transmittal 706
(Change Request 6972) dated May 21, 2010 and the CMS Web site, http://www.cms.gov/AmbulanceFeeSchedule/02_afspuf.asp.
2. Technical Correction
In the CY 2011 physician fee schedule final rule (75 FR 73386,
73625), CMS made technical changes to reformat Sec. 414.610(c)(1).
However, in making these revisions, language related to the ambulance
fee schedule conversion factor (CF) was inadvertently left out of this
regulation. Specifically, the following sentence was inadvertently
omitted from revised Sec. 414.610(c)(l): ``The CF is multiplied by the
applicable RVUs for each level of service to produce a service-level
base rate.'' Prior to the changes made in the CY 2011 physician fee
schedule final rule, this was the first sentence under Sec.
414.610(c)(l)(i). We did not intend to delete this language in making
the CY 2011 formatting changes. Therefore, in the CY 2012 ESRD PPS
proposed rule (76 FR 40536), we proposed to revise Sec. 414.610(c)(1)
to reinstate this sentence which was inadvertently deleted in the CY
2011 physician fee schedule final rule.

B. Response to Comments

We did not receive any comments regarding the proposed revisions to
Sec. 414.610 discussed above. (We received one ambulance-related
comment during the comment period which was beyond the scope of the
proposed rule, and thus, it is not addressed in the final rule).
Therefore, we are finalizing the revisions to Sec. 414.610 as
proposed.

IV. Durable Medical Equipment and Supplies

A. Background for Durable Medical Equipment (DME) and Supplies

Title XVIII of the Social Security Act (the Act) governs the
administration of the Medicare Program. The statute provides coverage
for broad categories of benefits, including inpatient and outpatient
hospital care, skilled nursing facility care, home health care,
physician services, and durable medical equipment (DME). DME is covered
by Medicare based, in part, upon section 1832(a) of the Act, which
describes the scope of benefits under the supplementary medical
insurance program (Medicare Part B). Section 1861(s)(6) of the Act
defines ``medical and other health services'' to include DME as a
separate benefit for which payment is authorized by section 1832 of the
Act. Section 1861(m)(5) of the Act specifically includes DME in the
definition of the term ``home health services.''
In accordance with section 1861(n) of the Act, the term ``durable
medical equipment'' includes iron lungs, oxygen tents, hospital beds,
and wheelchairs used in the patient's home whether furnished on a
rental basis or purchased. The patient's home includes an institution
used as his or her home other than an institution that meets the
requirements of section 1861(e)(1) or section 1819(a)(1) of the Act.
Besides being subject to this provision, the coverage of DME must also
meet the requirements of section 1862(a)(1)(A) of the Act, which in
general excludes from payment any items or services that are not
reasonable and necessary for the diagnosis or treatment of illness or
injury or to improve the functioning of a malformed body member, and
section 1862(a)(6) of the Act, which (except for certain specified
exceptions) precludes payment for personal comfort items.
Section 1834(a) of the Act, as added by section 4062 of the Omnibus
Budget Reconciliation Act of 1987 (OBRA 87), Public Law 100-203, sets
forth the payment rules for most DME furnished on or after January 1,
1989. Historically, the Medicare payment amount for a DME item is
generally equal to 80

[[Page 70286]]

percent of the lesser of the actual charge or the fee schedule amount
for the item, less any unmet Part B deductible. The beneficiary
coinsurance for such items is generally equal to 20 percent of the
lesser of the actual charge or the fee schedule amount for the item
once the deductible is met. The fee schedule amounts are generally
calculated using average allowed charges from a base period and then
updated by annual update factors. Sections 1834(a)(2) through (a)(7) of
the Act set forth six separate classes of DME and separate payment
rules for each class. The six classes of items are: inexpensive and
other routinely purchased DME; items requiring frequent and substantial
servicing; customized items; oxygen and oxygen equipment; other covered
items (other than DME); and capped rental items. For DME in general,
Sec. 414.210(f) specifies that payment can be made for replacement of
DME that is lost, stolen, irreparably damaged, or has been in
continuous use for the equipment's reasonable useful lifetime (RUL). In
general, the RUL for DME is established as 5 years. Computation of the
RUL is based on when the equipment is delivered to the beneficiary, not
the age of the equipment. The 5-year standard is set forth in section
1834(a)(7)(C)(iii) of the Act for capped rental DME, but was applied to
all DME through the regulations. The RUL is used to determine how often
it is reasonable to pay for replacement of DME under the program and is
not specifically set forth as a minimum lifetime standard. Therefore,
we are using our discretion to establish a rule regarding how long
equipment must withstand repeated use to be considered DME.
Payment for inexpensive or routinely purchased DME is made on a
purchase or rental basis, with total payments being limited to the
purchase fee schedule amount for the item. The regulation at 42 CFR
414.220 provides that inexpensive DME have an average purchase price of
$150 or less and routinely purchased DME are items that have
historically been acquired on a purchase basis 75 percent of the time
or more. Accessories used with DME are also included in the inexpensive
or routinely purchased DME class. Payment is generally made on a
monthly rental basis with no cap on the number of rental payments made
for items such as ventilators that require frequent and substantial
servicing. Payment for items meeting the definition of customized DME
set forth at Sec. 414.224 is made on a lump sum purchase basis in an
amount established based on the Medicare claims processing contractor's
individual consideration and judgment of a reasonable payment amount
for each item. Payment for oxygen equipment set forth at Sec. 414.226
is made on a monthly basis for up to 36 months of continuous use. The
supplier retains ownership of the oxygen equipment following the 36-
month cap, but must continue to furnish the equipment for the remainder
of the equipment's 5-year RUL, at which point the beneficiary can elect
to obtain new equipment. Payment for capped rental items set forth at
Sec. 414.229(f) is made on a monthly rental basis for up to 13 months
of continuous use. The supplier must transfer title to the equipment to
the beneficiary on the first day following the 13th month of continuous
use.
In establishing regulations for the purpose of implementing the
payment rules mandated by OBRA 87, 42 CFR 414.202 sets forth the basic
definition of DME that was originally established and elaborated upon
in program instructions discussed below. Section 414.202 defines DME as
equipment furnished by a supplier or a home health agency that--
Can withstand repeated use;
Is primarily and customarily used to serve a medical
purpose;
Generally is not useful to an individual in the absence of
an illness or injury; and
Is appropriate for use in the home.
The benefit for DME as it was initially defined at section
1861(s)(6) of the Act was a benefit for ``rental of durable medical
equipment.'' The owner of rented equipment is paid for the use of the
equipment. When the equipment is no longer needed, it is returned to
the owner and can then be rented by another customer. Items that are
disposable cannot be rented and items that last for short periods of
time are not likely to be items that would be rented. The Act was
amended by section 16 of the Medicare-Medicaid Anti-Fraud and Abuse
Amendments of 1977 (Pub. L. 95-142) to allow for purchase of DME in
cases where purchase is less costly or more practical than rental. In
1978, program instructions were added to the Medicare Part B Carriers
Manual (HCFA-Pub. 14-3, Rev. 3-669) to further define DME and
durability of an item, that is, when an item is considered durable. The
instructions are now included in section 110.1 of chapter 15 of the
Medicare Benefit Policy Manual (CMS-Pub. 100-02). In specifying which
items satisfy the durability criteria, these program instructions
provide that ``an item is considered durable if it can withstand
repeated use, that is, the type of item which could normally be
rented'' and excludes items that are ``of an expendable nature.'' The
instructions do not specify exactly how long an item must last to be
considered a durable item that would normally be rented as opposed to a
disposable item or an item that would not normally be rented.
CMS has provided program instructions for coverage of supplies and
accessories at Section 110.3 in Chapter 15 of the Medicare Benefit
Policy Manual. The instructions provide that payment may be made for
supplies that are necessary for the effective use of DME, such as
lancets used to draw blood for use with a home blood glucose monitor.
The lancet itself is disposable and would not be covered as DME, but it
is a covered item that falls under the general DME benefit because it
is necessary for the effective use of DME--the home blood glucose
monitor. Supplies necessary for the effective use of DME also include
oxygen and those drugs and biologicals which must be inserted directly
into the equipment for the effective use of DME.
The Healthcare Common Procedure Coding System (HCPCS) is a
standardized coding system used to process claims submitted to
Medicare, Medicaid, and other health insurance programs by providers,
physicians, and other suppliers. The HCPCS Code Set is divided into two
principal subsystems, referred to as level I and level II of the HCPCS:
Level I of the HCPCS codes is comprised of Current Procedural
Terminology (CPT) codes, which are copyrighted by the American Medical
Association (AMA), and are used primarily to identify medical services
and procedures furnished by physicians and other healthcare
professionals that are billed to public or private health insurance
programs.
Level II of HCPCS is a standardized coding system used primarily to
identify products and supplies that are not included in the CPT codes,
such as DME, orthotics, prosthetics, and supplies when used outside a
physician's office. Assignment of a HCPCS code is not a coverage
determination and does not imply that any payer will cover the items in
the code category. In October 2003, the Secretary delegated authority
under the Health Insurance and Portability Act of 1996 to CMS to
maintain and distribute HCPCS Level II codes.

B. Current Issues

The regulation and program instructions do not lend guidance
regarding the specific period of time that equipment must function in
order

[[Page 70287]]

to be considered ``durable.'' In addition, the regulation does not
provide specific guidance or criteria regarding how to determine if new
devices consisting of a system of durable and non durable components
that together serve a medical purpose fall within the DME benefit
category. Therefore, we believe it is necessary to revise the
regulation at this time to include a definition of DME that uses more
specific language to define the term ``durable'' for the purpose of
determining whether equipment is DME. The issue of linking durability
to the lifetime of equipment and where to draw the line has come to our
attention in light of the recent technology and engineering in the
field of medical devices and equipment. Establishing a minimum lifetime
requirement (MLR) would help facilitate the benefit category
determination process for items that clearly last longer or shorter
than the minimum lifetime threshold.
In cases where it is not clear that the equipment can function for
the specified minimum period of time, we proposed that reviewing
additional information and evidence consistent with the present benefit
category determination process would be necessary to determine the
expected life of the equipment. CMS and CMS contractors would base the
decision on various sources of information including but not limited to
the HCPCS request form, pre-market clearance documents from the Food
and Drug Administration (FDA), product warranty documents, product Web
site, product marketing materials, product user guides, product
operating manuals, consumer product reviews, subject matter expert
reviews, industry product standards data, and product data created as a
result of clinical studies or standardized test results. A minimum
lifetime standard for DME may also help facilitate the HCPCS process.
The current application form used to request new HCPCS codes for items
includes the question regarding whether equipment is durable and, if
so, instructs the applicant to provide an explanation of how the item
can withstand repeated use. We have received requests from several
entities including DME stakeholders for additional clarification
regarding the durability standard for DME. Comments from some of these
entities indicate that there is limited direction on what is required
for an item to be considered ``durable'' in the current regulation.
Additional clarification of the term ``durable'' would be helpful to
industry stakeholders such as manufacturers in anticipating how their
products would be treated under coding classification and benefit
category determinations.

C. Overview of the Provisions of the Proposed Durable Medical Equipment
(DME) Regulation

On July 8, 2011, we published in the Federal Register a proposed
rule entitled, ``Medicare Program; Changes to the End-Stage Renal
Disease Prospective Payment System for CY 2012, End-Stage Renal Disease
Quality Incentive Program for PY 2013 and PY 2014; Ambulance Fee
Schedule; and Durable Medical Equipment'' (76 FR 40498). In that rule,
we proposed revising the definition of DME by adding a 3-year MLR that
must be met by an item or device in order to be considered durable for
the purpose of classifying the item under the Medicare benefit category
for DME.

D. Summary of the Proposed Provisions and Responses to Comments on the
Definition of Durable Medical Equipment (DME) 3-Year Minimum Lifetime
Requirement (MLR)

We received approximately 35 comments on our proposal. Interested
parties that submitted comments included several medical device and
equipment manufacturers, a healthcare provider, RESNA (Rehabilitation
Assistive Technology Standards Board) and national organizations for
HCPCS coding, disability, medical technology innovators and
beneficiaries. In this final rule we provide a summary of each proposed
provision, a summary of the public comments received, and our responses
to them.
We proposed making changes to the definition of DME at 42 CFR
414.202 in order to clarify the meaning of the term ``durable'' in
order to reflect our current interpretation of the statutory provisions
discussed above consistent with the DME payment provisions.
Specifically, we proposed establishing a 3-year MLR that equipment will
be expected to meet in order to be considered DME. Based upon the
statute and current regulations, equipment would not qualify as DME if
it could not withstand repeated use. Although the capacity for reuse is
in itself a fundamental characteristic of durability, it is not clear
how many months or years an item must withstand repeated use in order
to be considered durable.
The Merriam Webster dictionary defines ``durable'' as the ability
to exist for a long time without significant deterioration. The United
States Department of Commerce uses a durability standard of 3 years for
consumer durable goods for National Income and Accounts estimates.\19\
Furthermore, economics dictionaries,\20\ various encyclopedias,\21\ and
economics textbooks \22\ define durable goods as goods that are
expected to last longer than 3 years.
---------------------------------------------------------------------------

\19\ The NIPA Handbook (Concepts and Methods of the U.S National
Income and Product Accounts, Chapter 5-Personal Care Expenditures.
The handbook is available at http://www.bea.gov/national/pdf/NIPAhandbookch5.pdf.
\20\ The McGraw Hill Dictionary of Modern Economics by Douglas
Greenwald & Associates, Economics dictionary by Donald Moffat,
Dictionary of Business and Economics by Christine Ammer and Dean
Ammer.
\21\ Encyclopedia of Business, Britannica Encyclopedia and Gale
Encyclopedia.
\22\ A Lexicon of Economics by Kenyon A. Knopf.
---------------------------------------------------------------------------

In addition, information gathered from various sources such as
Rehabilitative Engineering and Assistive Technology Society of North
America (RESNA),\23\ product catalogs, product warranty documents, and
consumer product reviews indicate that conventional DME items such as
wheelchairs, hospital beds, and ventilators specified in section
1861(n) of the Act typically have a useful life of 3 or more years
before they need to be replaced or need major repairs. Therefore, we
proposed establishing a 3-year MLR for items to meet the durability
criterion for DME.
---------------------------------------------------------------------------

\23\ http://resna.org/.
---------------------------------------------------------------------------

The 3-year MLR was proposed to increase the clarity of the current
definition and give regulatory weight to a reasonable benchmark for a
minimum period of durability or repeated use that an item would be
expected to meet in order for the equipment to be considered DME. In
addition, the rule was proposed to provide clear guidance to CMS and
other stakeholders for making consistent informal benefit category
determinations and national coverage determinations for DME. It was
also proposed to assist manufacturers in designing and developing new
medical equipment to have a better understanding of how long an item
must be able to withstand repeated use in order to be considered DME
for Medicare purposes. It is important to note that the 3-year MLR does
not replace the RUL standard established by section 1834(a)(7)(C) of
the Act for payment purposes. The RUL rules are used to determine how
often payment can be made for replacement items and is not a MLR for
DME. Although the proposed 3-year MLR is a requirement for determining
whether an item will be considered durable, it is not an indication of
the typical or average lifespan of DME, which in many cases may last
for much longer than 3 years.

[[Page 70288]]

1. Application of the 3-Year MLR to Items Currently Covered as DME and
to Supplies and Accessories of Covered DME
We proposed that the 3-year MLR be prospective only and not apply
to equipment classified as DME before the proposed rule is implemented.
Based on our experience with the program, we believe that most items
that are currently classified as DME function for 3 or more years. We
also proposed not to apply the standard to supplies and accessories
used with DME that are paid for under the DME benefit or blood glucose
monitors and blood testing strips to allow for continued coverage of
such items, supplies and accessories that are necessary for the
effective use of DME. In the proposed rule we also solicited public
comments on methods for determining when multi-component devices are
durable. We requested comments only and did not propose any regulation
changes regarding this issue. The comments received on this issue will
be taken into consideration in determining whether changes on this
issue should be proposed in future rulemaking.
Comment: Several commenters acknowledged that it is necessary to
establish a MLR for use in determining if medical equipment is durable
for purposes of Medicare payment.
Response: We agree and thank the commenters for their support and
feedback that it is necessary to establish a MLR for use in determining
if medical equipment is durable.
Comment: Several commenters argued that the proposed rule is
unnecessary and the current criteria for determining whether equipment
is durable are clear, with one commenter stating that Medicare payment
rules and manufacturer warranties already provide beneficiaries with
appropriate protection. Two commenters suggested that CMS should
publish a MLR for DME through subregulatory guidance.
Response: We appreciate the comments; however, we believe there is
a need to make changes to the definition of DME at 42 CFR 414.202 to
clarify the meaning of the term ``durable'' to reflect our current
interpretation of the statute, consistent with the DME payment rules
previously discussed. Manufacturers of new technology medical devices
have specifically asked how long an item must withstand repeated use in
order to be considered durable equipment, and therefore our objective
is to establish a clear expected MLR for equipment in order to
facilitate consistent benefit category determinations. We also wanted
to publish the 3-year MLR through rule making rather than providing
this clarification through Manual provisions and program instructions
to provide an opportunity for input given that the definition of DME is
set forth in regulations.
Comment: Several commenters stated that the proposed 3-year MLR was
arbitrary and inappropriate.
Response: We disagree. As discussed previously, the 3-year MLR for
durability reflects the standard used by various Federal agencies to
define durable consumer goods such as cars, refrigerators, air
conditioning units, as well as hospital beds, walkers, crutches,
scooters, wheelchairs, oxygen equipment, etc. Federal agencies such as
the Department of Commerce and the Department of Labor have been
applying this standard to durable goods including DME. Furthermore, the
3-year durability standard is widely supported in the industry. See for
example, Simon Kuznet's ``National Income and Capital Formation''
published by the National Bureau of Economic Research (1937), defining
durable commodities as those whose period of utilization is more than 3
years, and references in a wide variety of more recent literature,
textbooks, dictionaries and encyclopedias, which specifically reference
a 3-year period of time in defining or classifying items as
durable.\24\ We see no reason why a different standard for durability
should be used for the equipment covered as DME under the Medicare
program. Therefore, we believe it is reasonable for the Department of
Health and Human Services to apply this 3-year standard to DME.
---------------------------------------------------------------------------

\24\ The NIPA Handbook (Concepts and Methods of the U.S National
Income and Product Accounts, Chapter 5--Personal Care
Expenditures,The handbook is available at http://www.bea.gov/national/pdf/NIPAhandbookch5.pdf, U.S. Department of Labor/Bureau of
Labor Statistics. http://www.bls.gov/ppi/ppiwholesale.htm, The
McGraw Hill Dictionary of Modern Economics by Douglas Greenwald &
Associates, Economics dictionary by Donald Moffat, Dictionary of
Business and Economics by Christine Ammer and Dean Ammer,
Encyclopedia of Business, Britannica Encyclopedia and Gale
Encyclopedia, Lexicon of Economics by Kenyon A. Knopf, Fiscal Policy
and Business Cycles by Alvin H. Hansen, Economics: Principles in
Action by Steven M. Sheffrin, Durability of Output and Expected
Stock Returns by Joao F. Gomes, Leonid Kogan, & Motohiro Yogo,
Economics Fluctuations and Forecasting by Vincent Su, Macroeconomics
by Roger A. Arnold, and National Income and Capital Formation by
Simon Kuznet.
---------------------------------------------------------------------------

Additionally, in light of the statutory 5-year RUL requirement and
the DME payment rules, which support the fact that equipment paid for
under the DME benefit is intended to be used over many years, we
believe that it is reasonable to require that such equipment be
functional or capable of withstanding repeated use for at least 3
years. As we discussed in our equipment replacement payment rule, we
expect that equipment furnished by suppliers will function for a
reasonable period of time. See 71 FR 65884, 65920 (Nov. 9, 2006). We
believe that a 3-year MLR would provide sufficient flexibility to cover
new technology items that could be considered durable, but that may not
last for 5 years before having to be replaced. As noted previously, the
Congress, in drafting section 4152(c)(2)(F) of the Omnibus Budget
Reconciliation Act of 1990 (Pub. L. 101-508), selected 5 years as the
default RUL for capped rental DME. The RUL was specified to be 5 years
for each capped rental DME item unless prior experience in making
payment for the item resulted in the establishment of an alternative
RUL for the item. As part of the interim final rule (57 FR 57675)
implementing this provision on December 7, 1992, we extended the RUL
provision to other items of DME and specified that, in the absence of
program instructions, the carrier may determine that the RUL of
equipment is greater than, but not less than, 5 years. See 57 FR 57675,
57686 (Dec. 7, 1992). Furthermore, such standards are consistent with
the DME payment methodology, mandated by Section 4062(b) of the Omnibus
Budget Reconciliation Act of 1987, Public Law 100-203, and section
5101(b) of the Deficit Reduction Act of 2005, Public Law 109-171, which
authorized the changes in the payment for oxygen equipment and mandated
a cap on payments for all rented equipment other than a few frequently
serviced items such as ventilators. The following are some examples of
changes in payment rules that were made to avoid excessive payments for
durable items needed and used by patients for extended periods of time
lasting for several years.
The rental payments for inexpensive equipment such as
canes and crutches that the beneficiary elects to rent rather than
purchase is capped at the purchase fee for the equipment.
The payment for oxygen equipment is currently capped at 3
years and suppliers are mandated to continue furnishing the equipment
after the cap for up to 2 additional years.
Title to other expensive equipment such as wheelchairs and
hospital beds is transferred to the beneficiary after 13 continuous
rental payments.
The 5-year RUL and payment rules apply to durable equipment that
can be used for many years. See 71 FR at 65920, (regarding the
expectation that suppliers furnish a quality item that will last over a
5-year period). CMS continues to expect that in light of these

[[Page 70289]]

RUL provisions, equipment covered under the DME benefit should be
capable of withstanding repeated use for a minimum time period.
Consistent with these standards, we believe that a 3-year durability
threshold is reasonable, especially given our history with the program
and the vast majority of categories of DME that already last for at
least a 3-year period.
Comment: One commenter suggested that CMS should refrain from
adding a 3-year MLR and instead define what is meant by repeated use.
Response: We appreciate the comment; however, we believe it is
necessary to establish a reasonable expectation regarding durability by
adding a 3-year MLR to the definition of DME. Manufacturers of new
technology medical devices have specifically asked how long an item
must withstand repeated use in order to be considered durable
equipment, and therefore we believe it is necessary to establish a
clear expected MLR for equipment in order to assure payment for quality
items of DME, and facilitate consistent benefit category and national
coverage determinations.
Comment: One commenter suggested establishing 6 months as the MLR
for DME.
Response: We appreciate the comment, however, as discussed earlier,
3 years is a standard used by Federal agencies and the industry for
classifying durable goods, which include equipment typically covered
under the DME benefit. Therefore, we believe that adopting a standard
of 3 years for purposes of the Medicare program would be reasonable and
assure payment for equipment consistent with industry standards.
Furthermore, as noted previously, in light of the statutory 5-year RUL
requirement we do not believe it is reasonable to establish a 6-month
standard. As discussed earlier, consistent with the statute, the
payment rules support the fact that equipment included in the DME
benefit is intended to be used over many years. For all the reasons
stated above, we do not believe that a 6-month MLR for DME is a
reasonable option.
Comment: Several commenters added that using a universal 3-year MLR
for all types of products is inflexible and nonfeasible. One
commentator indicated that engineering a device for a guaranteed
lifetime is virtually impossible.
Response: We do not believe that establishing an expected 3-year
MLR is inflexible and nonfeasible. As noted earlier, the regulations
already provide a requirement for repeated use and a 5-year RUL
standard. We proposed to establish an expected 3-year threshold
standard consistent with these requirements and other Federal agencies
and industry standards. In addition, while we understand that exact
periods of longevity will vary, the purpose of the rule is to establish
a MLR in order for the equipment to be considered durable for purposes
of Medicare payment determinations. The 3-year MLR is intended to be a
minimum threshold that equipment will be expected to meet in order to
be considered durable under Medicare regulations We expect that
equipment furnished under the benefit will be quality items that will
function consistent with industry standards for a 3 year threshold
period.
Furthermore, a vast majority of the categories of DME last for 3
years or longer. Therefore, consistent with these RUL and payment
provisions, we believe that a 3-year MLR would continue to provide the
flexibility to cover new technology items.
We also appreciate the comment that engineering a device for a
guaranteed lifetime is virtually impossible; however, given the
industry standards, we expect that equipment should function for a
minimum threshold period of time. Based on our experience in making
benefit category determinations and analyzing the types of equipment
that are covered under the DME benefit over the years; we believe that
the 3-year MLR is a reasonable threshold standard for the types of
equipment paid for under the DME benefit. Therefore, we believe that
for purposes of Medicare payment, it is reasonable to establish a
threshold of 3 years which is consistent with other Federal agencies
and industry standards.
Comment: Two commenters suggested that the MLR should be based upon
a specific code set, natural therapeutic requirements, and normal
length of needs and medical necessity as dictated by the prescriber,
rather than a universally applied standard.
Response: We thank the commenters for their input that the MLR
should be based upon a specific code set, natural therapeutic
requirements, and normal length of needs and medical necessity as
dictated by the prescriber, rather than a universally applied standard.
However, we have established a standard applicable to the Medicare
benefit that is designed to be consistent with criteria established in
the statute and payment provisions. We have interpreted the benefit
consistent with the standards in the statute, Medicare payment
regulations, industry standards, and Federal agency standards.
Furthermore, based on our experience in making benefit category
determinations and analyzing the types of equipment that are covered
under the DME benefit over the years, the majority of the categories of
DME items already last for 3 years or longer. As noted earlier, we
already expect items will function consistent with the 5-year RUL and
DME payment rules. For all the reasons discussed, we believe that it is
appropriate to apply the 3-year MLR as a threshold for defining
durability for equipment under the program.
Comment: One commenter recommended that CMS create a rebuttable
presumption that a DME item should last for 3 years but provide that a
manufacturer can rebut that presumption with convincing evidence that
the 3-year MLR should not be applied automatically in a particular
instance.
Response: We disagree with the commenter's recommendation for
creating a rebuttable presumption that a DME item should last for 3
years. As stated earlier, manufacturers of new technology medical
devices have specifically asked how long an item must withstand
repeated use in order to be considered durable equipment, and therefore
our objective is to establish an expected MLR for equipment in order to
assure payment for quality items and facilitate consistent benefit
category and national coverage determinations. The issue of linking
durability to the lifetime of equipment and where to draw the line has
come to our attention in light of the recent technology and engineering
in the field of medical devices and equipment. We are establishing a
MLR for DME to clarify our expectation regarding durability. An option
to rebut the 3-year MLR in some instances would undermine this
objective.
Comment: Several commenters recommended that CMS collaborate with
industry stakeholders to develop additional requirements related to
determining durability of items.
Response: We appreciate the comment. The current processes
including Benefit Category Determination (BCD), National Coverage
Determination (NCD), Local Coverage Determinations (LCD), and
Healthcare Common Procedure Coding System (HCPCS) include meetings with
manufacturers in addition to the public where we seek input from the
stakeholders. We will continue to receive input from stakeholders
consistent with the BCD and NCD process when determining whether an
item is durable. See 68 FR 55634, (September 26, 2003); and http://www.

[[Page 70290]]

cms.gov/DeterminationProcess/Downloads/FR09262003.pdf.
See also, information on the HCPCS Level II coding process at:
http://www.cms.gov/MedHCPCSGenInfo/Downloads/2013_HCPCS_Application.pdf. http://www.cms.gov/MedHCPCSGenInfo/08_HCPCSPublicMeetings.asp#TopOfPage.
Comment: Several commenters stated that the rule would create
burdensome testing requirements to verify the 3-year MLR for a device.
One commenter stated that testing standards cannot validate the
lifetime of a device and it is unclear how a manufacturer would prove
an item meets the 3-year MLR. One commenter noted that added testing
for durability will increase the cost for manufacturers in addition to
designing new 3-year versions of DME products that currently function
for a shorter period of time.
Response: We did not intend to create burdensome testing
requirements. As noted previously, our objective is to establish a
reasonable minimum lifetime standard for DME for purposes of Medicare
payment, consistent with other Federal agencies and industry practice.
As stated in the proposed regulation, in cases where it is not clear
that the equipment can function for the specified minimum period of
time, we will review information and evidence consistent with the
current benefit category determination process to determine the
expected life of the equipment. As discussed previously, the benefit
category determination process typically involves reviewing information
from various sources including but not limited to information related
to Food and Drug Administration (FDA) pre-market clearance, product
manuals, operating guides, warranty documents, and standardized test
results. The NCD process is available at http://www.cms.gov/DeterminationProcess/Downloads/FR09262003.pdf. See also, 68 FR 55638
(September 23, 2003).
Additionally, we routinely collect information regarding durability
of new products as part of the HCPCS editorial process in order to
identify categories of new DME subject to the procedures established in
accordance with the mandate of section 531(b) of the Medicare, Medicaid
and SCHIP Benefit Improvement and Protection Act of 2000 (BIPA 2000),
Public Law 106-554. Based on our experience with the program, this
information has been readily available from the manufacturers of these
items and other entities submitting requests for changes to the HCPCS.
Information on the HCPCS Level II coding process is available at:
http://www.cms.gov/MedHCPCSGenInfo/Downloads/2013_HCPCS_Application.pdf and http://www.cms.gov/MedHCPCSGenInfo/08_HCPCSPublicMeetings.asp#TopOfPage.
Furthermore, the 3-year MLR will be prospective and will not be
applied on a retroactive basis; it will be used for making benefit
category decisions for new items. As noted previously, we believe that
a vast majority of the categories of DME already last for at least 3
years, consistent with the RUL and payment provisions. The 3-year MLR
is designed to be a minimum threshold for determining if an item is
considered durable and we expect that new DME products in general will
continue to meet or exceed this MLR. For reasons discussed above, we
have no reason to believe that the 3-year MLR will increase the cost
for manufacturers.
Comment: One commenter supported the grandfathering provision.
Response: We thank the commenter for the input and support.
Comment: Several commenters voiced concerns that the new
requirement will stifle innovation and prevent the entry of new devices
in the market. Several commenters stated that the grandfathering
provision would create disparities among manufacturers and be
disadvantageous to new product manufacturers and advantageous to
existing DME product manufacturers. Some commenters stated that
applying the rule prospectively and not applying the rule to items
currently classified as DME makes the rule unclear and nontransparent.
Response: We did not intend to create disparities. As noted in the
proposed regulation and a response to an earlier comment, we are making
changes to the definition of DME to reflect our current interpretation
of the statute consistent with the RUL and general DME payment
provisions. The 3-year MLR is designed to be applied on a prospective
basis and would represent a minimum threshold for determinations
regarding equipment durability. As noted earlier, in light of the
statutory 5-year RUL requirement and DME payment rules which support
the fact that DME items should be able to withstand repeated use for
many years; we believe that it is reasonable to require that equipment
be capable of withstanding repeated use consistent with the industry 3
year standard. We believe that a 3-year MLR would provide the
flexibility to cover new technology items that can be considered
durable, but may not last for 5 years before having to be replaced.
We also believe that the 3-year MLR is reasonable given the general
payment and RUL requirements. As discussed previously, the 5-year RUL
is well established since 1992 and we have not found that the RUL
standard has stifled innovation or prevented entry of new devices in
the market. Therefore, in light of these provisions, we believe that 3
years is a reasonable threshold consistent with Medicare payment rules,
industry standards and Federal agency standards. However, while we
expect that equipment will meet our 3 year standard, we will continue
to monitor the issue and undertake additional rulemaking if necessary.
Comment: One commenter requested clarification on the applicability
and scope of the rule. Some commenters requested clarification on how
the MLR would be applied to new generations of products that are
currently classified as DME or how the standard would apply to an
existing DME item that is modified in the future to improve
functionality. One commenter recommended that the new rule not apply if
an existing DME item is just upgraded. Some commenters questioned if
the rule would be applicable to only products that apply for a new
HCPCS code. Some commenters questioned if the new rule would apply to
items that are billed using existing HCPCS codes or any item that fits
into an existing product category or existing HCPCS codes and how
miscellaneous codes would be handled.
Response: We will apply the revised definition for DME on a
prospective basis. That is, we will not redetermine for payment as DME
any product that is currently paid under the DME benefit. The revised
definition would only apply to new products. To the extent that a
modified product is not a new product (including an item that has been
upgraded), the 3-year MLR will not be applicable. We will consider
issuing additional guidance to provide further clarification if
necessary.
Comment: One commenter questioned how CMS would validate that a
device lasts fewer than 3 years. One commenter requested clarification
on whether the MLR would be calculated from the date the manufacturer
sells the item to the provider or date first provided to the patient.
Response: We are not proposing a new process and as noted
previously, we will continue to follow the current benefit category
determination process to determine whether a product meets the
standards for DME set forth in the rule. As noted earlier, the expected
life of an item will be estimated based upon information gathered from
various sources consistent with the current benefit category
determination process

[[Page 70291]]

and will be calculated based upon use, not when it is sold to a
supplier.
Comment: One commenter voiced concern that there would be no
process for appealing decisions that items are not durable.
Response: A manufacturer or supplier can request a reconsideration
of an informal BCD determination or a reconsideration of a formal NCD
consistent with the statute. See (68FR 55638, September 26, 2003)
available at: http://www.cms.gov/DeterminationProcess/Downloads/FR09262003.pdf.
Comment: One commenter stated that the current testing standards
for certain types of equipment that are currently classified as DME
require a much shorter lifespan than 3 years.
Response: We appreciate the comment; however, as stated previously,
the 3-year MLR would not apply to any items currently classified as
DME. In addition, the 3-year MLR would not apply to blood testing
strips, accessories and supplies used with DME that are necessary for
the effective use of the DME item. For example: A blood glucose monitor
and lancets used to obtain blood samples for use in a blood glucose
monitor are covered under the DME benefit. The blood glucose monitor is
covered as DME and the lancets are covered as supplies necessary for
the effective use of the DME item.
After reviewing all the comments, we are finalizing the regulation
to revise the definition of durable medical equipment at Sec. 414.202
by adding a 3-year MLR that must be met by an item or device in order
to be considered durable for the purpose of classifying the item under
the Medicare benefit category for DME. This will be effective with
respect to items classified as DME after January 1, 2012.
2. Application of the 3-Year MLR to Multi-Component Devices
In some cases, a device may be a system consisting of durable and
non-durable components that together serve a medical purpose.
Currently, a multi-component device consisting of durable and non-
durable components is considered non-durable if the component that
performs the medically necessary function of the device is non-durable,
even if other components that are part of the device are durable.
Therefore, if the proposed regulation to establish a minimum 3-year MLR
for DME is applied to these devices, the component(s) of a multi-
component device that performs the medically necessary function of the
device would need to meet the 3-year MLR. Although, we did not propose
to change our policy with regard to these types of systems at this
point, we solicited public comments on this topic. Specifically, we
solicited public comments on various ways we might consider applying
the 3-year MLR to multi-component devices consisting of both durable
and non-durable components. Various options might include the
following:
1. Apply the 3-year MLR to the component(s) that performs the
entire medically necessary function of the device.
2. Apply the 3-year MLR to the component(s) that performs a vital
part of the medically necessary function of the device.
3. Consider a device/system to be durable only if the cost of the
durable component(s) over a period of time (for example, 5 years) makes
up greater than 50 percent of the overall cost of the device/system
over the same period.
In the proposed rule we solicited public comments on the
application of various options to multi-component devices to determine
whether the device is durable. We received approximately 20 comments
pertaining to the topic of applying the 3-year MLR to multi-component
devices consisting of both durable and non-durable components. One
commenter disagreed with option one because this option requires that
the whole device meet the MLR as many devices will not be able to
function without even minor elements, such as accessories and supplies.
This commenter noted that for the option two, it is not clear what is
meant by ``performs a vital part of the medically necessary function.''
This commenter further stated that for option three it is unclear what
is meant by ``cost.'' The commenter noted that option 3 could be
considered if the Medicare reimbursement rate for the durable and non-
durable components is used as the ``cost'' for calculating the ratio of
the cost for durable and non-durable components. One commenter
supported the 3-year MLR and endorsed option 2 which applies the 3-year
MLR to the component(s) that performs a vital part of the medically
necessary function for multi-component devices.
Several commenters endorsed the coverage of a specific multi-
component device for Medicare beneficiaries. One commenter stated that
medical equipment comprised of durable and non-durable components
should be considered durable if any one component of the equipment is
able to meet the MLR as determined in the HCPCS application process and
CMS should evaluate the medically necessary function performed by the
device in its totality rather than basing durability on the component
that performs the medically necessary function of the device.
We requested comments only and did not propose any regulation
changes. Therefore, the comments received will be taken into
consideration for future proposed rulemaking.

V. Interim Final Rule Regarding the Competitive Acquisition Program for
Certain Durable Medical Equipment, Prosthetics, Orthotics and Supplies
(DMEPOS)

A. Background

1. Legislative and Regulatory History of the DMEPOS Competitive Bidding
Program
Section 1847 of the Act, as amended by section 302(b)(1) of the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(MMA)(Pub. L. 108-173), requires the Secretary to establish and
implement a Medicare DMEPOS Competitive Acquisition Program
(``competitive bidding program'' or ``program''). Under the competitive
bidding program, Medicare sets payment amounts for selected DMEPOS
items and services furnished to beneficiaries in competitive bidding
areas (CBAs) based on bids submitted by qualified suppliers and
accepted by Medicare. For competitively bid items, the payment amounts,
referred to as ``single payment amounts'', replace the fee schedule
payment methodology set forth in section 1834 of the Social Security
Act (the Act) and 42 CFR part 414, Subpart D of our regulations.
The competitive bidding program guarantees savings to both the
Medicare program and beneficiaries under the program. The program also
includes provisions to ensure beneficiary access to quality DMEPOS
items and services. Section 1847 of the Act limits participation in the
program to suppliers who have met applicable quality and financial
standards and requires the Secretary to maintain beneficiary access to
multiple suppliers.
On May 1, 2006, we issued a proposed rule (72 FR 25654) in the
Federal Register that would implement the competitive bidding program
for certain DMEPOS items and services and solicited public comment on
our proposals. On April 10, 2007, we issued a final rule (72 FR 17992)
in the Federal Register addressing the comments on the proposed rule
and establishing the regulatory framework for the Medicare DMEPOS
competitive bidding program in accordance with section 1847 of the Act.
Consistent with the requirements of section 1847 of the Act and the

[[Page 70292]]

competitive bidding regulations, we began implementing the program by
conducting the first Round of competition in 2007 in 10 of the largest
metropolitan statistical areas (MSAs) for 10 product categories and
implemented the competitive bidding program on July 1, 2008.
2. The MIPPA and the Medicare DMEPOS Competitive Bidding Program
On July 15, 2008, section 154 of the Medicare Improvements for
Patients and Providers Act (MIPPA) amended section 1847 of the Act to
make certain limited changes to the Medicare DMEPOS competitive bidding
program. Section 154(a) of the MIPPA delayed competition under the
program and terminated the competitive bidding contracts effective June
30, 2008.
The MIPPA required the Secretary to conduct a second competition
for Round 1 in 2009 (``Round 1 rebid'') that included the ``same items
and services'' in the ``same areas'' as the 2007 Round 1 competition,
with certain limited exceptions. Specifically, the Round 1 rebid
excluded negative pressure wound therapy (NPWT) items and services and
excluded Puerto Rico. In addition, section 154(a) of the MIPPA
permanently excluded group 3 complex rehabilitative wheelchairs from
the competitive bidding program by amending the definition of ``items
and services'' in section 1847(a)(2) of the Act. Suppliers, including
suppliers that previously were awarded a competitive bidding contract,
had to resubmit bids to be considered for a contract under the Round 1
rebid.
Section 154(a) of the MIPPA also delayed competition for Round 2 of
the competitive bidding program from 2009 to 2011 and subsequent
competition under the program from 2009 until after 2011. A competition
for a national mail order competitive bidding program may occur after
2010 as a result of the MIPPA.
The MIPPA mandated certain changes to the bidding process, starting
with the Round 1 rebid. Section 154(a) of the MIPPA added a new
paragraph (F) to section 1847(a)(1) of the Act, which sets forth a
process for supplier feedback on missing financial documents. Pursuant
to this requirement, we notify suppliers that submit their bids within
a specific time period if their bid submission is missing any of the
required financial documents. We allow suppliers to submit missing
financial documents within 10 business days after this notice.
Section 154(b) of the MIPPA amended section 1847(b)(3) of the Act
to require contract suppliers to notify us of subcontracting
relationships they have entered into for the purpose of furnishing
items and services under the competitive bidding program. Contract
suppliers must also inform CMS whether each subcontractor meets the
accreditation requirement set forth in section 1834(a)(20)(F)(i) of the
Act, if applicable to the subcontractor.
Section 154(d) of the MIPPA excludes from the competitive bidding
program certain DME furnished by a hospital to the hospital's patients
during an admission or on the date of discharge.
On January 16, 2009, we published in the Federal Register (74 FR
2873) an interim final rule with comment period to incorporate into
regulations at 42 CFR 414 Subpart F the MIPPA provisions discussed
above.
In addition to the changes implemented through the interim final
rule, section 154 of the MIPPA made other changes to the competitive
bidding program which included:
Exclusions of certain areas in subsequent rounds that are
not already selected under Rounds 1 and 2;
Extension of the Program Advisory and Oversight Committee;
Exemption for Off-the-Shelf Orthotics from Competitive
Bidding when provided by Certain Providers; and
Evaluation of certain Healthcare Common Procedure Coding
System (HCPCS) codes.
These provisions have been addressed through subsequent rulemaking
or subregulatory guidance, as appropriate. For additional information
about exclusions of certain areas in subsequent rounds that are not
already selected under Rounds 1 and 2 and the exemption for off-the-
shelf orthotics from competitive bidding when provided by certain
providers, please refer to the November 29, 2010, Federal Register (75
FR 73574).
The following administrative requirements were also not addressed
in the interim final rule:
A post-award audit by the Office of Inspector General;
Establishment of a Competitive Acquisition Ombudsman; and
A Government Accountability Office report on the results
of the competitive bidding program.
The MIPPA mandated a nationwide 9.5 percent reduction in the fee
schedule payment amounts for all items and services that were
competitively bid during the prior round of competition regardless of
any exclusion such as group 3 complex rehabilitative wheelchairs. This
provision was not addressed in the interim final rule because it was
administered through the standard process for updating fee schedule
amounts.
On February 10, 2009, we published a notice (74 FR 6557) in the
Federal Register proposing to delay the effective date of the interim
final rule by 60 days to allow Department officials the opportunity for
further review of the issues of law and policy raised by the interim
final rule. On February 19, 2009, we published another notice (74 FR
7653) in the Federal Register that implemented the temporary delay
proposed on February 10, 2009. As specified by the February 19, 2009
notice, the interim final rule became effective on April 18, 2009.

B. Overview of the Interim Final Rule

On January 16, 2009, we published in the Federal Register an
interim final rule (74 FR 2873 through 2881) entitled ``Changes to the
Competitive Acquisition of Certain Durable Medical Equipment,
Prosthetics, Orthotics and Supplies (DMEPOS) by Certain Provisions of
the Medicare Improvements for Patients and Providers Act of 2008
(MIPPA)''. In the interim final rule, we revised current provisions at
42 CFR part 414, Subpart F, to incorporate certain self-implementing
MIPPA provisions. The interim final rule addressed the following
changes made by the MIPPA:
General Changes to the DMEPOS Competitive Bidding Program:
Temporary Delay of the Medicare DMEPOS Competitive Bidding
Program.
Supplier Feedback on Missing Covered Documents.
Disclosure of Subcontractors and their Accreditation
Status under the Competitive Bidding Program.
Exemption from Competitive Bidding for Certain DMEPOS.
Exclusion of Group 3 Complex Rehabilitative Wheelchairs.
Round 1 Changes of the Competitive Bidding Program:
Rebidding of the ``same areas'' as the previous Round 1,
unless otherwise specified.
Rebidding of the ``same items and services'' as the
previous Round 1, unless otherwise specified.

C. Summary of the Interim Final Rule Provisions and Response to
Comments on Changes to the Competitive Acquisition of Certain Durable
Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) by
Certain Provisions of the Medicare Improvements for Patients and
Providers Act of 2008 (MIPPA)

The interim final rule was published in the Federal Register on
January 16, 2009 with a comment period that ended

[[Page 70293]]

on March 17, 2009. We received approximately 793 timely pieces of
comments from the interim final rule. Various parties submitted
comments including DMEPOS manufacturers, suppliers, national
associations representing the supplier community, and pharmacies.
We note that we received many comments on a wide range of issues
that were not addressed in the interim final rule. We thank commenters
for sharing their views on these issues; however, because these
comments were outside the scope of the interim final rule, we do not
address those comments in this final rule. 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
interim final rule we are implementing in this final rule as a result
of comments received.
1. General Changes to the DMEPOS Competitive Bidding Program
a. Temporary Delay of the Medicare DMEPOS Competitive Bidding Program
Section 154(a) of the MIPPA amended section 1847(a)(1) of the Act
to delay competition under Rounds 1 and 2 of the Competitive Bidding
Program from 2007 and 2009 to 2009 and 2011, respectively. It also
delayed competition for a national mail order program until after 2010
and competition in additional areas, other than mail order, until after
2011.
We revised Sec. 414.410(a)(1) and (2) to indicate that competition
under Round 1 of the competitive bidding program occurred in 2009 and
competition under Round 2 of the program would occur in 2011. In
addition, we have revised Sec. 414.410(a)(3) to indicate that
competition in additional MSAs will occur after 2011 (or, in the case
of national mail order for items and services, after 2010).
The comments we received on Temporary Delay of the Medicare DMEPOS
Competitive Bidding Program and our responses are set forth below.
Comment: Several commenters disagreed with starting competition for
the Round 1 rebid in 2009 and wanted CMS to delay the program further.
Some commenters suggested that CMS spend more time determining the
impact and improving the quality of the DMEPOS Competitive Bidding
Program for suppliers and beneficiaries by considering comments
received on the interim final rule and evaluating the effects from
Round 1 of the competitive bidding program before starting the Round 1
rebid.
Response: Section 154(a) of the MIPPA 2009 required the supplier
competition for the Round 1 rebid to occur in 2009; therefore, we could
not delay the program further. We note that we made numerous process
improvements to the competitive bidding program for the Round 1 rebid.
For example, we implemented an upgraded on-line bid submission system,
early bidder education, and increased oversight of bidders that are new
to product categories or competitive bidding areas to ensure they meet
our requirements. These improvements, combined with the MIPPA reforms
discussed in this final rule, resulted in a smoother experience for
bidders and contributed to the successful implementation of the Round 1
rebid contracts and prices on January 1, 2011.
Consistent with our expectations, the Round 1 rebid results so far
have been very positive. The program is fulfilling its promise as an
effective tool to help Medicare set appropriate payment rates for
DMEPOS items and services: payment amounts from the supplier
competition for the Round 1 rebid of the program resulted in average
savings of 35 percent as compared to the current fee schedule prices.
The program is expected to save more than $17 billion in Medicare
expenditures over 10 years. In addition to this positive impact on the
Medicare Part B trust fund balance, the program is expected to save
beneficiaries more than $11 billion over the next ten years as a result
of lower coinsurance payments and the downward effect on monthly
premium payments. The overall combined savings to Medicare and
beneficiaries is therefore expected to total more than $28 billion over
the first ten years of the program.
As anticipated, beneficiaries are receiving quality products from
contract suppliers in their CBAs. 76 percent of contracts were awarded
to suppliers already furnishing contract items in the local area.
Additional contract suppliers have furnished other items in the local
area or furnished contract items in other areas: fully 97 percent of
contracts were awarded to suppliers already established in the
competitive bidding area, the product category, or both. Also, CMS
exceeded the the 30 percent small supplier target. For the Round 1
rebid, small suppliers, those with gross revenues of $3.5 million or
less as defined for the program, make up about 51 percent of the
contract suppliers. As discussed later in this preamble, our
comprehensive monitoring program has shown a very smooth effective
implementation with few inquiries and complaints and no changes in
beneficiary health status outcomes.
After consideration of the public comments received, we are
finalizing this provision without modification.
b. Supplier Feedback on Missing Covered Documents
Section 1847(b)(2)(A) of the Act prohibits the Secretary from
awarding a contract under the program to a supplier unless the supplier
meets applicable financial standards specified by the Secretary, taking
into account the needs of small providers. We have implemented this
requirement at Sec. 414.414(d) of the competitive bidding regulations,
which requires suppliers to submit, as part of their bids, financial
documents specified in the request for bids (RFB).
The RFB issued for the Round 1 rebid required suppliers to submit
the same categories of financial documents as we requested for the
previous Round 1 competition. In the previous round of competition, we
required suppliers to submit financial documents from the most recent 3
years. As stated in 42 CFR 414.414(d), the required financial documents
have been specified in the RFB. Based on experience from the previous
round of competition, we modified the required financial documents to
lessen the burden on suppliers; instead of 3 years of documentation, we
required only 1 year. We believe that we can determine whether a
supplier demonstrates financial soundness by reviewing one year of
documentation.
Section 154(a) of the MIPPA added a new paragraph (F) to section
1847(a)(1) of the Act, which established a detailed process by which we
must notify suppliers of missing ``covered documents''--defined by
MIPPA as financial, tax or other documents required to be submitted by
a bidder as part of an original bid submission in order to meet
required financial standards--if such documents are submitted within a
specified time period. The MIPPA details the specific steps of this
process and provides a timeline for each stage of this covered document
submission review. We have implemented this provision of the MIPPA
consistent with its detailed requirements.
Consistent with section 1847(a)(1)(F) of the Act, in the case of a
bid in which one or more covered documents in connection with such a
bid has been submitted not later than the covered document review date,
we would notify suppliers of each covered document that is missing from
the bidder's submission as of the covered document review date. As set
out in the Act the ``covered document review date'' is the later of--

[[Page 70294]]

(1) The date that is 30 days before the final date specified by the
Secretary for submission of bids; or (2) the date that is 30 days after
the first date specified by the Secretary for submission of bids. For
example, if a bid window opens on January 1st and closes on April 30th,
the ``covered document review date'' would be the later of: (1) March
31st (30 days before the final date specified by the Secretary); or (2)
January 31st (30 days after the first date specified by the Secretary).
Therefore, in this case, the ``covered document review date'' would be
March 31st. Suppliers that submit their financial documents after the
covered document review date would not receive notice of any missing
financial documents.
Section 1847(a)(1)(F)(i) of the Act requires that we notify bidders
of any missing covered documents within 45 days after the covered
document review date for the Round 1 rebid. In subsequent rounds of
competition, we have 90 days after the covered document review date to
provide such notice. For all rounds of competition, bidders that are
notified of the missing covered document(s) have 10 business days after
the date of notice to submit the missing covered document(s). If a
supplier submits the missing covered document(s) within this time
period, we may not reject the supplier's bid on the basis that any
covered document is missing or has not been submitted on a timely
basis.
Section 1847(a)(1)(F)(iii) of the Act places certain limitations on
the covered document review process. First, the covered document review
process applies only to the timely submission (prior to the covered
document review date) of covered documents. Second, the process does
not apply to any determination as to the accuracy or completeness of
the covered documents submitted or whether such documents meet
applicable financial requirements. Third, the process does not prevent
us from rejecting a bid for reasons other than those not described in
section 1847(a)(1)(F)(i)(II) of the Act. Fourth, the covered document
review process shall not be construed as permitting a bidder to change
bidding amounts or to make other changes in a bid submission.
We have amended Sec. 414.414 by adding paragraphs (d)(2)(i)
through (iii) to set forth the required covered document review
process. These paragraphs identify the timeframes established by the
MIPPA for--
Suppliers to submit covered documents in order to be
eligible to receive notice of any missing covered documents;
CMS to review the submitted covered documents and notify
bidders of any missing covered documents; and
Suppliers to submit the missing covered documents.
We also added a definition for ``covered document'' and ``covered
document review date'' to Sec. 414.402.
Comment: Several commenters suggested that the decision to change
financial document requirements from 3 years to 1 year should have been
subjected to notice and comment rulemaking. Commenters believed that
this would ensure that quality suppliers are selected as contract
suppliers, taking into consideration historical demonstrated financial
stability. Some commenters also believed that it would be easier to
falsify 1 year worth of financial documents as opposed to 3 years.
Response: As noted in the interim final rule, regulations at 42 CFR
414.414(d) state that required financial documents will be specified in
the RFB. Based on our experience from the initial Round 1 competition,
we determined that one year of financial documents provides sufficient
information for determining whether suppliers meet the required
financial standards. In the interest of lessoning the burden on
suppliers and ensuring compliance with program requirements, we
therefore decided to revise the financial documentation requirements
from three years to one year. We also sought public comment on the RFB
for the Round 1 rebid through the Paperwork Reduction Act (PRA)
process, and the Office of Management and Budget (OMB) approved the RFB
(OMB Control Number 0938-1016).
Comment: One commenter reflected that, in Round 1 of the
competitive bidding program, many bidders lost because they did not
have the required documents and CMS did not allow suppliers to resend
the documents after the close of the bid window.
Response: The MIPPA-mandated covered document review process was
incorporated into our regulations through the interim final rule
addressed this issue. Many Round 1 rebid bidders took advantage of this
process, and we believe it greatly helped these bidders ensure that
they submitted all required financial documents.
Comment: One commenter suggested that the rule needs to address not
only missing documents but missing and incorrect contents in documents.
Response: We appreciate this comment; however, the statute
specifically indicates that the covered document review process does
not apply to the accuracy or completeness of individual documents.
After consideration of the public comments received, we are
finalizing this provision without modification.
c. Disclosure of Subcontractors and Their Accreditation Status Under
the Competitive Bidding Program
Section 154(b)(2) of the MIPPA added a new paragraph (C) to section
1847 (b)(3) of the Act. This new paragraph requires contract suppliers
to disclose information on: (1) Each subcontracting arrangement the
supplier has in furnishing items and services under the contract; and
(2) whether each such subcontractor meets the accreditation requirement
of section 1834(a)(20)(F)(i) of the Act, if applicable to such
subcontractor. The contract supplier must make this disclosure not
later than 10 days after the date a supplier enters into a contract
with CMS. If the contract supplier subsequently enters into a
subcontracting relationship, the supplier must disclose this
information to CMS no later than 10 days after entering into the
subcontracting relationship.
Section 154(b) of the MIPPA added section 1834(a)(20)(F)(i) to the
Act, which mandates that the Secretary require suppliers furnishing
items and services under a competitive bidding program on or after
October 1, 2009, directly or as a subcontractor for another entity, to
submit evidence of accreditation by a CMS-designated accreditation
organization. Both contract suppliers and their subcontractors that
furnish items and services under the competitive bidding program must
do so in accordance with the applicable supplier standards found in
Part 424, subpart D and other Federal regulations.
We have amended Sec. 414.422, by revising paragraph (f) to set
forth these requirements for disclosing subcontracting arrangements. We
have also addressed subcontracting relationships and the method for
disclosure of the subcontracting relationships in subregulatory
guidance.
Comment: Some commenters stated that subcontracting relationships
should not be allowed after contract suppliers have been selected.
Commenters believed that companies that did not win a contract would
contact the contract supplier and form an arrangement in which the
contract supplier would bill for an item furnished by a non-contract
supplier. Several commenters also mentioned that adding subcontractors
after contract suppliers have been selected could mean that the
contract suppliers are not

[[Page 70295]]

able to furnish items to beneficiaries in the CBA and that they need
subcontractors to provide items for the contract supplier.
Response: The MIPPA specifically indicates that contract suppliers
must disclose subcontracting relationships they establish after
contract award; therefore, we do not have discretion to prohibit
subcontracting after contract suppliers have been selected. Under the
competitive bidding program, contract suppliers are permitted to
subcontract under the same rules that apply to all DMEPOS suppliers.
Thus, the extent to which contract suppliers subcontract is not a valid
measure of contract suppliers' ability to furnish items.
We note that we have implemented a robust monitoring program to
track and resolve any issues that might occur with program
implementation and have not identified any concerns about contract
suppliers' ability to furnish items. To date, the data show that Round
1 rebid implementation is going very smoothly with very few inquiries
or complaints. For example, the competitive bidding call volume at the
1-800-MEDICARE call center for the first calendar quarter of 2011was
less than 0.9 percent of 1-800-MEDICARE's total call volume. Most
inquiries were about routine matters like selecting a contract
supplier. Also, no changes in beneficiary health outcomes resulting
from the competitive bidding program have been observed to date. The
monitoring program includes:
Local, on-the-ground presence in each competitive bidding
area through the CMS regional offices and local ombudsmen;
A complaint process for beneficiaries, caregivers,
providers and suppliers to use for reporting concerns about contract
suppliers or other competitive bidding implementation issues;
Contract supplier quarterly reports identifying the brands
of products they furnish;
Real-time claims analysis to identify utilization trends,
monitor health outcomes and beneficiary access, address aberrancies in
services, and target potential fraud and abuse;
A CMS Competitive Acquisition Ombudsman who will respond
to complaints and inquiries from beneficiaries and suppliers about the
application of the program and will issue an annual Report to Congress;
Secret shopping; and
Beneficiary surveys.
Comment: Some commenters recommended that CMS obtain and verify
disclosures of both accreditation and licensing status of contract
suppliers and subcontractors prior to awarding contracts.
Response: Regulations at Sec. 414.414 specify that suppliers must
be licensed and accredited to be selected for contract award. We
carefully check all bidders during bid evaluation and reject any
bidders that are not fully licensed and accredited. As specified by
MIPPA, contract suppliers must disclose any subcontractors within set
time frames after contract award; disclosures must indicate if the
subcontractors meet applicable accreditation requirements. We check all
subcontractor disclosures and verify that all applicable accreditation
requirements have been met. If we find that a contract supplier has
subcontracted with an entity that does not meet applicable
accreditation requirements, we will take appropriate action to ensure
that the contract supplier stops using the subcontractor until the
subcontractor becomes properly accredited. Although MIPPA does not
require specific disclosure of subcontractors' licensure status,
contract suppliers, like all suppliers, must comply with all State
regulatory and licensure requirements (see Sec. 424.57(c)(1)((ii)).
This would include any State regulatory requirements regarding
applicable subcontractor licensure.
Comment: Many commenters wanted CMS to clarify what is considered
to be a subcontracting relationship between the contract supplier and a
subcontractor with respect to accreditation. One commenter wanted CMS
to provide the industry with a framework for entering into
subcontracts.
Response: Contract suppliers may subcontract to the same extent as
any other DMEPOS suppliers. The supplier standards at Sec. 424.57 set
forth requirements regarding subcontracting arrangements for purchase
of inventory, delivery and instruction on the use of Medicare-covered
items, and maintenance and repair of rented equipment. The quality
standards are a helpful reference tool in distinguishing the role of a
primary supplier versus the role of a subcontractor as described in the
supplier standards. We note that guidance about subcontracting,
including guidance about accreditation of subcontractors, may be found
on the National Supplier Clearinghouse Web site, http://www.palmettogba.com/nsc and the Competitive Bidding Implementation
Contractor Web site at http://www.dmecompetitivebid.com.
Comment: One commenter believed that the accreditation status of a
subcontractor is irrelevant to the contract supplier's relationship
with the subcontractor. One commenter did not believe that disclosing
the subcontractor was a part of the MIPPA statute.
Response: MIPPA sections 154(b)(1) and (2) explicitly require
subcontractors to meet applicable accreditation requirements and
require contract suppliers to disclose their subcontracting
arrangements within specific time frames. We do not have the authority
to eliminate this requirement.
After consideration of the public comments received, we are
finalizing this provision without modification.
d. Exemption From Competitive Bidding for Certain DMEPOS
Section 414.404(b) previously exempted from competitive bidding
certain DME items when furnished by a physician or treating
practitioner to his or her own patients as part of his or her
professional services. This exception is limited to crutches, canes,
walkers, folding manual wheelchairs, blood glucose monitors, and
infusion pumps that are considered DME. Section 154(d) of MIPPA amended
section 1847(a) of the Act to exclude from the competitive bidding
program these same items when they are furnished by hospitals to the
hospital's own patients during an admission or on the date of
discharge. We interpreted this exclusion to include only DMEPOS paid
for under Part B of the Medicare program because section 1847 does not
apply to items that are paid for under Part A. As discussed in the
April 10, 2007 final rule, in accordance with Sec. 414.404(b)(3)
payment for items furnished under the exceptions in Sec. 414.404(b)
will be made in accordance with Sec. 414.408(a).
We have revised Sec. 414.402 to include a definition for hospitals
and have revised Sec. 414.404(b)(1) to incorporate the mandated
exemption from the competitive bidding program for hospitals that
furnish certain types of competitively bid DME to their own patients
during an admission or on the date of discharge. In addition, we
amended subparagraph (b)(1)(iii) to address the billing requirements
for hospitals under this exemption.
Comment: Some commenters expressed concern that the MIPPA hospital
exemption was not more expansive. Several commenters suggested that CMS
reconsider including hospital-based suppliers in the competitive
bidding program. One commenter suggested that although there is a
hospital exemption, hospitals may have trouble finding DME equipment,
such as oxygen, for snowbird beneficiaries. A few commenters believed
that quality of care and efficient operations of hospitals

[[Page 70296]]

would be impacted if they were allowed to furnish some items directly
to their patients while having to arrange with contract suppliers for
furnishing other items not covered by the exemption. One commenter
suggested that a separate competitive bidding process should be
established for hospital-based DME suppliers.
Response: Section 154(d) of MIPPA explicitly described the scope of
the hospital exemption, so we do not believe we have discretion to
provide a broader exemption. We do not believe that separate
competitions for suppliers that only furnish items to patients in
hospitals is necessary or would result in efficient implementation of
the requirements of section 1847 of the Act.
After consideration of the public comments received, we are
finalizing this provision without modification.
e. Exclusion of Group 3 Complex Rehabilitative Power Wheelchairs
Section 1847(a)(2) of the Act defines the items and services
subject to competitive bidding. Section 1847(a)(2)(A) of the Act
includes DME and supplies as items and services subject to competitive
bidding. Section 154(a) of the MIPPA amended this definition to exclude
group 3 complex rehabilitative power wheelchairs (and related
accessories when furnished in connection with such wheelchairs) from
competitive bidding. For Medicare coding, coverage, and payment
purposes, power wheelchairs are classified under several groups based
on performance and durability test results, patient weight capacity,
and equipment handling capabilities. For a description of the
components, performance requirements and coding guidelines for group 3
power wheelchairs, see https://www.dmepdac.com/resources/articles/2006/08_14_06.pdf. Group 2 complex rehabilitative power wheelchairs were
included in Round 1 rebid of the competitive bidding program because
they were not excluded by the MIPPA.
We amended Sec. 414.402 to revise the definition of ``item'' to
exclude group 3 complex rehabilitative wheelchairs from the competitive
bidding program.
Comment: One commenter agreed that the exclusion was good policy
because the equipment needs to be properly designed or it would result
in additional costs for the government. Another commenter believed that
the exclusion should not be implemented because having some power
wheelchair equipment options subject to competitive bidding while
others are not would promote Medicare fraud.
Response: The statute explicitly excludes Group 3 complex
rehabilitative power wheelchairs from the competitive bidding program,
and therefore, we do not believe we have any discretion to include
these items in the program.
Comment: Some commenters suggest that Group 2 complex
rehabilitative power wheelchairs be excluded from the competitive
bidding program for several reasons. One commenter suggested that, if
the Group 2 complex rehabilitative power wheelchairs are not excluded,
suppliers should be able to bid above the fee schedule amount. Another
commenter stated that the inclusion of Group 2 complex rehabilitative
power wheelchairs in the Round 1 rebid is not envisioned by the
statute; this commenter did not believe that this product category has
the potential for significant savings.
Response: The MIPPA excludes Group 3 complex rehabilitative power
wheelchairs from the competitive bidding program but also mandates
rebidding of the ``same items and services'' as the previous Round 1.
Therefore, we had no discretion to exclude 2 complex rehabilitative
power wheelchairs from the Round 1 rebid because these wheelchairs were
included in the Round 1 competition.
After consideration of the public comments received, we are
finalizing this provision without modification.
2. Round 1 Changes to the Competitive Bidding Program
a. Rebidding of the ``Same Areas'' as the Previous Round 1, Unless
Otherwise Specified
Section 1847(a)(1)(D)(i)(II) of the Act, as amended by section
154(a) of the MIPPA, required us to conduct the supplier competition
for the Round 1 rebid in 2009. Pursuant to section 1847(a)(1)(D)(i)(II)
of the Act, we conducted the competition for the Round 1 rebid in a
manner ``so that it occurs in 2009 with respect to the same items and
services and the same areas'' as the first Round 1 competition, except
as provided by section 1847(a)(1)(D)(i)(III) and (IV) of the Act. Under
section 1847(a)(1)(D)(i)(III), as amended by the MIPPA, we excluded
Puerto Rico so that the Round 1 rebid of the competitive bidding
program occurred in 9 of the largest MSAs. Therefore, the Round 1 rebid
occurred in the following MSAs:

Cincinnati--Middletown (Ohio, Kentucky and Indiana)
Cleveland--Elyria--Mentor (Ohio)
Charlotte--Gastonia--Concord (North Carolina and South
Carolina)
Dallas--Fort Worth--Arlington (Texas)
Kansas City (Missouri and Kansas)
Miami--Fort Lauderdale--Miami Beach (Florida)
Orlando (Florida)
Pittsburgh (Pennsylvania)
Riverside--San Bernardino--Ontario (California)

Section 154(a) of MIPPA mandated that we conduct the Round 1
``rebid'' in the ``same areas''--except for Puerto Rico--as the
previous competition in 2007. As stated in the Federal Register (72 FR
18016), we identified CBAs in the 2007 Round 1 competition by counties
and zip codes to clearly identify the boundaries of a CBA. Therefore,
we believe it is reasonable to implement the ``same areas'' mandate by
conducting the Round 1 rebid in those same zip codes. Certain zip codes
changed since the first competition. We therefore reviewed zip code
changes made since 2007 and incorporated applicable updates to the zip
codes for the Round 1 rebid. For example, if a particular zip code had
been split into two new zip codes, we included the new zip codes in the
CBA. We did not add any new zip codes that expanded the geographic area
of the CBAs.
Accordingly, we have amended Sec. 414.410(a)(1) to reflect the
areas for competition set forth in section 1847(a)(1) of the Act, as
amended by the MIPPA.
Comment: Several commenters recommended various changes to the
areas for the Round 1 rebid competition. For example, several
commenters suggested that a few MSAs have rural areas and should be
excluded from the program to prevent patient access and quality issues.
Some also felt that small suppliers would not be able to provide items
to the rural parts of the MSAs, especially with lower reimbursements.
One commenter suggested that the Dallas MSA is too large and should be
split into two separate CBAs. One commenter recommended that CBAs
should be limited to large cities and not divided at a county level.
One commenter suggested that CMS choose different MSAs for the Round 1
rebid competition because the original MSAs' suppliers have been
affected financially from Round 1 and because the suppliers that bid in
the first round know the single payment amounts that were selected for
those areas and may cause bids to be skewed.
Response: MIPPA explicitly required the Round 1 rebid competition
to occur in the same areas as in the initial Round 1 competition except
for Puerto Rico, therefore we do not have any discretion to change the
areas for the Round 1 rebid.

[[Page 70297]]

After consideration of the public comments received, we are
finalizing this provision without modification.
b. Rebidding of the ``Same Items and Services'' as the Previous Round
1, Unless Otherwise Specified
Section 1847(a)(1)(D)(i)(II) of the Act, as amended by the MIPPA,
required that we conduct the Round 1 rebid competitive bidding program
with respect to the ``same items and services'' as were previously bid
in Round 1 except as provided in section 1847(a)(1)(D)(i)(IV) of the
Act, which excludes negative pressure wound therapy. The Round 1 rebid
also excludes group 3 complex rehabilitative power wheelchairs as noted
previously. Therefore, the Round 1 rebid included the following
categories of items and services:
Oxygen Supplies and Equipment.
Standard Power Wheelchairs, Scooters, and Related
Accessories.
Complex Rehabilitative Power Wheelchairs and Related
Accessories (Group 2).
Mail-Order Diabetic Supplies.
Enteral Nutrients, Equipment and Supplies.
Continuous Positive Airway Pressure (CPAP), Respiratory
Assist Devices (RADs), and Related Supplies and Accessories.
Hospital Beds and Related Accessories.
Walkers and Related Accessories.
Support Surfaces (Group 2 mattresses and overlays) in
Miami.
In the April 10, 2007 Federal Register (72 FR 18084), we define an
item, in part, as a product included in a competitive bidding program
that is identified by a HCPCS code.
Therefore, consistent with our understanding of the MIPPA and the
mandate that bidding in the Round 1 rebid occur with respect to the
``same items and services'' as the previous round of competition, we
conducted the competition for the Round 1 rebid for essentially the
same codes for which we bid in 2007. We have made certain adjustments
to reflect changes in the HCPCS codes consistent with 42 CFR 414.426.
We excluded obsolete codes and codes which, in light of the MIPPA
amendments, are no longer separately payable. For example, under the
MIPPA, the transfer of title provision was deleted, thus oxygen
accessories are no longer separately payable because the supplier
maintains ownership of the equipment. The final list of HCPCS codes for
the Round 1 rebid was published on the Competitive Bidding
Implementation Contractor (CBIC) Web site at http://www.dmecompetitivebidcom. prior to opening of the bid window.
Comment: Some commenters suggested that several items should be
excluded from competitive bidding for a variety of reasons.
Response: The MIPPA specifically required us to conduct the Round 1
rebid competitive bidding program for the ``same items and services''
as were previously bid in Round 1 except negative pressure wound
therapy and group 3 complex rehabilitative power wheelchairs, and
therefore, we had no discretion to exclude these items from the Round 1
rebid.
Comment: One commenter agreed with the statutory exclusion of
negative pressure wound therapy (NPWT) for the Round 1 rebid and
suggested that it be excluded entirely from competitive bidding.
Response: Although MIPPA excluded NPWT from the Round 1 rebid, it
did not provide a permanent exclusion from the competitive bidding
program. The statute mandates competitive bidding for most items of
DME, including NPWT equipment and supplies. CMS has decided to utilize
the flexibility provided by the statute to phase in items under the
program beginning with high cost or high volume items. The average
monthly rental fee schedule amount for the NPWT pump is currently
$1,558, meaning the beneficiary pays at least $312 per month on average
for rental of this device. By comparison, the average monthly fee and
corresponding coinsurance amount for a respiratory suction pump is $46
(monthly fee) and $9 (monthly coinsurance). A study conducted in 2009
by the Office of Inspector General for the Department of Health and
Human Services found that suppliers purchase these pumps for
significantly less, $3,604 on average, than Medicare pays over 13
months, currently $16,359. The savings potential for the Medicare
program and beneficiary for this item is therefore very significant.
Medicare allowed charges for NPWT equipment and supplies were
approximately $178 million in 2010, making this a high volume and high
cost item as well.
We note that section 154 (c) (3) of MIPPA required the Secretary of
the Department of Health and Human Services (DHHS) to perform an
evaluation of the Healthcare Common Procedure Coding System (HCPCS)
coding decisions for NPWT devices. CMS requested this report from The
Technology Assessment Program (TAP) at the Agency for Healthcare
Research and Quality (AHRQ). AHRQ determined that there are no
significant therapeutic distinctions among NPWT devices. Because there
are no significant differences among NPWT products, the current HCPCS
codes are adequate and do not need to be updated or changed. The study
results are available on the AHRQ Web site at: http://www.ahrq.gov/clinic/ta/negpresswtd/npwtd01.htm.
After consideration of the public comments received, we are
finalizing this provision without modification.

D. Other Public Comments Received on the January 16, 2009 Interim Final
Rule

We ordinarily publish a notice of proposed rulemaking in the
Federal Register to provide for public comment before the provisions of
a rule take effect in accordance with section 553(b) of the
Administrative Procedure Act (APA) and section 1871 of the Act. This
process may be waived, however, if an agency finds good cause that a
notice and comment procedure is impracticable, unnecessary, or contrary
to the public interest. We found good cause to waive notice and comment
rulemaking because we simply conformed the competitive bidding
regulations to specific, detailed, and proscriptive statutory
provisions.
The comments we received on the waiver of proposed rulemaking and
our responses are set forth below.
Comment: Several commenters believed that CMS should have engaged
in notice and comment rulemaking to implement MIPPA provisions rather
than issuing an interim final rule with comment period for several
reasons. One reason was so that stakeholders would have sufficient time
and opportunity to give input on the program. The second reason was
because commenters wanted to ensure that comments received during the
comment period would be taken into account before any final rule was
published. The third reason commenters wanted CMS to conduct a notice
and comment rulemaking was because commenters felt that important
issues were left unaddressed in the interim final rule such as how the
program would be impacted by the changes that were made by MIPPA,
lessons learned from Round 1, and supplier and beneficiary concerns and
suggestions from Round 1. Commenters felt that CMS should address major
issues in notice and comment rulemaking instead of using of
subregulatory guidance and Web site postings.
Response: As we explained in the interim final rule, under the
waiver of proposed rulemaking, we ordinarily publish a notice of
proposed rulemaking to provide for public comment before provisions of
a rule take effect, but the

[[Page 70298]]

process may be waived if the agency finds good cause that a notice and
comment procedure is impracticable, unnecessary, or contrary to public
interest. Because CMS issued the rule to conform to the specific
statutory requirements contained in section 154 of the MIPPA it was
impractical, unnecessary, and contrary to public interest to use notice
and comment rulemaking to incorporate these provisions into
regulations. As indicated earlier in this preamble, we also made
process improvements to ensure compliance with the statute that did not
require notice and comment rulemaking before we conducted the Round 1
rebid. Finally, we agree that substantive issues should be addressed
through notice and comment rulemaking consistent with the
Administrative Procedure Act and note that we used notice and comment
rulemaking to implement non-self-implementing provisions of MIPPA (see
75 FR 73170 (November 29, 2010).
Comment: A few commenters disagreed with the statement in the
interim final rule that MIPPA ``did not alter fundamental requirements
* * * used by us in * * * selecting suppliers under the program''. Some
of the commenters believed that the interim final rule is not self-
implementing and was not clear or understandable.
Response: We continue to believe as discussed in the interim final
rule that the provisions of MIPPA included in the interim final rule
were self-implementing. The language in these provisions was highly
detailed and proscriptive and did not provide options for discretionary
revisions.

V. Collection of Information Requirements

A. Legislative Requirement for Solicitation of Comments

Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Because we did not receive any comments for the ESRD PPS, we are
finalizing the collection of information section as proposed.

B. Requirements in Regulation Text

We solicited public comment on the issues below for the following
sections of this document that contain information collection
requirements (ICRs):
As discussed in section I.B.3 of this final rule, to receive the
low-volume adjustment, an ESRD facility would need to provide an
attestation to their Fiscal Intermediary or Medicare Administrative
Contractor (FI/MAC) that it has met the criteria to qualify as a low-
volume facility no later than November 1st of each year preceding the
applicable low-volume adjustment payment year (except for the 2012 low-
volume payment year, which has an attestation submission deadline of
January 3, 2012). The FI/MAC would verify the ESRD facility's
attestation of their low-volume status for the 3-consecutive years
immediately preceding the payment year, using the ESRD facility's most
recent final-settled or as-filed 12-month cost reports.
The burden associated with the requirement is the time and effort
necessary for an ESRD facility attesting as a low-volume facility to
develop an attestation and submit it to their FI/MAC. In the proposed
rule, we estimated that it would require an administrative staff member
from each low-volume facility 10 minutes to obtain the total number of
treatments in the cost reports necessary for eligibility determination,
develop the attestation, and submit it to their FI/MAC. For this final
rule, using 2010 claims our contractor, UM-KECC, identified 963 ESRD
facilities as providing treatments below the low-volume threshold of
4,000 treatments in 2010. Of these 963 facilities, we estimated that
378 met the additional low-volume criteria as specified in Sec.
413.232. Further, due to the historical trend of increase in the number
of small dialysis facilities, we believe that several dozen additional
ESRD facilities may meet the criteria of a low-volume facility prior to
the CY 2012 payment year. To take these facilities into account, we
have rounded the total number of estimated low-volume facilities to
400. Therefore, for CY 2012, we estimate that the total initial ESRD
facility burden would be 67 hours. The estimated cost associated with
compliance with this requirement is $2.61 per ESRD facility and a total
of $1,044 for all 400 facilities. These costs are estimated using the
2010 estimate for the occupational code 43-0000 Office and
Administrative Support Occupation mean hourly wage of $15.66 as stated
by the U.S. Bureau of Labor Statistics.

C. Additional Information Collection Requirements

This final rule imposes collection of information requirements as
outlined in the regulation text and specified above. However, this
final rule also makes reference to several associated information
collections that are not discussed in the regulation text contained in
this document. The following is a discussion of these information
collections, some of which have already received OMB approval.
1. Display of Certificates for the PY 2013 and PY 2014 ESRD QIP
Section II.B of this rule discusses a disclosure requirement for
both the PY 2013 and the PY 2014 ESRD QIP. As stated earlier in this
final rule, section 1881(h)(6)(C) of the Act requires the Secretary to
provide certificates to dialysis care providers and facilities about
their total performance scores under the ESRD QIP. This section also
requires each provider and facility that receives a QIP certificate to
display it prominently in patient areas.
To comply with this requirement, we proposed to issue a PY 2013 and
PY 2014 ESRD QIP certificate to providers and facilities via a
generally accessible electronic file format. We proposed that each
provider and facility would be required to prominently display the
applicable ESRD QIP certificate in patient areas. In addition, we
proposed that each provider and facility would take the necessary
measures to ensure the security of the certificate in the patient
areas. Finally, we proposed that each provider/facility would be
required to have staff available to answer questions about the
certificate in an understandable manner, taking into account that some
patients might have limited English proficiency. These proposals
represent no change from the policy finalized for the PY 2012 ESRD QIP,
and we are finalizing them in this final rule.
The burden associated with the aforementioned requirements is the
time and effort necessary for providers and facilities to print the
applicable ESRD QIP certificate, display the certificate prominently in
patient areas, ensure the safety of the certificate, and respond to
patient inquiries in reference to the certificates. We estimate that

[[Page 70299]]

approximately 5,503 providers and facilities will receive an ESRD QIP
certificate in PY 2013 and PY 2014 and will be required to display it.
We also estimate that it will take each provider/facility 10 minutes
per year to print, prominently display, and secure the ESRD QIP
certificate, for a total estimated annual burden of 917 hours [(10/60)
hours x 5503 facilities] at a cost of $31, 755 [917 hours x $34.63 per
hour]. We estimate that approximately one-third of ESRD patients
(estimated to be 119,686 out of 395,058) will ask a question about the
ESRD QIP certificate. We further estimate that it will take each
provider/facility approximately 5 minutes to answer each patient
question about the applicable ESRD QIP certificate, or 1.8 hours per
provider or facility each year. The total estimated annual burden
associated with this requirement is 9,905 hours [1.8 hours x 5503
providers]. The total estimated annual burden for both displaying the
ESRD QIP certificates and answering patient questions about the
certificates is 10,822 hours [10,822 hours + 9,905 hours] (for each of
PY 2013 and PY 2014). While the total estimated annual burden
associated with both of these requirements as discussed is 10,822
hours, we do not believe that there will be a significant cost
associated with these requirements because we are not proposing to
require providers/facilities to complete new forms. As discussed in
section A.1.3 of this final rule, we estimate that the total cost for
all ESRD providers/facilities to comply with the collection of
information requirements associated with the certificate each year
would be less than $400,000.
We did not receive any public comments regarding our analysis of
the economic impact of the collection of information requirement for
this proposal.
2. NHSN Reporting Requirement for the PY 2014 ESRD QIP
As stated above in section II.B.2.b.vi of this final rule, we are
finalizing a proposal to include reporting dialysis events to the
National Healthcare Safety Network (NHSN) as a reporting measure for
the PY 2014 ESRD QIP. Specifically, we are requiring providers/
facilities to: (1) Enroll in the NHSN and complete required training as
verified by a digital certificate obtained from CDC; and (2) submit at
least 3-consecutive months of dialysis event data to the NHSN.
The burden associated with these requirements is the time and
effort necessary for providers and facilities to enroll in the NHSN and
conduct the required training and submit 3 months of data. We estimated
in the proposed rule that approximately 5,503 providers and facilities
will enroll in the NHSN and submit the necessary data. We also
estimated that it would take each provider or facility 48 hours per
year to enroll in the NHSN and complete the required training, for a
total estimated annual burden of 264,144 hours [5,503 providers x 48
hours]. Upon further consultation with the CDC, we have now revised
this estimate. We now believe that it will take each provider/facility
approximately 8 hours to enroll in the NHSN and complete the required
training, for a total estimated burden of 44,024 hours (8 hours x 5,503
facilities). Based on the Bureau of Labor Statistics we estimate the
average salary to be $34.63 per hour. Thus, average cost for each
provider/facility will be $277.04 (8 hours x $34.63 per hour). Across
all 5,503 providers/facilities, this will equal approximately $1.5
million ($277.04 x 5,503 facilities). However, we further estimate that
the number of dialysis events in a 3-month period will be 125,680 for
the 2014 ESRD population. We estimate it will require 2 hours of staff
time per month to collect and submit data on these events and the
estimated burden for submitting 3 months of data will be 33,018 hours
(6 hours times 5,503 facilities). If the dialysis events are
distributed evenly across all 5,503 providers/facilities, that will
result in an additional 6-hour burden ($218.58 (6 hours times $36.43))
for each provider/facility. Based upon our updated analysis, the total
estimated annual burden for enrolling in the NHSN, conducting the
required training, and submitting 3-consecutive months of data is
77,042 hours (44,024 + 33,018). We estimate that the total cost for all
ESRD providers/facilities to comply with the collection of information
requirements associated with NHSN reporting requirement each year will
be less than $2.8 million (77,042 x $36.43), with the total average
cost per provider/facility approximately $508.80 ($2.8 million/5,503
facilities).
We did not receive any public comments regarding our proposed
analysis of the economic impact of the collection of information
requirements related to the adoption of an NHSN reporting measure for
the PY 2014 ESRD QIP.
3. Patient Experience Survey Usage Requirement for the PY 2014 ESRD QIP
As stated above in section B.A.2. of this final rule, we are
finalizing our proposal to include a measure that assesses provider/
facility usage of the In-Center Hemodialysis (ICH) Consumer Assessment
of Healthcare Providers and Systems (CAHPS) Survey as a reporting
measure for the PY 2014 ESRD QIP. The burden associated with this
requirement is the time and effort necessary for providers and
facilities to administer the ICH CAHPS survey and submit an attestation
to CMS that they successfully administered the survey.
We estimate that approximately 5,503 providers and facilities will
administer the ICH CAHPS survey and submit an attestation to that
affect. We estimate that it will take each provider or facility 16
hours per year to be trained on the survey features. We further
estimate that it will take each provider/facility approximately 5
minutes to submit the attestation each year. The estimated total annual
burden on providers/facilities is estimated to be 88,507 hours [(5,503
providers x 16 hours) + (5,503 providers x (5/60) hours)] which is
valued at $3 million [88,507 hours x $34.63 per hour], or $556.97 per
provider/facility [$3 million/5,503 providers]. We estimate that
administering the survey would take a third-party entity 45 minutes per
patient (to account for variability in education levels) and 200
surveys per year which equals 150 hours [(45/60) hours x 200 surveys]
or $2,707.32 [150 hours x $17.58 per hour] per facility-year to
administer the ICH CAHPS survey for an estimated annual burden of
825,450 hours (150 hours x 5,503 providers) which is valued at $14.5
million ($2,637.00 x 5,503 providers). As discussed in section A. of
this final rule, we estimate that the total cost for ESRD providers/
facilities to comply with the collection of information requirements
associated with administering the ICH CAHPS survey each year will be
approximately $3,193.97 [$556.97 + $2,637.00] or $17.5 million [$3
million + $14.5 million] across all ESRD providers/facilities.
We did not receive any public comments regarding the proposed
collection of information requirements associated with our adoption of
this measure for the PY 2014 ESRD QIP.
4. Mineral Metabolism Reporting Requirement for the 2014 ESRD QIP
As stated above in section B.A.2 of this final rule, we are
finalizing our proposal to include a Mineral Metabolism reporting
measure as part of the PY 2014 ESRD QIP. The burden associated with
this requirement is the time and effort necessary for providers and
facilities to review their records and submit an attestation to CMS
that they had monitored on a monthly basis the serum calcium and serum
phosphorus levels of all patients each month.
We estimate that approximately 5,503 providers and facilities will
submit the

[[Page 70300]]

attestation. We estimate that it will take each provider or facility
approximately 18 hours to review its records and submit the attestation
each year. The estimated total annual burden on providers/facilities is
estimated to be 99,054 hours [18 hours x 5,503 providers] which is
valued at $3.43 million [99,054 hours x $34.63 per hour], or $623 per
provider/facility [$3.43 million/5,503 providers].
We did not receive any public comments regarding our proposed
collection of information requirements associated with the adoption of
a mineral metabolism reporting measure for the PY 2014 ESRD QIP.
5. Competitive Acquisition Program for Certain Durable Medical
Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Collection of
Information Requirements
We solicited public comment on the following information collection
requirements (ICRs):
i. ICRs Regarding Round 1 Rebid
We previously estimated that the burden associated with Round 1
would be 1,086,164 hours (68 hours x 15,973 bids). Our estimate was
that on average it would take a supplier 68 hours to complete and
submit a bid and that we would receive 15,973 bids. Although we expect
the amount of hours to generally remain the same (68 hours) for the
Round 1 rebid, based on our Round 1 experience we anticipated fewer
bids. For the 2007 Round 1 of the competitive bidding program, we
received approximately 6,500 bids. Therefore, the total estimated
burden associated with the Round 1 rebid was approximately 442,000
hours (68 hours x 6,500).
ii. ICRs Regarding Disclosure of Subcontracting Arrangements
Section 414.422(f) states that suppliers entering into a contract
with CMS must disclose information on each subcontracting arrangement
that the supplier has to furnish items and services under the contract
and whether each subcontractor meets the accreditation requirements in
section 424.57, if applicable. Section 414.422(f) also requires that
the required disclosure be made no later than 10 days after the date a
supplier enters into a contract with CMS or 10 days after a supplier
enters into a subcontracting arrangement after entering into a contract
with CMS.
The burden associated with the requirements in Sec. 414.422(f) is
the time and effort necessary to disclose the information to CMS. In
the 2007 Round 1 competition, there were 329 winning suppliers.
Therefore, we approximated fewer than 400 winning suppliers for the
Round 1 rebid. Also, we estimated it will take each of the winning
suppliers that use subcontractors on average approximately 1.5 hours to
submit information on each subcontracting arrangement to furnish items
and services under the contract and whether each subcontractor meets
the accreditation requirements in Sec. 424.57, if applicable. Those
that do not use subcontractors will not have a reporting burden. The
total estimated burden associated with these requirements is
approximately 600 hours (1.5 hours x 400 winning suppliers).
We did not receive any comments on the information collection
requirements of the interim final rule. We sought comments on these
information collection requirements again in the May 19, 2009 Federal
Register (74 FR 23415), and the Office of Management and Budget (OMB)
approved the collection (OMB Control Number 0938-1016).

VII. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
We examined the impacts of this final rule as required by Executive
Orders 12866 (September 30, 1993, Regulatory Planning and Review) and
Executive Order 13563 on Improving Regulation and Regulatory Review
(January 18, 2011). Executive Orders 12866 and 13563 direct agencies to
assess all costs and benefits of available regulatory alternatives and,
if regulation is necessary, to select regulatory approaches that
maximize net benefits (including potential economic, environmental,
public health and safety effects, distributive impacts, and equity).
Executive Order 13563 emphasizes the importance of quantifying both
costs and benefits, of reducing costs, of harmonizing rules, and of
promoting flexibility. This rule has been designated an
``economically'' significant rule, under section 3(f)(1) of Executive
Order 12866. Accordingly, the rule has been reviewed by the Office of
Management and Budget. We have prepared a Regulatory Impact Analysis
that to the best of our ability presents the costs and benefits of the
final rule. We solicited comments on the regulatory impact analysis
provided.
2. Statement of Need
This rule finalizes a number of routine updates for renal dialysis
services in CY 2012, implementing the second year of the transition,
and makes several policy and technical changes to the CY 2011 ESRD PPS
final rule. This includes updates to the ESRD PPS and composite rate
base rates, wage index values, wage index budget-neutrality adjustment
factors, outlier payment policy, low-volume adjustment and transition
budget-neutrality adjustment. Failure to publish this final rule would
result in ESRD facilities not receiving appropriate payments in CY
2012.
In addition, this rule will implement a QIP for Medicare ESRD
dialysis providers and facilities with payment reductions beginning
January 1, 2013. Under section 1881(h) of the Act, after selecting
measures, establishing performance standards that apply to each of the
measures, specifying a performance period, and developing a methodology
for assessing the total performance of each provider and facility based
on the specified performance standards, the Secretary is required to
apply an appropriate reduction to ESRD providers and facilities that do
not meet or exceed the established total performance score. Our vision
is to continue to implement a robust, comprehensive ESRD QIP that
builds on the foundation that has already been established in providing
incentives to providers/facilities to improve the quality of care they
provide to Medicare beneficiaries.
Also, this final rule will revise the ambulance fee schedule
regulations to conform to the requirements of section 106 of the
Medicare and Medicaid Extenders Act of 2010 Public Law 111-309 (MMEA).
This final rule also revises the definition of durable medical
equipment. The revision adds a 3-year MLR that must be met by an item
or device in order to be considered durable for the purpose of
classifying the item under the Medicare benefit category for DME. The
proposed rule would not impact items classified and covered as DME
before the new rule takes effect or supplies and accessories used with
covered DME. Finally, this final rule incorporates into regulations
certain self-implementing provisions of section 154 of MIPPA that
affect the DMEPOS Competitive Bidding Program.
3. Overall Impact
We estimate that the final revisions to the ESRD PPS will result in
an increase of approximately $240 million in payments to ESRD
facilities in CY 2012. Furthermore, as a result of implementing the
ESRD QIP for Medicare outpatient ESRD dialysis providers and
facilities, we estimate aggregate payment reductions in payment years
2013 and 2014 would be $23.7 million and $22.1 million,

[[Page 70301]]

respectively. However, given the lack of data for several measures, the
actual impact of the PY 2014 ESRD QIP may vary significantly from the
values provided herein. Lastly, the aggregate costs associated with the
QIP collection of information requirements described in section III.1
of this final rule (Display of Certificates for the 2013 ESRD QIP) are
estimated to be $400,000 for all ESRD providers/facilities in PY 2013.
The additional estimated aggregate costs associated with the collection
of information requirements described in sections III.1. (Display of
Certificates for the PY 2013 and PY 2014 ESRD QIP), III.2 (NHSN
Reporting Requirement for the PY 2014 ESRD QIP), III.3 (Patient
Experience Survey Usage Requirement for the PY 2014 ESRD QIP) and III.4
(Mineral Metabolism Reporting Requirement for the PY 2014 ESRD QIP) in
this final rule are expected to be approximately less than $24 million
for all participating ESRD facilities.
The impact of section 106 of the MMEA, requiring the extension of
certain add-on payments for ground ambulance services, and the
extension of certain rural area designations for purposes of air
ambulance payment, through CY 2011, is estimated to be $20 million (for
CY 2011).
The fiscal impact of the proposed 3-year MLR cannot be estimated
because it is difficult to predict how many different types of devices
will be introduced in the market in the future that may or may not
qualify as DME items as a result of the new rule. We would expect that
this final rule would have a small, if any, savings impact on the
program.
Finally, we believe that the changes to the Medicare DMEPOS
Competitive Bidding Program have a minimal fiscal impact because they
are very limited and do not change fundamental program requirements.

B. Detailed Economic Analysis

1. CY 2012 End-Stage Renal Disease Prospective Payment System
a. Effects on ESRD Facilities
As explained in the proposed rule (76 FR 40542), to understand the
impact of the changes affecting payments to different categories of
ESRD facilities, it is necessary to compare estimated payments (that
is, payments made under the 100 percent ESRD PPS and those under the
blended payment during the transition) in CY 2012 to estimated payments
(that is, payments made under the 100 percent ESRD PPS and those under
the ESRD PPS blended payment during the transition) in CY 2011. To
estimate the impact among various classes of ESRD facilities, it is
imperative that the estimates of payments in CY 2011 and CY 2012
contain similar inputs. Therefore, we simulated payments only for those
ESRD facilities that we are able to calculate both current payments and
new payments.
For this final rule, we used the June 2011 update of CY 2010
National Claims History file as a basis for Medicare dialysis
treatments and payments under the ESRD PPS. We updated the 2010 claims
to 2011 and 2012 using various updates. The updates to the ESRD PPS
base rate and the base composite rate portion of the blended rate
during the transition are described in section I.B of this final rule.
In addition, in order to prepare an impact analysis, since some
providers opted to be paid the blended payment amount during the
transition, we made various assumptions about price growth for the
formerly separately billable drugs and laboratory tests with regard to
the composite portion of the ESRD PPS blended payment during the
transition. These rates of price growth are briefly outlined below, and
are described in more detail in the CY 2011 ESRD PPS final rule (75 FR
49078 through 49080).
We used the CY 2010 amounts for the CY 2011 and CY 2012 amounts for
Supplies and Other Services, since this category primarily includes the
$0.50 administration fee for separately billable part B drugs and this
fee is not increased; thus we used no price update. Because some ESRD
facilities will receive blended payments during the transition and
receive payment for ESRD drugs and biologicals based on their average
sales price plus 6 percent (ASP+6), we estimated price growth for these
drugs and biologicals based on ASP+6 percent. We updated the last
available quarter of actual ASP data for the top twelve drugs (the
fourth quarter of 2011) thru 2012 by using the quarterly growth in the
Producer Price Index (PPI) for Drugs, consistent with the method for
addressing price growth in the ESRDB market basket. This resulted in
1.7 percent, 1.4 percent, 1.1 percent, and 0.8 percent increase,
respectively, for the first thru the fourth quarter of 2012. Since the
top twelve drugs account for over 99 percent of total former separately
billable Part B drug payments, we used a weighted average growth of the
top twelve drugs, for the remainder. Table 7 below shows the updates
used for the drugs.
We updated payments for laboratory tests paid under the laboratory
fee schedule to 2011 and 2012 using the statutory required update of
the CPI-U increase with any legislative adjustments. For this final
rule, the growth from 2010 to 2011 is -1.8 percent and the growth from
2010 to 2012 is -1.2 percent.
BILLING CODE 4120-01-P

[[Page 70302]]

[GRAPHIC] [TIFF OMITTED] TR10NO11.010

Table 8 shows the impact of the estimated CY 2012 ESRD payments
compared to estimated payments to ESRD facilities in CY 2011.

[[Page 70303]]

[GRAPHIC] [TIFF OMITTED] TR10NO11.011

[[Page 70304]]

[GRAPHIC] [TIFF OMITTED] TR10NO11.012

BILLING CODE 4120-01-C
Column A of the impact table indicates the number of ESRD
facilities for each impact category and column B indicates the number
of dialysis treatments (in millions). The overall effect of the final
changes to outlier payment policy and the final changes for the BSA
national average described in section I.C.10 and section .I.C.9,
respectively, of this final rule, are shown in column C. For CY 2012,
the impact on all facilities as a result of the changes to outlier
payment policy and the BSA national average would be a 0.3 percent
increase in estimated payments. The estimated impact of the changes to
outlier payment policy and the BSA national average ranges from -0.1
percent decrease to a 0.5 percent increase. Most ESRD facilities are
anticipated to experience a positive effect in their estimated CY 2012
payments as a result of the outlier policy and BSA national average
changes being finalized.
Column D shows the effect of the wage index on ESRD facilities and
reflects the CY 2012 wage index values for the composite rate portion
of the blended payment during the transition and the ESRD PPS payments.
Facilities located in the census region of Puerto Rico and the Virgin
Islands would receive a 2.4 percent decrease in estimated payments in
CY 2012. Since most of the facilities in this category are located in
Puerto Rico, the decrease is primarily due to the reduction in the wage
index floor (which only affects facilities in Puerto Rico in CY 2012).
Renal dialysis facilities outside of Puerto Rico would experience
changes in estimated payments ranging from a 0.4 percent decrease to a
0.9 percent increase due to the update of the wage index.
Column E reflects the overall impact (that is the effects of the
outlier policy and BSA national average changes, the wage index, the
effect of the ESRDB market basket increase minus productivity
adjustment, and the effect of the change in the blended payment
percentage from 75 percent of payments based on the composite rate
system and 25 percent based on the ESRD PPS in 2011, to 50/50,
respectively, for 2012, for those facilities that opted to be paid
under the transition). We expect that overall, ESRD facilities will
experience a 2.5 percent increase in estimated payments in 2012. ESRD
facilities in Puerto Rico are expected to receive a 0.3 percent
increase in their estimated payments in CY 2012. This negligible
increase is primarily due to the negative impact of the wage index. The
remainder of ESRD facilities are expected to be positively impacted
ranging from an increase of 1.7 percent to 3.6 percent in their 2012
estimated payments.
b. Effects on Other Providers
Under the ESRD PPS, ESRD facilities are paid directly for the renal
dialysis bundle and other provider types such as laboratories, DME
suppliers, and pharmacies, may no longer bill Medicare directly for
renal dialysis services. Rather, effective January, 1, 2011, such other
providers can only furnish renal dialysis services under arrangements
with ESRD facilities and must seek payment from ESRD facilities rather
than Medicare. Under the ESRD PPS, Medicare pays ESRD facilities one
payment for renal dialysis services, which may have been separately
paid to suppliers by Medicare prior to the implementation of the ESRD
PPS. Therefore, in CY 2012, the second year of the ESRD PPS, we
estimate that the ESRD PPS will have zero impact on these other
providers.
c. Effects on the Medicare Program
We estimate that Medicare spending (total Medicare program
payments) for ESRD facilities in 2012 will be approximately $8.2
billion. This estimate is based on various price update factors
discussed in section VII.B in this final rule. In addition, we estimate
that there will be an increase in fee-for-service Medicare beneficiary
enrollment of 4.3 percent in CY 2012.
d. Effects on Medicare Beneficiaries
Under the ESRD PPS, beneficiaries are responsible for paying 20
percent of the ESRD PPS payment amount or blended payment amount for
patients treated in facilities going through the ESRD PPS transition.
As a result of the projected 2.5 percent overall increase in the ESRD
PPS payment amounts in CY 2012, we estimate that there will be an
increase in beneficiary co-insurance payments of 2.5 percent in CY
2012, which translates to approximately $50 million.
e. Alternatives Considered
As we explained in the proposed rule (76 FR 40544), we considered
eliminating all laboratory tests from the outlier policy, but instead
we proposed to eliminate only the Automated Multi-Channel Chemistry
(AMCC) panel tests. We indicated that we believed this approach would
continue to recognize expensive laboratory tests in the outlier policy
while reducing the burden associated with the 50 percent rule. We also
considered alternatives for applying the wage index budget-neutrality
adjustment factor under the ESRD PPS for purposes of the full ESRD PPS
payments and ESRD PPS portion of the blended payment during the
transition, such as applying the wage index budget-neutrality
adjustment factor to the ESRD PPS wage index values. We chose to apply
the wage index budget-neutrality adjustment factor to the ESRD PPS base

[[Page 70305]]

rate and ESRD PPS portions of the transition blended payment to be
consistent with how these adjustments are applied in other Medicare
payment systems. Finally, we considered retaining the current BSA
adjustment under the composite rate potion of the blended payment
amount.
2. End-Stage Renal Disease Quality Incentive Program
a. Effects of the PY 2013 and PY 2014 ESRD QIP
This final rule is intended to mitigate possible reductions in the
quality of ESRD dialysis facility services provided to beneficiaries as
a result of payment changes under the ESRD PPS by implementing an ESRD
QIP that would reduce ESRD payments by up to 2 percent to dialysis
providers/facilities that fail to meet or exceed a Total Performance
Score with respect to performance standards established by the
Secretary with respect to certain specified measures.
The methodology that we are finalizing to determine a provider/
facility's Total Performance Score is described in section IV.A.3
(Methodology for Calculating the Total Performance Score for the PY
2013 ESRD QIP) and section IV.A.2.e (Methodology for Calculating the
Total Performance Score for the PY 2014 ESRD QIP) of this final rule.
Any reductions in ESRD payment would begin on January 1, 2013 for
services furnished on or after January 1, 2013 for the PY 2013 ESRD QIP
and any reductions in ESRD payment would begin on January 1, 2014 for
services furnished on or after January 1, 2014 for the PY 2014 ESRD
QIP.
As a result, based on the ESRD QIP outlined in this final rule, we
estimate that approximately 19 percent or 1,014 of total ESRD dialysis
providers/facilities would likely receive a payment reduction for PY
2013. In PY 2014, we estimate that approximately 30.3 percent or 1,665
of total ESRD facilities would likely receive some type of payment
reduction. We note that these estimates differ significantly from the
estimates that were included in the proposed rule. We believe that the
difference in our PY 2013 estimates is attributable to two changes.
First, we determined that our previous estimates for PY 2013 had
mistakenly included the Hemoglobin Less Than 10 g/dL measure, which
resulted in lower provider/facility scores and greater payment
reductions. Second, we are now able to update our PY 2013 estimates
using newly available data, such that we are now using 2009 data as the
baseline period and 2010 data as the performance period. We believe
that the difference in our PY 2014 estimates is attributable to four
changes that were made to how we calculated the estimate. First, as
previously mentioned, we are now able to update our estimates using
newly available data, such that we are now using 2009 data as the
baseline period and 2010 data as the performance period. Second, our
estimates no longer include performance on the proposed SHR measures,
because we are not finalizing its inclusion in the PY 2014 program.
Third, our estimate now uses data from the Fistula First Breakthrough
Initiative to approximate provider/facility performance on the Vascular
Access Type (VAT) measure proposed for the 2014 QIP. The 2014 QIP will
use data from Medicare claims based on HCPCS modifier V-codes that
indicate fistula or catheter use. Because sufficient historical data
are not yet available from Medicare claims for the fistula and catheter
rates that will be used to calculate the VAT, historical data regarding
fistula and catheter use were obtained from the Fistula First
Breakthrough Initiative dataset for use in this impact analysis. For
more information on the Fistula First Dataset, please see http://www.fistulafirst.org.. Lastly, our estimates incorporate the changes to
the proposed payment reduction methodology that have been finalized in
this final rule.
The ESRD QIP impact assessment assumes an initial count of 5,596
dialysis providers/facilities with paid Medicare dialysis claims in
2010. The PPS analysis, presented earlier, excludes 93 facilities for
PPS-specific reasons thereby narrowing the final analytic sample to
5,503. The most common reason for exclusion was that facilities closed
during 2010. As a result, Table 9 shows the overall estimated
distribution of payment reductions resulting from the PY 2013 ESRD QIP.
Table 10 shows the overall estimated distribution of payment reductions
resulting from the PY 2014 ESRD QIP.

[[Page 70306]]

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To estimate the total payment reductions in PY 2013 and PY 2014 for
each provider/facility resulting from this final rule, we multiplied
the total Medicare payments to the facility in 2010 by the provider's/
facility's estimated payment reduction percentage expected under the
ESRD QIP, yielding a total payment reduction amount for each provider/
facility: (Total ESRD payment in 2010 x estimated payment reduction
percentage).
---------------------------------------------------------------------------

\25\ PY 2014 QIP Scores estimated using the Hemoglobin > 12 g/dl
and Urea Reduction Ratio >= 65 percent measures, as well as data
from the Fistula First initiative as a proxy for the VAT measure.
---------------------------------------------------------------------------

The PY 2014 payment reduction levels will include the 0.5 percent
payment reduction level as an additional level within the payment
reduction scale. We are finalizing new measures, a new scoring
methodology, and rigorous performance standards which are not familiar
to the community. We believe that including this additional payment
reduction level will allow time for providers/facilities to become
familiar with this new structure and for CMS to acquire additional data
on the impact of these changes. The inclusion of the 0.5 percent
payment reduction level creates a more gradual payment reduction scale,
and therefore benefits providers by lessening the reduction impacts
that would have been received under the original proposed scale.
For PY 2013, totaling all of the payment reductions for each of the
1,014 providers/facilities expected to receive a reduction leads to a
total payment reduction of approximately $23.7 million. Further, we
estimate that the total costs associated with the collection of
information requirements described in section III.1, of this final rule
(Display of Certificates for the PY 2013 ESRD QIP) would be less than
$400,000 for all ESRD providers/facilities in PY 2013.
For PY 2014, totaling all of the payment reductions for each of the
1,665 facilities expected to receive a reduction leads to a total
payment reduction of approximately $22.1 million. Further, we estimate
that the total costs associated with the collection of information
requirements described in sections III.1. (Display of Certificates for
the PY 2013 and PY 2014 ESRD QIP), III.2 (NHSN Reporting Requirement
for the PY 2014 ESRD QIP), III.3 (Patient Experience Survey Usage
Reporting Requirement for the PY 2014 ESRD QIP) and III.4 (Mineral
Metabolism Reporting Requirement for the PY 2014 ESRD QIP) of this
final rule would be less than $25 million for all ESRD providers/
facilities.
As a result, we estimate that ESRD providers/facilities will
experience an aggregate impact of $24.1 million for PY 2013 and $47.1
million for PY 2014.
Table 11 below shows the estimated impact of the finalized ESRD QIP
payment reductions to all ESRD facilities for PY 2013. The table
details the distribution of ESRD providers/facilities by facility size
(both among facilities considered to be small entities and by number of
treatments per facility), geography (both urban/rural and by region),
and by facility type (hospital based/freestanding facilities).
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[[Page 70308]]

[GRAPHIC] [TIFF OMITTED] TR10NO11.015

We note that for the PY 2014 ESRD QIP we lack performance data on
the Vascular Access Type measure to conduct an analysis at this time.
We conducted a simulation using the latest available performance data
on the Hemoglobin Greater Than 12 g/dL measure, and the Dialysis
Adequacy (URR) measure and fistula and catheter rates based on Fistula
First data to estimate the impact of this final rule as accurately as
possible. These simulated analyses were performed using 2010 claims
data as the performance year and 2009 claims data as the baseline year
for the Hemoglobin Greater Than 12g/dL measure and the Dialysis
Adequacy Measure (URR).
Using these conditions, we calculated estimated national
achievement threshold and benchmark values for the Hemoglobin Greater
Than 12 g/dL, URR Hemodilaysis Adequacy, and VAT measures using all
facilities present in the data set. Equal weighting was applied in
calculating Total Performance Scores. Facilities were required to have
data on at least one of the measures. Given the lack of data for the
reporting measures, and the use of Fistula First data, the actual
impact of the PY 2014 ESRD QIP may vary significantly from the values
provided here.
Using the above assumptions, Table 12 below shows the estimated
impact of the ESRD QIP payment reductions to all ESRD facilities for PY
2014. The table details the distribution of ESRD providers/facilities
by facility size (both among facilities considered to be small entities
and by number of treatments per facility), geography (both urban/rural
and by region), and by facility type (hospital based/freestanding
facilities).

[[Page 70309]]

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[[Page 70310]]

[GRAPHIC] [TIFF OMITTED] TR10NO11.017

BILLING CODE 4120-01-C
b. Alternatives Considered for the PY 2013 and PY 2014 ESRD QIP
In developing the final PY 2013 ESRD QIP, we carefully considered
the size of the incentive to providers and facilities to provide high-
quality care. We also selected the measures adopted for the PY 2013
ESRD QIP because these measures are important indicators of patient
outcomes and quality of care. For example, inadequate dialysis can lead
to avoidable hospitalizations, decreased quality of life, and death.
Thus, we believe the measures selected will allow CMS to continue
focusing on improving the quality of care that Medicare beneficiaries
receive from ESRD dialysis providers and facilities.
Additionally, for PY 2013 we considered whether to leave the
Hemoglobin Measure Less Than 10g/dL in the program. Ultimately we
decided that the clinical evidence shows that this measure is not
conducive to improving the patient quality of care for which the ESRD
QIP strives. The ESA labeling approved by the FDA on June 24, 2011
states that no trial has identified a hemoglobin target level that does
not increase risks, and that ``in controlled trials, patients
experienced greater risks for death, serious adverse cardiovascular
reactions, and stroke when administered ESAs to target a hemoglobin
level of greater than 11 g/dL.'' We decided to retire the Hemoglobin
Less Than 10g/dL measure from the program and are finalizing that
proposal in this final rule.
This final rule implements an ESRD QIP for Medicare ESRD dialysis
providers and facilities with payment reductions beginning January 1,
2013 and January 1, 2014. Under section 1881(h) of the Act, after
selecting measures, establishing performance standards that apply to
each of the measures, specifying a performance period, and developing a
methodology for assessing the total performance of each provider and
facility based on the specified performance standards, the Secretary is
required to apply an appropriate reduction to ESRD providers and
facilities that do not meet or exceed the established Total Performance
Score. In developing the final ESRD QIP, we carefully considered the
size of the incentive to providers and facilities to provide high-
quality care. We also considered finalizing all of the measures
proposed for the PY 2014 ESRD QIP because these measures are important
indicators of patient outcomes and quality of care. Poor management of
anemia and inadequate dialysis, for example, can lead to avoidable
hospitalizations, decreased quality of life, and death. Infections are
also a leading cause of death and hospitalization among hemodialysis
patients, but there are proven infection control methods that have been
shown effective in reducing morbidity and mortality. However, after
considering public comments, we decided not to finalize all the
measures we proposed. While we intend to adopt additional measures in
future payment years, we believe that the measures finalized will allow
us to continue focusing on improving the quality of care that Medicare
beneficiaries receive from ESRD dialysis providers and facilities.
In finalizing the scoring methodology for the PY 2014 ESRD QIP, we
considered a number of alternatives, including continuing to use the
existing scoring model. In proposing to move to a new scoring approach
for the PY 2014 ESRD QIP, we aimed to design a scoring methodology that
was straightforward and transparent to providers/facilities, patients,
and other stakeholders. During the public comment period, we received
comments on the Total Performance Score as proposed, and in light of
those concerns, we have adjusted how we set the minimum Total
Performance Score. Rather than set the minimum Total Performance Score
as the score a provider/facility would receive if it had met the
performance standards for each finalized measure, we will define the
minimum Total Performance Score as the score a provider/facility would
receive if it had met the performance standards for each of the
finalized clinical measures. In recognition of commenter concerns
regarding the proposed reporting measures, and our lack of data on
which to approximate likely provider/facility performance, we will
exclude these measures from the calculation of the minimum Total
Performance Score. We believe this policy balances our desire to
appropriately incentivize improvements to clinical quality of care
while ensuring that providers/facilities are not unduly penalized.
Furthermore, although we believe that the ESRD QIP should provide a
means for patients to evaluate their providers/facilities over time, we
do not believe that PY 2014 will be comparable to previous years of the
ESRD QIP because of the significant changes to the scoring methodology
and measures. We believe the 100 point scale will accommodate the
growing number of measures that may be adopted in future years of the
ESRD QIP and plan to consistently use the 100 point scale going
forward.

[[Page 70311]]

Additionally, we believe that all scoring methodologies for
Medicare Value-Based Purchasing programs should be aligned as
appropriate given their specific statutory requirements, and that the
changes made to the proposed methodology in this final rule are in
keeping with this approach.
The comments we received on this analysis and our responses are set
forth below.
Comment: One commenter asked CMS to explain why rural and urban
facilities will be affected differently by the PY 2013 and PY 2014 ESRD
QIP. This commenter specifically asked why those providers/facilities
not receiving scores because of, for example, inadequate data varied
from PY 2013 to PY 2014. This commenter urged CMS to change its
methodology to encompass as many facilities as possible in the ESRD
QIP. This commenter also requested the CMS explain why more payment
reductions will likely result from PY 2014.
Response: The estimates of the impact for both PY 2013 and PY 2014
of the proposed rule we developed were created by modeling how
providers/facilities would have scored on the ESRD QIP using data from
2008 and 2009. While these estimates did show a slight difference in
the average payment reduction between urban and rural facilities for PY
2013 and PY 2014, we believe that these differences are relatively
minor. While these estimates have changed since we used more recent
data (2009 and 2010) and adjusted the model to account for changes to
the program in this final rule, we still believe that the differences
will be relatively minor. We expect all facilities to provide quality
care, particularly in the important areas of anemia management and
dialysis adequacy, regardless of size or geographic location. We will
continue to monitor and evaluate the impact of the ESRD QIP on access
to and quality to care and the quality of care received by Medicare
ESRD beneficiaries, including indicators of facility financial health,
to identify any disruptions or to make future improvements in the
program. In light of our finalized proposal that every provider/
facility will receive a Total Performance Score as long as at least one
measure applies to it, we believe that nearly all providers/facilities
will be included in the ESRD QIP. Lastly, we do not believe that
payment reductions will be significantly greater in PY 2014. As seen
from the estimates above, we believe that payment reductions will be
$23.7 million for PY 2013 and $22.1 million for PY 2014. To the extent
that this number decreases somewhat in PY 2014, we believe this is
appropriate given that providers/facilities will be adjusting to a
dramatically different program with new measures.
3. Ambulance Fee Schedule
Section 106 of the Medicare and Medicaid Extenders Act of 2010 (MMEA)
As discussed in section III of this final rule, section 106 of the
MMEA requires the extension of certain add-on payments for ground
ambulance services, and the extension of certain rural area
designations for purposes of air ambulance payment, through CY 2011. As
further discussed in section III of this final rule, we are amending
the Medicare program regulations to conform the regulations to this
section of the MMEA. This MMEA section is essentially prescriptive and
does not allow for discretionary alternatives on the part of the
Secretary.
As discussed in the July 1, 2004 interim final rule (69 FR 40288),
in determining the super-rural bonus amount under section 1834(l)(12)
of the Act, we followed the statutory guidance of using the data from
the Comptroller General (GAO) of the U.S. We obtained the same data
that were used in the GAO's September 2003 Report titled, ``Ambulance
Services: Medicare Payments Can Be Better Targeted to Trips in Less
Densely Populated Rural Areas'' (GAO report number GAO-03-986) and used
the same general methodology in a regression analysis as was used in
that report. The result was that the average cost per trip in the
lowest quartile of rural county populations was 22.6 percent higher
than the average cost per trip in the highest quartile. As required by
section 1834(l)(12) of the Act, this percent increase is applied to the
base rate for ground ambulance transports that originate in qualified
rural areas, which were identified using the methodology set forth in
the statute. Payments for ambulance services under Medicare are
determined by the point of pick-up (by zip code area) where the
beneficiary is loaded on board the ambulance.
We determined that ground ambulance transports originating in 7,842
zip code areas (which were determined to be in ``qualified rural
areas'') out of 42,879 zip code areas, according to the July 2010 zip
code file, will realize increased base rate payments under section
106(c) of the MMEA for CY 2011; however, the number and level of
services that might occur in these areas for CY 2011 is unknown at this
time. Similarly, for purposes of assessing the impact of MMEA section
106(a) and (b), the number and level of services that might occur
during CY 2011 in rural and urban areas generally is unknown at this
time. While many elements may factor into the final impact of section
106 of the MMEA, our Office of the Actuary (OACT) estimates the impact
of this section to be $20 million for CY 2011.
4. Durable Medical Equipment (DME) and Supplies
The fiscal impact of the final 3-year MLR for DME will be minimal
because we believe that this standard is consistent with our current
interpretation of the payment and repeated use provisions for DME. It
is difficult to predict how many different types of new devices will be
introduced in the market in the future that may or may not meet the 3-
year MLR. However, even absent the final rule, it is likely that new
products which do not meet the 3-year MLR will not qualify as DME based
upon our current interpretation of the criteria for DME. It is possible
that with the clarification of the 3-year MLR, we will limit what can
be covered as DME compared to what we would have covered as DME absent
this regulatory clarification. To the extent the regulatory change is
binding to some new products, there may be reduced program cost. Also,
the final revised regulation does not apply to items that were
classified as DME before the effective date of the amended regulation,
which tends to lessen the overall impact to the program. In general, we
expect that this final will have a small, if any, savings impact on the
program. We are finalizing the rule with no modifications.
5. The Competitive Acquisition Program for Certain Durable Medical
Equipment, Prosthetics, Orthotics and Supplies (DMEPOS)
As discussed in section V of this final rule, section 154 of MIPPA
amended section 1847 of the Act to make limited changes to the Medicare
DMEPOS Competitive Bidding Program. These changes were incorporated
into regulations through an interim final rule with comment period
published in the Federal Register on January 16, 2009 (74 FR 2873). The
interim final rule merely incorporated limited statutory changes to the
Medicare DMEPOS Competitive Bidding Program and did not change the
fundamental requirements of the program. Specifically, this final rule
cites the new timeframes for competition under the program. In
addition, the rule implements the MIPPA provisions that mandated
limited changes that affected

[[Page 70312]]

competition under the program including a process for providing
feedback to suppliers regarding missing financial documentation,
requiring contractors to disclose to CMS information regarding
subcontracting relationships, and exempting from competitive bidding
certain items and services. These changes are not economically
significant. Furthermore, because the regulation simply codifies the
MIPPA provisions, we do not have the authority to consider
alternatives.

C. Accounting Statement

As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4), in Table 13 below, we
have prepared an accounting statement showing the classification of the
transfers and costs associated with the various provisions of this
final rule.
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BILLING CODE 4120-C

VIII. Regulatory Flexibility Act Analysis

The Regulatory Flexibility Act (September 19, 1980, Pub. L. 96-
354)(RFA) requires agencies to analyze options for regulatory relief of
small entities, if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, small entities
include small businesses, nonprofit organizations, and small
governmental jurisdictions. Approximately 20 percent of ESRD dialysis
facilities are considered small entities according to the Small
Business Administration's size standards, which classifies small
businesses as those dialysis facilities having total revenues of less
than $34.5 million in any 1 year. Individuals and States are not
included in the definitions of a small entity and 17 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

[[Page 70313]]

Centers are listed as 621492 with a size standard of $34.5 million).
The claims data used to estimate payments to ESRD facilities in
this RFA and RIA do not identify which dialysis facilities are part of
a large dialysis organization (LDO), regional chain, or other type of
ownership. Each individual dialysis facility has its own provider
number and bills Medicare using this number. Therefore, in previous
RFAs and RIAs presented in proposed and final rules that updated the
basic case-mix adjusted composite payment system, we considered each
ESRD to be a small entity for purposes of the RFA. However, we
conducted a special analysis for this final rule that enabled us to
identify the ESRD facilities that are part of an LDO or regional chain
and therefore, were able to identify individual ESRD facilities,
regardless of ownership, that would be considered small entities.
We do not believe ESRD facilities are operated by small government
entities such as counties or towns with populations 50,000 or less and
therefore, they are not enumerated or included in this estimated RFA.
Individuals and States are not included in the definition of a small
entity.
For purposes of the RFA, we estimate that approximately 20 percent
of ESRD facilities are small entities as that term is used in the RFA
(which includes small businesses, nonprofit organizations, and small
governmental jurisdictions). This amount is based on the number of ESRD
facilities shown in the ownership category in the impact Table 12.
Using the definitions in this ownership category, we consider the 663
facilities that are independent and the 437 facilities that are shown
as hospital-based to be small entities. The ESRD facilities that are
owned and operated by LDOs and regional chains would have total
revenues more than $34.5 million in any year when the total revenues
for all locations are combined for each business (individual LDO or
regional chain) are not included as small entities.
For the ESRD PPS updates finalized in this rule, a hospital-based
ESRD facility (as defined by ownership type) is estimated to receive a
2.3 percent increase in payments for CY 2012. An independent facility
(as defined by ownership type) is estimated to receive a 2.3 percent
increase in payments for 2012.
Based on the finalized QIP payment reduction impacts to ESRD
facilities for PY 2013, we estimate that of the 2,059 ESRD facilities
expected to receive a payment reduction, 385 ESRD small entity
facilities would experience a payment reduction (ranging from 0.5
percent up to 2.0 of total payments), as presented in Table 11 above.
We anticipate the payment reductions to average approximately $22,934
per facility, with an average of $23,807 per small entity. Using our
projections of provider/facility performance, we then estimated the
impact of anticipated payment reductions on ESRD small entities, by
comparing the total payment reductions for the 385 small entities
expected to receive a payment reduction, with the aggregate ESRD
payments to all small entities. For the entire group of 1,054 ESRD
small entity facilities, a decrease of 0.57 percent in aggregate ESRD
payments is observed.
Furthermore, based on the finalized QIP payment reduction impacts
to ESRD facilities for PY 2014, we estimate that of the 737 ESRD entity
facilities expected to receive a payment reduction, 132 small entities
are expected to experience a payment reduction (ranging from 1.0
percent up to 2.0 of total payments), as presented in Table 11 above.
We anticipate the payment reductions to average approximately $18,820
per facility, with an average of $20,436 per small entity facility.
Using our projections of provider/facility performance, we then
estimated the impact of anticipated payment reductions on small
entities, by comparing the total payment reductions for the 132 small
entities expected to receive a payment reduction, with the aggregate
ESRD payments to all small entities. For the entire group of 1,054
small entity facilities, a decrease of 0.16 percent in aggregate ESRD
payments is observed.
Therefore, the Secretary has determined that this final rule will
not have a significant economic impact on a substantial number of small
entities. We solicit comment on the RFA analysis provided.
Finally, based on data from the Small Business Administration
(SBA), we estimate that 85 percent of the suppliers of the items and
services affected by the changes to the Medicare DMEPOS Competitive
Bidding Program would be defined as small entities with total revenues
of $6.5 million or less in any 1 year. This final rule merely codifies
MIPPA provisions, so there are no options for regulatory relief for
small suppliers. The RFA therefore does not require that we analyze
regulatory options in this instance.
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 will have a significant impact on operations of
a substantial number of small rural hospitals because most dialysis
facilities are freestanding. While there are 178 rural hospital-based
dialysis facilities, we do not know how many of them are based at
hospitals with fewer than 100 beds. However, overall, the 178 rural
hospital-based dialysis facilities will experience an estimated 2.3
percent increase in payments. As a result, this final rule is estimated
to not have a significant impact on small rural hospitals. Therefore,
the Secretary has determined that this proposed rule will not have a
significant impact on the operations of a substantial number of small
rural hospitals.

IX. Unfunded Mandates Reform Act Analysis

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

X. Federalism Analysis

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

XI. Files Available to the Public via the Internet

This section lists the Addenda referred to in the preamble of this
final. Beginning in CY 2012, the Addenda for the annual ESRD PPS
proposed and final rulemakings will no longer appear in the Federal
Register. Instead, the

[[Page 70314]]

Addenda will be available only through the Internet. We will continue
to post the Addenda through the Internet.
Readers who experience any problems accessing the Addenda that are
posted on the CMS Web site at http://www.cms.gov/ESRDPayment/PAY/list.asp, should contact Lisa Hubbard at (410) 786-4533.

List of Subjects

42 CFR Part 413

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

42 CFR Part 414

Proposed Rule to revise the definition of durable medical equipment
(DME) to incorporate a minimum lifetime standard of 3 years and further
refine the meaning of the term durable.

For the reasons set forth in the preamble, under the authority at
42 U.S.C. 1395hh section 1871 of the Act, the Centers for Medicare &
Medicaid Services confirms as final, the interim final rules published
on January 16, 2009 (74 FR 2873), and April 6, 2011 (76 FR 18930), and
further amends 42 CFR chapter IV as set forth below:

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

0
1. The authority citation for part 413 continues to read as follows:

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

0
2. Section 413.232 is amended by revising paragraphs (b)(1), (b)(2),
and (f) to read as follows:

Sec. 413.232 Low-volume adjustment.

(a) * * *
(b) * * *
(1) Furnished less than 4,000 treatments in each of the 3 cost
reporting years (based on as-filed or final settled 12-consecutive
month cost reports, whichever is most recent) preceding the payment
year; and
(2) Has not opened, closed, or received a new provider number due
to a change in ownership in the 3 cost reporting years (based on as-
filed or final settled 12-consecutive month cost reports, whichever is
most recent) preceding the payment year.
* * * * *
(f) Except as provided below, to receive the low-volume adjustment
an ESRD facility must provide an attestation statement, by November 1st
of each year preceding the payment year, to its Medicare administrative
contractor that the facility has met all the criteria established in
paragraphs (a), (b), (c), and (d) of this section. For calendar year
2012, the attestation must be provided by January 3, 2012.
* * * * *

0
3. Section 413.237 is amended by adding a new paragraph (a)(1)(v) to
read as follows:

Sec. 413.237 Outliers.

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

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

0
4. The authority citation for part 414 continues to read as follows:

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

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

0
5. Section 414.202 is amended by revising the definition of ``durable
medical equipment'' to read as follows:

Sec. 414.202 Definitions.

* * * * *
Durable medical equipment means equipment, furnished by a supplier
or a home health agency that meets the following conditions:
(1) Can withstand repeated use.
(2) Effective with respect to items classified as DME after January
1, 2012, has an expected life of at least 3 years.
(3) Is primarily and customarily used to serve a medical purpose.
(4) Generally is not useful to an individual in the absence of an
illness or injury.
(5) Is appropriate for use in the home.
* * * * *

Subpart F--Competitive Bidding for Certain Durable Medical
Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)

0
6. Section 414.402 is amended by--
0
A. Revising the definitions of ``covered document'' and ``covered
document review date'' and ``hospital''.
0
B. Revising the introductory text of paragraph (1) of the definition of
``item''.

Sec. 414.402 Definitions.

* * * * *
Covered document means a financial, tax, or other document required
to be submitted by a bidder as part of an original bid submission under
a competitive acquisition program in order to meet the required
financial standards.
Covered document review date means the later of--
(1) The date that is 30 days before the final date for the closing
of the bid window; or
(2) The date that is 30 days after the opening of the bid window.
* * * * *
Hospital has the same meaning as in section 1861(e) of the Act.
Item * * *
(1) Durable medical equipment (DME) other than class III devices
under the Federal Food, Drug and Cosmetic Act, as defined in Sec.
414.202 of this part and group 3 complex rehabilitative wheelchairs and
further classified into the following categories:
* * * * *

0
7. Section 414.404 is amended by revising paragraphs (b)(1)
introductory text, (b)(1)(ii), and (b)(1)(iii) to read as follows:

Sec. 414.404 Scope and applicability.

* * * * *
(b) * * *
(1) Physicians, treating practitioners, and hospitals may furnish
certain types of competitively bid durable medical equipment without
submitting a bid and being awarded a contract under this subpart,
provided that all of the following conditions are satisfied:
* * * * *
(ii) The items are furnished by the physician or treating
practitioner to his or her own patients as part of his or her
professional service or by a hospital to its own patients during an
admission or on the date of discharge.
(iii) The items are billed under a billing number assigned to the
hospital, physician, the treating practitioner (if possible), or a
group practice to which the physician or treating practitioner

[[Page 70315]]

has reassigned the right to receive Medicare payment.
* * * * *

0
8. Section 414.408 is amended by revising paragraph (e)(2)(iv) to read
as follows:

Sec. 414.408 Payment rules.

* * * * *
(e) * * *
(2) * * *
(iv) A physician, treating practitioner, physical therapist in
private practice, occupational therapist in private practice, or
hospital may furnish an item in accordance with Sec. 414.404(b) of
this subpart.
* * * * *

0
9. Section 414.410 is amended by revising paragraphs (a)(1) through (3)
to read as follows:

Sec. 414.410 Phased-in implementation of competitive bidding
programs.

(a) Phase-in of competitive bidding programs. CMS phases in
competitive bidding programs so that competition under the programs
occurs--
(1) In CY 2009, in Cincinnati--Middletown (Ohio, Kentucky and
Indiana), Cleveland--Elyria--Mentor (Ohio), Charlotte--Gastonia--
Concord (North Carolina and South Carolina), Dallas--Fort Worth--
Arlington (Texas), Kansas City (Missouri and Kansas), Miami--Fort
Lauderdale--Miami Beach (Florida), Orlando (Florida), Pittsburgh
(Pennsylvania), and Riverside--San Bernardino--Ontario (California).
(2) In CY 2011, in an additional 91 MSAs (the additional 70 MSAs
selected by CMS as of June 1, 2008, and the next 21 largest MSAs by
total population based on 2009 population estimates, and not already
phased in as of June 1, 2008). CMS may subdivide any of the 91 MSAs
with a population of greater than 8,000,000 into separate CBAs, thereby
resulting in more than 91 CBAs.
(3) After CY 2011, additional CBAs (or, in the case of national
mail order for items and services, after CY 2010).
* * * * *

0
10. Section 414.414 is amended by revising paragraph (c) and (d) as
follows:

Sec. 414.414 Conditions for awarding contracts.

* * * * *
(c) Quality standards and accreditation. Each supplier furnishing
items and services directly or as a subcontractor must meet applicable
quality standards developed by CMS in accordance with section
1834(a)(20) of the Act and be accredited by a CMS-approved organization
that meets the requirements of Sec. 424.58 of this subchapter, unless
a grace period is specified by CMS.
(d) Financial standards. (1) General rule. Each supplier must
submit along with its bid the applicable covered documents (as defined
in Sec. 414.402) specified in the request for bids.
(2) Process for reviewing covered documents. (i) Submission of
covered documents for CMS review. To receive notification of whether
there are missing covered documents, the supplier must submit its
applicable covered documents by the later of the following covered
document review dates:
(A) The date that is 30 days before the final date for the closing
of the bid window; or
(B) The date that is 30 days after the opening of the bid window.
(ii) CMS feedback to a supplier with missing covered documents. (A)
For Round 1 bids. CMS has up to 45 days after the covered document
review date to review the covered documents and to notify suppliers of
any missing documents.
(B) For subsequent Round bids. CMS has 90 days after the covered
document review date to notify suppliers of any missing covered
documents.
(iii) Submission of missing covered documents. Suppliers notified
by CMS of missing covered documents have 10 business days after the
date of such notice to submit the missing documents. CMS does not
reject the supplier's bid on the basis that the covered documents are
late or missing if all the applicable missing covered documents
identified in the notice are submitted to CMS not later than 10
business days after the date of such notice.
* * * * *

0
11. Section 414.422 is amended by revising paragraph (f) to read as
follows:

Sec. 414.422 Terms of contracts.

* * * * *
(f) Disclosure of subcontracting arrangements. (1) Initial
disclosure. Not later than 10 days after the date a supplier enters
into a contract under this section the supplier must disclose
information on both of the following:
(i) Each subcontracting arrangement that the supplier has in
furnishing items and services under the contract.
(ii) Whether each subcontractor meets the requirement of section
1834(a)(20)(F)(i) of the Act if applicable to such subcontractor.
(2) Subsequent disclosure. Not later than 10 days after the date a
supplier enters into a subcontracting arrangement subsequent to
contract award with CMS, the supplier must disclose information on both
of the following:
(i) The subcontracting arrangement that the supplier has in
furnishing items and services under the contract.
(ii) Whether the subcontractor meets the requirement of section
1834(a)(20)(F)(i) of the Act, if applicable to such subcontractor.
* * * * *

Subpart H--Fee Schedule for Ambulance Services

0
12. Section 414.610 is amended by revising paragraphs (c)(1)
introductory text, (c)(1)(ii), (c)(5)(ii), and (h) to read as follows:

Sec. 414.610 Basis of payments.

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

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

[[Page 70316]]

Dated: October 26, 2011.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
Approved: October 31, 2011.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2011-28606 Filed 11-1-11; 4:15 pm]
BILLING CODE 4120-01-P