[Federal Register Volume 76, Number 3 (Wednesday, January 5, 2011)]
[Rules and Regulations]
[Pages 628-646]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-33143]



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Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 413



Medicare Program; End-Stage Renal Disease Quality Incentive Program; 
Final Rule

  Federal Register / Vol. 76 , No. 3 / Wednesday, January 5, 2011 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 413

[CMS-3206-F]
RIN 0938-AP91


Medicare Program; End-Stage Renal Disease Quality Incentive 
Program

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

ACTION: Final rule.

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SUMMARY: This final rule will implement a quality incentive program 
(QIP) for Medicare outpatient end-stage renal disease (ESRD) dialysis 
providers and facilities with payment consequences beginning January 1, 
2012, in accordance with section 1881(h) of the Act (added on July 15, 
2008 by section 153(c) of the Medicare Improvements for Patients and 
Providers Act (MIPPA)). Under the ESRD QIP, ESRD payments made to 
dialysis providers and facilities under section 1881(b)(14) of the 
Social Security Act will be reduced by up to two percent if the 
providers/facilities fail to meet or exceed a total performance score 
with respect to performance standards established with respect to 
certain specified measures.

DATES: These regulations are effective on February 4, 2011.

FOR FURTHER INFORMATION CONTACT: Shannon Kerr, (410) 786-3039.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
    A. Overview of Quality Monitoring Initiatives
    B. Statutory Authority for the ESRD QIP
    C. Finalized Anemia Management and Dialysis Adequacy Measures
II. Provisions of the Proposed Regulations
III. Analysis of and Responses to Public Comments
    A. Performance Standards for the ESRD QIP Measures
    B. Performance Period for the ESRD QIP Measures
    C. Methodology for Calculating the Total Performance Score for 
the ESRD QIP Measures
    D. Payment Reductions Using the Total Performance Score
    E. Public Reporting Requirements
    1. Introduction
    2. Notifying Providers/Facilities of Their QIP Scores
    3. Informing the Public Through Facility-Posted Certificates
    4. Informing the Public Through Medicare's Web site
    F. Excluded Providers
    G. Additional Comments
IV. Future QIP Considerations
    A. ESRD Services Monitoring and Evaluation
    B. Potential QIP Changes and Updates
V. Collection of Information Requirements
VI. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact
    C. Anticipated Effects
    D. Alternatives Considered

Acronyms

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

CIP Core Indicators Project
CMS Centers for Medicare & Medicaid Services
CPM Clinical performance measure
CROWNWeb Consolidated Renal Operations in a Web-Enabled Network
DFC Dialysis Facility Compare
DFR Dialysis Facility Report
ESA Erythropoiesis-stimulating agent
ESRD End-stage renal disease
FDA Food and Drug Administration
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
MIPPA Medicare Improvements for Patients and Providers Act of 2008 
(Pub. L. 110-275)
NQF National Quality Forum
PPS Prospective payment system
QIP Quality incentive program
REMIS Renal management information system
RFA Regulatory Flexibility Act
SIMS Standard information management system
SSA Social Security Administration
the Act Social Security Act
URR Urea reduction ratio

I. Background

A. Overview of Quality Monitoring Initiatives

    For over 30 years, monitoring the quality of care provided to end-
stage renal disease (ESRD) patients and provider/facility 
accountability have been important components of the Medicare ESRD 
payment system. In the proposed rule, we described the evolution of our 
ESRD quality monitoring initiatives by category: The ESRD Network 
Organization Program, the Clinical Performance Measures (CPM) Project, 
Dialysis Facility Compare (DFC), the ESRD Quality Initiative, the ESRD 
Conditions for Coverage, and CROWNWeb (75 FR 49216-49217). Most 
recently, we finalized three quality measures that we will use for the 
initial year of the QIP (see ``End-Stage Renal Disease Prospective 
Payment System final rule (referred to in this final rule as the ``ESRD 
PPS final rule''), which appeared in the Federal Register on August 12, 
2010 (75 FR 49030, 49182-49190)). We also proposed to implement other 
components of the QIP in a notice of proposed rulemaking entitled 
``End-Stage Renal Disease Quality Incentive Program'' proposed rule, 
which appeared in the Federal Register on August 12, 2010 (75 FR 49215-
49232). We received and reviewed many helpful comments regarding the 
design of the QIP that contributed to the development of this ESRD QIP 
final rule.
    We view the ESRD QIP, required by section 1881(h) of the Social 
Security Act (the Act), as the next step in the evolution of the ESRD 
quality program that began more than three decades ago. Our vision is 
to implement a robust, comprehensive ESRD QIP that builds on the 
foundation that has already been established.

B. Statutory Authority for the ESRD QIP

    Congress required in section 153 of MIPPA that the Secretary 
implement an ESRD quality incentive program (QIP). Specifically, 
section 1881(h) of the Act, as added by section 153(c) of MIPPA, 
requires the Secretary to develop a QIP that will result in payment 
reductions to providers of dialysis services and dialysis facilities 
that do not meet or exceed an established total performance score with 
respect to performance standards established for certain specified 
measures. As provided under this section, the payment reductions, which 
will be up to two percent of payments otherwise made to providers and 
facilities under section 1881(b)(14) of the Act, will apply to payment 
for renal dialysis services furnished on or after January 1, 2012. The 
total performance score that providers and facilities must meet or 
exceed in order to receive their full payment in 2012 will be based on 
a specific performance period prior to this date. Under section 
1881(h)(1)(C) of the Act, the payment reduction will only apply with 
respect to the year involved for a provider/facility and will not be 
taken into account when computing future payment rates for the impacted 
provider/facility.
    For the ESRD QIP, section 1881(h) of the Act generally requires the 
Secretary to: (1) Select measures; (2) establish the performance 
standards that apply to the individual measures; (3) specify a 
performance period with respect to a year; (4) develop a methodology 
for assessing the total performance of each provider and facility based 
on the performance standards established with respect to the measures 
for a performance period; and (5) apply an

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appropriate payment reduction to providers and facilities that do not 
meet or exceed the established total performance score.

C. Finalized Anemia Management and Hemodialysis Adequacy Measures

    In accordance with section 1881(h)(2)(A)(i) of the Act, we 
finalized in the ESRD PPS final rule the following three measures for 
the initial year of the ESRD QIP:
     Percentage of Medicare patients with an average Hemoglobin 
Less Than 10.0g/dL;
     Percentage of Medicare patients with an average Hemoglobin 
Greater Than 12.0g/dL;
     Percentage of Medicare hemodialysis patients with an 
average Urea Reduction Ratio (URR)  65 percent.

(75 FR 49182). However, we received some questions on the measures 
during the public comment period for this rule and are, therefore, 
providing clarifying information in this final rule.
    As we stated in the ESRD PPS final rule, pediatric patients (those 
< 18 years of age) will not be included in the final calculation of the 
anemia management measures (75 FR 49185). However, we want to emphasize 
that providers/facilities do not need to submit any new data on the 
measures we are using for the first year of the QIP. This population 
will be excluded from the final calculation of the measure during the 
first year (75 FR 49185).
    We also want to reiterate that the patient population for the 
anemia management measures will include hemodialysis and peritoneal 
dialysis patients who are receiving ESAs. To be eligible for inclusion 
in the patient population for these measures, the patient must have 
four or more eligible claims from the provider/facility within the 
performance period. Data from patients whose first ESRD maintenance 
dialysis started less than 90 days after diagnosis or who have 
hemoglobin values of less than 5g/dL or greater than 20g/dL will be 
excluded from the calculation (75 FR 49182). Also, patients not 
receiving ESAs are excluded from these measures (75 FR 49184).
    We would like to clarify that as we stated in the ESRD PPS final 
rule, the hemodialysis adequacy measure will be calculated as the 
percentage of patients with a URR greater than or equal to 65 percent 
(75 FR 49190).
    Additionally, providers/facilities do not need to submit any 
additional data with respect to the measures for the first year of the 
ESRD QIP. We will calculate the measures using claims data, which we 
will collect, as we do for DFC, in accordance with the technical 
specifications outlined in the Dialysis Facility Reports, which can be 
accessed for reference at: http://www.dialysisreports.org/Methodology.aspx. For the hemodialysis adequacy measure, home 
hemodialysis patients and peritoneal dialysis patients, as well as 
pediatric patients, are excluded from the calculation (75 FR 49185).
    We also note that the laboratory values we will use to calculate 
the three finalized measures are included on the Medicare ESRD claim 
form and, thus, are submitted by providers/facilities along with their 
claims. For guidance on how those values should be obtained and 
submitted, please see the Medicare Claims Processing Manual (Medicare 
Publication 100.04, Chapter 8--Outpatient ESRD Hospital, Independent 
Facility, and Physician/Supplier Claims, Section 50.3).
Requirements for Issuance of Regulations
    Section 902 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) amended section 1871(a) of the Act and 
requires the Secretary, in consultation with the Director of the Office 
of Management and Budget, to establish and publish timelines for the 
publication of Medicare final regulations based on the previous 
publication of a Medicare proposed or interim final regulation. Section 
902 of the MMA also states that the timelines for these regulations may 
vary, but shall not exceed three years after publication of the 
preceding proposed or interim final regulation except under exceptional 
circumstances.
    This final rule finalizes provisions set forth in the Notice of 
Proposed Rulemaking, entitled ``End-Stage Renal Disease Quality 
Incentive Program'', published on August 12, 2010 in the Federal 
Register (75 FR 49215 through 49232). In addition, this final rule has 
been published within the three-year time limit imposed by section 902 
of the MMA. Therefore, we believe that this final rule is being 
published in accordance with the statutory requirements of section 902 
to ensure the timely publication of final regulations.

II. Provisions of the Proposed Regulations

    On August 12, 2010, we published in the Federal Register a proposed 
rule entitled ``Medicare Program; End-Stage Renal Disease Quality 
Incentive Program'' (75 FR 49215). In that proposed rule, we proposed 
that under the ESRD QIP, ESRD payments for facilities/providers would 
be reduced by up to two percent if they failed to meet or exceed the 
total performance score for performance standards established with 
respect to certain quality measures. As stated above, the three quality 
measures we will use for payment consequence year 2012 are Hemoglobin 
Less Than 10.0g/dL, Hemoglobin More Than 12.0g/dL and Hemodialysis 
Adequacy >= 65 percent (URR). As detailed below, we received numerous 
comments on the various portions of the proposed rule, which we analyze 
and respond to below. After consideration of these comments and 
responses, we are finalizing the ESRD QIP as proposed.

III. Analysis of and Responses to Public Comments

    The proposed rule was published on August 12, 2010 (75 FR 49215 
through 49232) in the Federal Register with a comment period that ended 
on September 24, 2010. We received approximately 71 public comments. 
Interested parties that submitted comments included dialysis 
facilities, the national organizations representing dialysis 
facilities, nephrologists, nurses, nutritionists, home health agencies, 
the major chain dialysis facilities, clinical laboratories, 
pharmaceutical manufacturers, hospitals and their representatives, 
individual dialysis patients, advocacy groups, and the Medicare Payment 
Advisory Commission (MedPAC). In this final rule, we provide a summary 
of each proposed provision, a summary of the public comments received, 
our responses, and any changes to the proposed ESRD QIP contained in 
this final rule.

A. Performance Standards for the ESRD QIP Measures

    Section 1881(h)(4)(A) of the Act requires the Secretary to 
establish performance standards with respect to the measures selected 
for the QIP for a performance period with respect to a year. Section 
1881(h)(4)(B) of the Act provides that the performance standards shall 
include levels of achievement and improvement, as determined 
appropriate by the Secretary. However, for the first performance 
period, we proposed to use for the three selected measures the 
performance standard required by the special rule in section 
1881(h)(4)(E) of the Act. Under this provision, the Secretary is 
required to ``initially use'', as a performance standard, the lesser of 
a provider/facility-specific performance rate in the year selected by 
the Secretary under the second sentence of section

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1881(b)(14)(A)(ii) of the Act, or a standard based on the national 
performance rates for such measures in a period determined by the 
Secretary. We did not propose to include in this initial performance 
standard levels of achievement or improvement because we do not believe 
that section 1881(h)(4)(E) of the Act requires that we include such 
levels. In addition, we interpret the term ``initially'' to apply only 
to the performance period applicable for payment consequence calendar 
year 2012. For subsequent performance periods, we will propose 
performance standards under section 1881(h)(4)(A) of the Act.
    As stated above, to implement the special rule for the anemia 
management and hemodialysis adequacy measures, we proposed to use as 
the performance standard the lesser of the performance of a provider or 
facility on each measure during 2007 (the year selected by the 
Secretary under the second sentence of section 1881(b)(14)(A)(ii) of 
the Act, referred to as the base utilization year), or the national 
performance rates of all providers/facilities for each measure in 2008.
    In setting the performance standard based on national performance 
rates, we proposed to adopt a standard that is equal to the national 
performance rates of all dialysis providers and facilities based on 
2008 data as calculated and reported on the Dialysis Facility Compare 
(DFC) Web site. We proposed to use 2008 data because it is the most 
recent year for which data is publicly available prior to the beginning 
of the proposed performance period. Specifically, the national 
performance rates for the anemia management and hemodialysis adequacy 
measures were posted on DFC in November 2009, as follows:
     For the anemia management measure (referred to in this 
final rule as the ``Hemoglobin Less Than 10g/dL Measure'')--the 
percentage of Medicare patients who have an average hemoglobin value 
less than 10.0g/dL: the national performance rate is two percent.
     For the anemia management measure (referred to in this 
final rule as the ``Hemoglobin Greater Than 12g/dL Measure'')--the 
percentage of Medicare patients who have an average hemoglobin value 
greater than 12.0g/dL: the national performance rate is 26 percent.
     For the proposed hemodialysis adequacy measure (referred 
to in this final rule as ``Hemodialysis Adequacy Measure'')--the 
percentage of Medicare patients who have an average URR level greater 
than or equal to 65 percent: the national performance rate is 96 
percent.
    For purposes of implementing the special rule, we proposed that the 
performance standard for each of the three measures for the initial 
performance period with respect to payment consequence year 2012 would 
be the lesser of (1) the provider/facility-specific rate for each of 
these measures in 2007, or (2) the 2008 national performance rates for 
each of these measures.
    We received several comments on our proposed selection of 
performance standards. Summaries of the comments received and our 
responses are set forth below.
    Comment: Several commenters objected to setting the performance 
standards based on previous provider/facility performance in 2007 and 
2008 because they believe that those years provide an inaccurate 
picture of the quality of care furnished to ESRD patients today. 
Specifically, these commenters noted that changes have been made since 
2007 in anemia management clinical practice and suggested that CMS set 
the initial performance standards based on more current data, such as 
data from 2009.
    Response: As stated above, under section 1881(h)(4)(E) of the Act, 
the Secretary is required to ``initially use'' as a performance 
standard the lesser of a provider/facility-specific performance rate in 
the year selected by the Secretary under the second sentence of section 
1881(b)(14)(A)(ii) of the Act, or a standard based on the national 
performance rate for each measure in a period determined by the 
Secretary. In the ESRD PPS final rule we determined that 2007 was the 
year representing the lowest per-patient utilization of the renal 
dialysis services which comprise the ESRD payment bundle as required by 
section 1881(b)(14)(A)(ii) of the Act. (75 FR 49065). Therefore, in 
accordance with section 1881(h)(4)(E)(i), we must use the 2007 
provider/facility performance rates.
    In setting the performance standard based on national performance 
rates under section 1881(h)(4)(E)(ii), we sought to balance the 
importance of using the most recent available data with the desire to 
use data that was publicly available at the time we issued the proposed 
rule. At the time we issued the proposed rule, the most recent national 
performance rate data that was publicly available on DFC was from 2008.
    We agree with the commenters that the initial performance standard 
should be based on the most contemporary data and as close to the 
performance period as possible. However, we also believe that it is 
important for providers/facilities, beneficiaries and the public to 
know exactly what the performance standards are as soon as possible.
    Comment: One commenter noted that the proposed initial performance 
standard based on the 2008 national performance rate of two percent for 
the Hemoglobin Less Than 10g/dL measure would be extremely difficult 
for providers/facilities to meet and would likely lead to overuse of 
ESAs. The commenter noted that the 2008 data reflects practices that 
were furnished prior to recent studies and FDA warnings regarding the 
danger of high hemoglobin levels, and that at the time, providers/
facilities were unaware of the danger of high hemoglobin levels. 
Additionally, the commenter suggested setting the initial performance 
standards for the anemia management measures at 10 percent for 
Hemoglobin Less than 10g/dL and Hemoglobin Greater than 12g/dL.
    Response: We disagree with the commenter's suggestion that the 
anemia management measures performance standards should be set at 10 
percent. We have made providers/facilities aware of the dangers of high 
hemoglobin levels related to use of ESAs since as early as 2005, when 
we changed our policy regarding ESAs and the monitoring of high 
hemoglobin levels (see CMS Manual System, Pub 100-04 Medicare Claims 
Processing, Transmittal 751 (November 10, 2005)). Since that time and 
with the release of the FDA guidelines in 2008, the historical data 
demonstrate that the number of patients with high hemoglobin levels has 
decreased and the number of patients with Hemoglobin Less than 10 g/dL 
has not increased. We believe that lowering the standard to 10 percent 
does not move quality forward.
    We also believe that most providers/facilities are capable of 
meeting the initial 2 percent performance standard, and note that the 
2008 national performance rates for the anemia management measures will 
only be used as the initial performance standard for those providers/
facilities whose 2007 specific rates are lower than these national 
performance rates. For providers/facilities that had 2007 specific 
rates that were higher than the 2008 national performance rates their 
specific performance rates will be used as the initial performance 
standard. We also note that analysis of historical data for all three 
measures shows improvements in the average provider/facility 
performance of each measure, and therefore more facilities should 
receive maximum performance scores

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for these measures in future years of the ESRD QIP.
    Comment: One commenter requested that the initial performance 
standard for the hemodialysis adequacy measure be recalculated to 
reflect that home hemodialysis patients are excluded from the measure.
    Response: As stated in the ESRD PPS final rule (75 FR 49186), home 
hemodialysis patients are not part of the measure population for the 
hemodialysis adequacy measure for purposes of the ESRD QIP. Therefore, 
home hemodialysis patients will not be included in the measure 
calculation.
    After consideration of the public comments, we are finalizing the 
performance standards as proposed.

B. Performance Period for the ESRD QIP Measures

    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. 
Because we are required under section 1881(h)(1)(A) of the Act to 
implement the payment reduction beginning with renal dialysis services 
furnished on or after January 1, 2012, the first performance period 
would need to occur prior to that date.
    We proposed to select all of CY 2010 as the initial performance 
period for the three finalized measures (42 FR 49218). We believe that 
this is the performance period that best balances the need to collect 
sufficient data, analyze the data, calculate the provider/facility-
specific total performance scores, determine whether providers and 
facilities meet the performance standards, prepare the pricing files 
needed to implement applicable payment reductions beginning on January 
1, 2012, and allow providers and facilities time to preview their 
performance scores and inquire about their scores prior to finalizing 
their scores and making performance data public (75 FR 49218). We 
requested public comments about the selection of CY 2010 as the initial 
performance period.
    The comments we received on this proposal and our responses are set 
forth below.
    Comment: Many commenters suggested that calendar year 2010 should 
not be selected as the performance period. Some commenters suggested 
that the QIP was created to ensure that patient outcomes are not 
negatively affected as an unintended consequence of the new prospective 
payment system for ESRD care, and for that reason, they believe that 
the initial performance period should be calendar year (CY) 2011, when 
the new prospective payment system for ESRD care is effective, rather 
than CY 2010. Recognizing the time constraints that CMS is under with 
respect to the use of data from a performance period, one commenter 
suggested that CMS select the first half of 2011 as the performance 
period and conduct data processing during the final six months of 2011, 
if this final rule is published in 2010.
    Response: Although an important goal of the ESRD QIP is to assess 
whether patient outcomes are negatively affected as a result of the new 
ESRD PPS, the primary purpose of the QIP is to incentivize providers/
facilities to continuously improve their performance in the care of 
ESRD patients. In addition to the reasons we gave for selecting CY 2010 
as the performance period in the proposed rule (42 FR 49218-19), we 
believe that selecting CY 2010 as the initial performance period will 
enable us to do two things: (1) Determine the first set of performance 
scores prior to the change in the ESRD payment system which, as 
indicated, may affect provider/facility practice especially as it 
relates to medication management, laboratory testing and other patient 
management practices that now come under the bundled payment; and (2) 
use this first set of performance scores to evaluate whether the new 
ESRD PPS has created positive or negative consequences. We also believe 
that using all of CY 2010 as the initial performance period will 
provide us with a more complete picture of provider and facility 
performance than we would get if we set a six month performance period, 
which will enable us to conduct a more robust evaluation of provider/
facility performance. We also plan to implement a monitoring program in 
2011 for the purpose of tracking the impact of the new ESRD PPS and 
observing any changes to access to and quality of care for 
beneficiaries.
    Comment: Other commenters stated that using CY 2010 as the initial 
performance period would not serve as an incentive because dialysis 
providers and facilities would be judged on outcomes based on care 
provided to patients before the performance standards were established. 
Commenters also observed that data used for the QIP score will be over 
a year old by the time providers/facilities receive payments affected 
by that data.
    Response: We agree that it is important to use up-to-date quality 
data for the ESRD QIP, which is why we are working on the feasibility 
of using such data in future years. Currently, claims are the most 
complete data source for the selected measures, but we need a 
sufficient time period to collect and analyze the data before we can 
use it to make payment determinations. For this reason, we do not 
believe that we can select a performance period more recent than CY 
2010 for the initial year of the ESRD QIP. As other data sources or 
accurate and reliable methodologies for faster analysis of claims data 
become available, we will seek to use those resources to reduce the gap 
between the performance period and payment implementation.
    Comment: Several commenters objected to the proposed 2010 
performance period, claiming that CMS should have established the 
performance standards (by issuing this final rule) by the end of 2009 
if it wanted to set 2010 as the performance period. Specifically, 
commenters reference section 1881(h)(4)(C), which requires the 
Secretary to ``establish the performance standards * * * prior to the 
beginning of the performance period for the year involved.''
    Response: We acknowledge that section 1881(h)(4)(C) 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 CY 2012 in accordance with section 1881(h)(4)(E), 
which does not impose the limitation suggested by the commenters. As we 
have stated, we believe that setting a CY 2010 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, implement the applicable payment reductions for CY 2012, and 
provide providers/facilities with an opportunity to preview their 
performance scores and submit related inquiries. For these reasons, we 
are finalizing calendar year 2010 as the performance period for the 
2012 ESRD QIP.
    After consideration of the public comments, we are finalizing the 
performance period as proposed.

C. Methodology for Calculating the Total Performance Score for the ESRD 
QIP Measures

    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 a performance period.

[[Page 632]]

Section 1881(h)(3)(A)(iii) of the Act states that the scoring 
methodology must also 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. In addition, section 1881(h)(3)(B) of the Act 
requires the Secretary to calculate separate performance scores for 
each measure. Finally, under section 1881(h)(3)(A)(ii) of the Act, for 
those providers and facilities that do not meet (or exceed) the total 
performance score, the Secretary is directed to ensure that the 
application of the scoring methodology results in an appropriate 
distribution of payment reductions to providers and facilities, with 
those achieving the lowest total performance scores receiving the 
largest reductions.
    We proposed to calculate the total performance of each provider and 
facility with respect to the measures adopted for the initial 
performance period by assigning 10 points to each of the three measures 
(75 FR 49219). If a provider or facility meets or exceeds the 
performance standard for one measure, then it would receive 10 points 
for that measure. We proposed to award points on a 0 to 10 point scale, 
because this scale is commonly used in a variety of settings and is 
easily understood by stakeholders. We also believe that the scale 
provides sufficient variation to show meaningful differences in 
performance between providers/facilities.
    We proposed that a provider or facility that does not meet or 
exceed the initial performance standard for a measure based on its CY 
2010 data would receive fewer than 10 points for that measure, with the 
exact number of points corresponding to how far below the initial 
performance standard the provider/facility's actual performance falls 
(75 FR 49219). Specifically, we proposed to implement a scoring 
methodology that subtracts two points for every one percentage point 
the provider/facility performance falls below the initial performance 
standard. In the proposed rule, we discussed various examples of how 
this proposed methodology would work (75 FR 49219).

Table 1--Proposed Scoring Methodology for Anemia Management Measures Using National Performance Rates in 2008 as
                         the Performance Standard for 2010 Facility-Specific Comparison
----------------------------------------------------------------------------------------------------------------
                                                              Anemia management measures
                                     ---------------------------------------------------------------------------
                                         Percentage of Medicare patients       Percentage of Medicare patients
                                       whose average hemoglobin levels are   whose average hemoglobin levels are
                                               less than  10 g/dL                   greater than  12 g/dL
----------------------------------------------------------------------------------------------------------------
                       POINTS                            Percentage                            Percentage
----------------------------------------------------------------------------------------------------------------
                    10 points                     2 percent or less                    26 percent or less
                     8 points                             3 percent                            27 percent
                     6 points                             4 percent                            28 percent
                     4 points                             5 percent                            29 percent
                     2 points                             6 percent                            30 percent
                      0 point                     7 percent or more                    31 percent or more
----------------------------------------------------------------------------------------------------------------
Note that the bolded rows show the performance standard for the applicable measure.


  Table 2--Proposed Scoring Methodology for Anemia Management Measures Using Facility-Specific Rates in 2007 as
                     the Performance Standard and 2010 Facility-Specific Rate for Comparison
----------------------------------------------------------------------------------------------------------------
                                                              Anemia management measures
                                     ---------------------------------------------------------------------------
                                         Percentage of Medicare patients       Percentage of Medicare patients
                                       whose average hemoglobin levels are   whose average hemoglobin levels are
                                               less than  10 g/dL                   greater than  12 g/dL
----------------------------------------------------------------------------------------------------------------
                       POINTS                            Percentage                            Percentage
----------------------------------------------------------------------------------------------------------------
                                       4 percent (Example of a 2007                            30 percent
                                           facility-specific score)         (Example of a 2007 facility-specific
                                                                                                   score)
----------------------------------------------------------------------------------------------------------------
                    10 points                     4 percent or less                    30 percent or less
                     8 points                             5 percent                            31 percent
                     6 points                             6 percent                            32 percent
                     4 points                             7 percent                            33 percent
                     2 points                             8 percent                            34 percent
                     0 points                     9 percent or more                    35 percent or more
----------------------------------------------------------------------------------------------------------------


[[Page 633]]


 Table 3--Proposed Scoring Methodology for Hemodialysis Adequacy Measure
Using National Performance Rates in 2008 as the Performance Standard for
                    2010 Facility-Specific Comparison
------------------------------------------------------------------------
                                     Hemodialysis adequacy measure
                              ------------------------------------------
            POINTS               Percentage of Medicare patients whose
                                 average URR levels are greater than or
                                          equal to 65 percent
------------------------------------------------------------------------
           10 points                         96 percent or more
            8 points                                 95 percent
            6 points                                 94 percent
            4 points                                 93 percent
            2 points                                 92 percent
            0 points                         91 percent or less
------------------------------------------------------------------------


 Table 4--Proposed Scoring Methodology for Hemodialysis Adequacy Measure
  Using Facility-Specific Rates in 2007 as the Performance Standard and
               2010 Facility-Specific Rate for Comparison
------------------------------------------------------------------------
                                     Hemodialysis adequacy measure
                              ------------------------------------------
            POINTS             Percentage of Medicare patients whose URR
                                 levels are greater than or equal to 65
                                                percent
------------------------------------------------------------------------
                                                     92 Percent
                               (Example of a 2007 facility-specific
                                                         score)
------------------------------------------------------------------------
           10 points                         92 percent or more
            8 points                                 91 percent
            6 points                                 90 percent
            4 points                                 89 percent
            2 points                                 88 percent
            0 points                         87 percent or less
------------------------------------------------------------------------

    We noted that our proposed methodology--subtracting two points for 
every one percentage point the provider or facility's performance falls 
below the performance standard--does not take into account the relative 
variability in performance associated with each measure. Despite the 
difference in variability in performance among the measures, we 
proposed to apply the straightforward methodology we described in the 
proposed rule (75 FR 49219) in a consistent manner across all three 
measures. We stated that in designing the scoring methodology for the 
first year, we wanted to adopt a clear-cut approach (subtracting two 
points for each percentage point providers and facilities fell below 
the performance standard) consistent with the conceptual model that we 
discussed in the End-Stage Renal Disease Prospective Payment System 
Proposed Rule (CMS-1418-P)(74 FR 50010). We requested public comment on 
our proposal to apply the score reductions in this manner, as opposed 
to a methodology which takes into account the relative variations in 
performance that exists for each measure.
    We recognize that this straightforward approach may not be 
appropriate in future years of the ESRD QIP as we adopt new measures 
for inclusion in the program which may have a wider variability in 
performance. Moreover, we may need to reevaluate this approach 
depending on how providers and facilities perform in future years on 
the current measures. As we have stated, we want to ensure the 
performance measures included in the QIP will result in meaningful 
quality improvement for patients at both the national and individual 
facility/provider level. Therefore, we requested comment on potential 
methodologies that would take into account variations in performance 
amongst all measures included in the QIP.
    In calculating the total performance score, section 
1881(h)(3)(A)(iii) of the Act requires the agency to weight the 
performance scores with respect to individual measures to reflect 
priorities for quality improvement. In developing the conceptual model, 
we originally considered that the initial scoring method would weight 
each of the three proposed measures equally. After further examination 
and based on public comments, we proposed to give greater weight to the 
Hemoglobin Less Than 10g/dL measure. Low hemoglobin levels below 10g/dL 
can lead to serious adverse health outcomes for ESRD patients such as 
increased hospitalizations, need for transfusions, and mortality. 
Assigning greater weight to the Hemoglobin Less Than 10g/dL measure 
ensures that providers/facilities are incentivized to continue to 
properly manage and treat anemia. We believe that this is important in 
light of concerns that have been raised that the new bundled ESRD 
payment system could improperly incentivize providers/facilities to 
under-treat patients with anemia by underutilizing ESAs.
    Specifically, we proposed to weight the Hemoglobin Less Than 10g/dL 
measure as 50 percent of the total performance score (75 FR 49222). The 
remaining 50 percent of the total performance score would be divided 
equally between the Hemoglobin Greater Than 12g/dL measure (25 percent) 
and the Hemodialysis Adequacy Measure (25 percent) (75 FR 49222). When 
calculating the total performance score for a provider/facility, we 
would first multiply the score achieved by that provider/facility on 
each measure (0-10 points) by that measure's assigned weight (either 
.50 or .25). Then we would add each of the three numbers together, 
resulting in a number (although not necessarily an integer) between 0-
10. Lastly, this number would be multiplied by the number of measures 
(three) and rounded to the nearest integer (if necessary). In rounding, 
any fractional portion 0.5 or greater would be rounded up to the next 
integer, while fractional portions less than 0.5 are rounded down. 
Thus, a score of 27.4 would round to 27, while 27.6 would round to 28.
    In the proposed rule, we discussed our rationale and provided 
examples of how the proposed scoring methodology would work for 
calculating the total performance score (75 FR 49222). As discussed in 
the proposed rule (75 FR 49219), we believe this proposed total 
performance score methodology is appropriate for the initial 
performance period in the new ESRD QIP, but recognize that it will be 
important to monitor the impact and potentially reevaluate this 
methodology as provider and facility performance changes, and as new 
measures are added in future years of the ESRD QIP. We requested public 
comment on the proposed scoring methodology for the ESRD QIP. We also 
solicited comment on potential weighting methodologies that could be 
incorporated into the QIP in future years as new measures are 
introduced.
    The comments we received on this proposal and our responses are set 
forth below.
    Comment: Many commenters supported our proposal to weight the three 
measures. A few commenters recommended that CMS re-evaluate the weights 
assigned to each performance measure. Several commenters suggested that 
the weight of the anemia management measure (Hemoglobin Less Than 10g/
dL) was too high. Another commenter recommended a weighting schema of 
35 percent (Low Hemoglobin), 30 percent (High Hemoglobin) and 35 
percent (Dialysis Adequacy), while another suggested a weighting schema 
of 40 percent (Low Hemoglobin), 20 percent (High Hemoglobin) and 40 
percent (Dialysis Adequacy), to highlight the significant impact 
inadequate dialysis can have on patient morbidity and mortality. Some 
commenters that supported the proposed weighting methodology for the 
initial year also asked CMS to revisit the issue in subsequent years, 
especially if additional measures are adopted for the

[[Page 634]]

QIP or our quality improvement priorities change.
    Response: The purpose of giving greater weight to the Hemoglobin 
Less Than 10g/dL Measure was twofold: (1) To provide a disincentive to 
providers/facilities to under-treat patients for anemia, particularly 
in light of the implementation of the new ESRD PPS; and (2) to reflect 
the clinical importance of this measure. Low hemoglobin levels that are 
not appropriately managed can lead to increased morbidity and 
mortality. In terms of giving greater weight to the Hemodialysis 
Adequacy (URR) Measure, we agree that inadequate dialysis contributes 
to what should otherwise be avoidable negative patient outcomes. As we 
have noted earlier in this final rule, we eventually intend to propose 
to replace the Hemodialysis Adequacy Measure with Kt/V, which is a more 
precise measure of dialysis adequacy. Further, unlike URR values, which 
are only reported for patients above the age of 18 years receiving in-
center hemodialysis, Kt/V values can be reported for all ESRD 
beneficiaries. If we propose to replace the Hemodialysis Adequacy 
Measure with a measure that uses Kt/V values, we will re-evaluate our 
weighting methodology in light of the change. We also note that as the 
QIP evolves and as new measures are adopted in the program, we will 
reexamine the overall weighting methodology to ensure that it aligns 
with our quality improvement priorities. However, for the reasons 
discussed above, we believe that the proposed weighting methodology 
reflects our current quality goals.
    Comment: One commenter suggested that CMS adopt a scoring system 
that will not unduly penalize providers/facilities for small deviations 
from the QIP performance standards.
    Response: Based on our evaluation of historical data, we believe 
that the initial performance standards are achievable by most 
providers/facilities. We also considered whether providers/facilities 
would be unduly penalized for small deviations from the ESRD 
performance standards and used historical data to model various 
outcomes that could occur under the proposed scoring methodology. We 
concluded that because provider/facility performance will be initially 
evaluated based on the lower of the 2008 national performance rates or 
provider/facility specific performance in 2007, the proposed scoring 
methodology allows for flexibility in meeting ESRD QIP standards and 
will not result in undue penalties for providers/facilities. We 
appreciate the commenter's concern that providers/facilities not be 
unduly penalized; however, we believe that the methodology carefully 
balances this concern with the need to adequately incentivize 
meaningful quality improvement. After consideration of the comments, we 
are finalizing the scoring methodology as proposed.

D. Payment Reductions Using the Total Performance Score

    Section 1881(h)(3)(A)(ii) of the Act requires the Secretary to 
ensure that the application of the scoring methodology results in an 
appropriate distribution of reductions in payments among providers and 
facilities achieving different levels of total performance scores; with 
providers and facilities achieving the lowest total performance scores 
receiving the largest reductions.
    We proposed to implement a sliding scale of payment reductions for 
payment consequence year 2012, where the minimum total performance 
score that providers/facilities would need to achieve in order to avoid 
a payment reduction would be a score of 26 out of 30 points (75 FR 
49224). Providers/facilities that score between 21-25 points would 
receive a 0.5 percent payment reduction; between 16-20 points a one 
percent payment reduction; between 11-15 points a 1.5 percent payment 
reduction; and between 0-10 points a two percent payment reduction (75 
FR 49224).
    In developing the proposed payment reduction scale, we carefully 
considered the size of the incentive to providers/facilities to provide 
high quality care and the range of total performance scores to which 
the payment reduction applies, recognizing that this would be the first 
year of a new program. Our goal is to avoid situations where small 
deficiencies in a provider/facility's performance results in a large 
payment reduction. We noted that we want to avoid imposing a large 
payment reduction on providers/facilities whose performance on one or 
more measures falls just slightly below the performance standard (75 FR 
49224). At the same time, poorly performing providers/facilities should 
receive a more significant payment reduction. Our analysis suggests 
that using payment differentials of 0.5 percent for the total 
performance score ranges distinguishes between providers/facilities 
with fair to good performance and providers/facilities with poor 
performance. We will consider other differentials between payment 
levels for future years of the QIP, which we believe will further 
differentiate providers/facilities based on their performance. 
Additionally, section 1881(h)(1)(A) of the Act requires that the 
Secretary implement payment reductions of up to two percent, and 
section 1881(h)(3)(A)(ii) requires that the application of the total 
performance score methodology result in an appropriate distribution of 
reductions in payment among providers/facilities. Consistent with these 
requirements, we believe that Medicare beneficiaries will be best 
served if the full two percent payment reduction is initially applied 
only to those providers/facilities whose performance falls well below 
the performance standards. We believe that applying a payment reduction 
of two percent to providers/facilities whose performance falls 
significantly below the performance standards, coupled with applying 
0.5 payment differential reductions to providers/facilities based on 
lesser degrees of performance deficiencies, will incentivize all 
providers/facilities to improve the quality of their care in order to 
avoid or reduce the size of a payment reduction. We requested public 
comments about how the proposed payment reduction scale would 
incentivize providers/facilities to meet or exceed the performance 
standards for the first year of the QIP, and whether it is an 
appropriate standard to use in future years.
    In general, ESRD facilities are paid monthly by Medicare for the 
ESRD services they furnish to a beneficiary even though payment is on a 
per-treatment basis. In finalizing the new bundled payment system 
starting on January 1, 2011, we elected to continue the practice of 
paying ESRD facilities monthly for services furnished to a beneficiary
    We proposed to apply any payment reduction under the QIP for 
payment consequence year 2012 to the monthly payment amount received by 
ESRD facilities and providers. The payment reduction would be applied 
after any other applicable adjustments to an ESRD facility's payment 
were made, including case-mix, wage index, outlier, etc. (This includes 
providers/facilities being paid a blended amount under the transition 
and those that had elected to be excluded from the transition and 
receive its payment amount based entirely on the payment amount under 
the ESRD PPS.)
    Section 1833 of the Act governs payments of benefits for Part B 
services and the cost-sharing amounts for services that are considered 
medical and other health services. In general, many Part B services are 
subject to a payment structure that requires beneficiaries to be 
responsible for a 20 percent co-insurance after the deductible (while 
Medicare pays 80 percent). With respect to dialysis services furnished 
by ESRD

[[Page 635]]

facilities, under section 1881(b)(2)(a) of the Act, payment amounts are 
80 percent (and 20 percent by the individual).
    Under the proposed approach for implementing the QIP payment 
reductions, the beneficiary co-insurance amount would be 20 percent of 
the total Medicare ESRD payment, after any payment reductions are 
applied. To the extent a payment reduction applies, we note that the 
beneficiary's co-insurance amount would be calculated after applying 
the proposed payment reduction and would thus lower the co-insurance 
amount.
    We proposed to incorporate the statutory requirements of the QIP 
payment reduction set forth in proposed Sec.  413.177.
    The comments we received on this proposal and our responses are set 
forth below.
    Comment: Several commenters recommended that CMS set the maximum 
first-year penalty (that is, payment reduction) in the QIP at one 
percent. The commenters characterized section 1881(h)(1)(A) of the Act 
as saying that ``[p]ayment consequences of QIP should be up to two 
percent,'' and believe that the Secretary has some latitude in setting 
the maximum payment reduction as an amount lower than two percent. 
Commenters noted that some provider/facilities have a case-mix (for 
example, nursing home patients, patients with complex conditions) that 
may make meeting the performance standards difficult. One of the 
commenters suggested that the lower penalty be used in the first year 
to allow for establishment of standards. A few commenters further 
suggested that payment reductions be implemented in increments of one 
quarter percent to support a one percent maximum reduction.
    Response: We understand the importance of implementing the ESRD QIP 
in a manner that does not unfairly penalize providers/facilities, and 
we believe that the performance standards we are initially setting will 
be achievable by the majority of providers/facilities. However, we also 
believe that a full 2 percent payment reduction is appropriate for the 
lowest performers and that it will incentivize them to improve the 
quality of care they furnish to ESRD beneficiaries. We acknowledge the 
commenters' concern that some providers/facilities face increased 
challenges due to the population they serve (for example, nursing home 
patients, higher number of patients with complex conditions). Below, we 
discuss the monitoring plan we intend to implement for the ESRD QIP to 
monitor, in part, the distribution of measure outcomes that show a 
possible pattern of concern.
    Comment: Many commenters suggested that any funds withheld from 
provider/facility payments be used as additional incentive payments to 
other providers/facilities. Several commenters expressed strong concern 
that the quality incentive program would function only as a 
disincentive program and should not be used as a mechanism to achieve 
financial savings in the system. Specifically, some commenters 
requested any funds withheld from providers/facilities that failed to 
meet the national performance standards should be redistributed to 
providers/facilities that exceeded the national performance standards.
    Response: We appreciate the commenters' concerns; however, we 
interpret section 1881(h)(1)(A) of the Act to require the Secretary to 
make payment reductions of up to 2 percent with respect to payments 
that would otherwise be made to providers/facilities if those 
providers/facilities do not meet the requirements of the ESRD QIP. The 
statute that establishes the QIP does not provide authority to issue 
bonus payments for performance above the standards selected for the 
QIP.
    Comment: One commenter recommended that CMS apply the maximum 
penalty of a two percent payment reduction to any provider/facility 
whose performance on the Hemoglobin Less Than 10g/dL Measure falls six 
percent or more below the performance standard.
    Response: We agree with the commenter about the higher relative 
importance of the Hemoglobin Less Than 10g/dL Measure and for that 
reason, we proposed to weight that measure more heavily in calculating 
the total performance score. However, we also believe that the maximum 
penalty should initially be applied only to those providers/facilities 
whose performance falls well below the performance standards for all 
three measures. We believe that instituting an automatic payment 
reduction along the lines suggested by the commenter would dilute the 
importance of the other measures. A score-based system provides an 
incentive for providers/facilities to track their progression over time 
while not neglecting outcomes on other measures. We would not want to 
apply such a reduction to provider/facilities that had achieved high 
scores on the other two measures, thereby removing any incentive for 
them to perform well on those measures in the future.
    Comment: One commenter suggested that a two percent payment 
reduction is not a large enough deduction to ensure the quality and 
safety of dialysis patients.
    Response: Section 1881(h)(1)(A) of the Act does not permit the 
Secretary to make payment reductions greater than two percent for ESRD 
providers/facilities. In determining the potential impact on facilities 
of all sizes, it was important to identify a maximum percentage level 
of payment reduction that provides an incentive, yet is not overly 
burdensome.
    Comment: A few comments discussed the impact of lower beneficiary 
co-insurance amounts as a result of a payment reduction. One commenter 
expressed concern that higher co-insurance costs at high-performing 
ESRD facilities might serve as a disincentive for patients and that 
lower income patients may not be able to pay higher out-of-pocket 
costs, reducing patients' access to quality care. Another commenter 
agreed with CMS' proposal to calculate beneficiary co-insurance after 
applicable quality payment reductions are made, arguing that 
beneficiaries should not have to pay higher co-insurance for care 
delivered by facilities that perform below quality standards.
    Response: Under section 1881(h)(1)(A), the Secretary is required to 
make reductions to the ``payments otherwise made'' to a provider/
facility that furnishes ESRD services to an individual with ESRD. We 
interpret the phrase ``payments otherwise made'' to be the payments for 
ESRD services that would otherwise be made after applying all 
applicable adjustments, such as case-mix, wage index, and outlier. We 
note that there will be no increase in beneficiary co-insurance and 
that any changes to beneficiary co-insurance resulting from the QIP 
will likely be minimal. As such, we do not believe that resulting 
changes in co-insurance amounts will significantly affect beneficiary 
selection of providers/facilities.
    After consideration of the public comments, we are finalizing the 
proposed methodology for implementing the QIP payment reductions as 
proposed. We are also finalizing our proposed addition of 42 CFR 
413.77, which states that ESRD facilities that do not meet the 
requirements of the ESRD QIP will be subject to up to a 2 percent 
reduction in their payments otherwise made under section 1814(b)(14) of 
the Act.

[[Page 636]]

E. Public Reporting Requirements

1. Introduction
    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) further requires that a 
provider or facility has an opportunity to review the information to be 
made public with respect to it prior to its publication.
    In addition, section 1881(h)(6)(C) of the Act requires the 
Secretary to provide each provider and facility with a certificate 
containing its total performance score to post in patient areas within 
their 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.
2. Notifying Providers/Facilities of Their QIP Scores
    Section 1881(h)(6)(B) of the Act requires CMS to establish 
procedures that include giving providers/facilities an opportunity to 
review the information that is to be made public with respect to the 
provider or facility prior to such data being made public.
    CMS currently uses a secure, Web-based tool to share confidential, 
facility-specific, quality data with providers, facilities, and select 
others. Specifically, we provide annual Dialysis Facility Reports 
(DFRs) to dialysis providers/facilities, ESRD Network Organizations, 
and State Survey Agencies. The DFRs provide valuable facility-specific 
and comparative information on patient characteristics, treatment 
patterns, hospitalizations, mortality, and transplantation patterns. In 
addition, the DFRs contain actionable practice patterns such as dose of 
dialysis, vascular access, and anemia management. We expect providers 
and facilities to use the data included in the DFRs as part of their 
ongoing clinical quality improvement projects.
    The information contained in the DFRs is sensitive and, as such, 
most of that information is made available through a secure Web site 
accessible only by that provider/facility and its ESRD Network 
Organization, State Survey Agency, and the applicable CMS Regional 
Office. However, select measures based on DFR data are made available 
to the public through the Dialysis Facility Compare (DFC) Web site, 
which allows Medicare beneficiaries and others to publically review and 
compare characteristics and quality information on dialysis providers 
and facilities in the United States. To allow dialysis providers/
facilities a chance to ``preview'' these data before they are released 
publicly, we supply draft DFRs to providers/facilities in advance of 
every annual DFC update. Dialysis providers and facilities are 
generally given 30 days to review their facility-specific data and 
submit comments if the provider/facility has any questions or concerns 
regarding the report. A provider/facility's comment is evaluated and 
researched. If a provider/facility makes us aware of an error in any 
DFR information, a recalculation of the quality measurement results for 
that provider/facility is conducted, and the revised results are 
displayed on the DFC Web site.
    We proposed to use the above-described procedures, including the 
DFR framework, to allow dialysis providers/facilities to preview their 
quality data under the QIP before a payment reduction is applied and 
that data is reported publicly. Specifically, the quality data 
available for preview through the Web system will include a provider/
facility's performance score (both in total and by individual quality 
measure) as well as a comparison of how well the provider/facility's 
performance scores compare to national averages for total performance 
and individual quality measure performance (75 FR 49225). We believe 
that adapting these existing procedures for purposes of the ESRD QIP 
will create minimum expense and burden for providers/facilities because 
they will not need to familiarize themselves with a new system or 
process for obtaining and commenting upon their preview reports. We 
also note that under these procedures, dialysis providers and 
facilities would have an opportunity to submit performance score 
inquiries and to ask questions of CMS data experts about how their 
performance scores were calculated on a facility-level basis. This 
performance score inquiry process would also give providers/facilities 
the opportunity to submit inquiries, including what they believe to be 
errors in their performance score calculations, prior to the public 
release of the performance scores. Every provider/facility that submits 
an inquiry will receive a response.
    While we believe that the DFR process is the most logical solution 
for meeting the data preview requirements at this time, we may decide 
to revise this approach in the future. Should we decide to make 
changes, or should we find a more administratively feasible or cost-
effective solution, we proposed to use sub-regulatory processes to 
revise our approach for administering the QIP performance score preview 
process in a way that maintains our compliance with section 
1881(h)(6)(B) of the Act. We also proposed to use sub-regulatory 
processes to determine issues such as the length of the preview period 
and the process we will use to address inquiries received from dialysis 
providers/facilities during the preview period.
    We requested public comments on our proposal to use the DFR process 
and suggestions for other options that will allow dialysis providers/
facilities to preview the information that is to be made public with 
respect to the provider or facility in advance of such information 
being made public.
    The comments we received on this proposal and our responses are set 
forth below.
    Comment: Although one commenter agreed with our proposal to use the 
existing DFR process to allow providers/facilities to preview their QIP 
data and make performance score inquiries, it suggested that CMS extend 
the review period from 30 days to 60 days.
    Response: We believe the 30-day preview period is an adequate 
timeframe for providers/facilities to review their performance 
information and submit questions regarding their performance scores. 
Because the initial measures have been collected by ESRD providers/
facilities since 2001, we believe that providers/facilities should be 
familiar with how they are calculated. We have also worked to make the 
calculation of the measures and the scoring methodology as transparent 
as possible to facilitate review by providers/facilities.
    Comment: Another commenter recommended that there be a method to 
allow providers/facilities to post comments related to their scores.
    Response: We appreciate the suggestion and will explore the 
possibility of allowing providers/facilities to post comments related 
to their scores on an appropriate venue (for example, a secure Web 
site).
    Comment: One commenter suggested that there be a formal appeals 
process so that providers may appeal a payment determination if they 
believe it was made in error.
    Response: As part of the preview process we discuss above, 
providers/facilities may submit inquiries related to what they believe 
to be one or more errors in their performance score

[[Page 637]]

calculations, and we will respond to those inquiries. We note, however, 
that under section 1881(h)(5)(A), there is ``no administrative or 
judicial review under section 1869, section 1878, or otherwise of * * * 
the determination of the amount of the payment reduction under 
paragraph (1).''
    After consideration of the public comments, we are finalizing the 
proposed methodology for notifying providers/facilities of their QIP 
Scores as proposed.
3. Informing the Public Through Facility-Posted Certificates
    Section 1881(h)(6)(C) of the Act requires the Secretary to provide 
certificates to dialysis providers and facilities about their total 
performance scores under the QIP. This section also requires each 
provider/facility that receives a QIP certificate to display it 
prominently in patient areas.
    We proposed to meet this requirement by providing providers and 
facilities with an electronic file in a generally accessible format 
(for example, Microsoft Word and/or Adobe Acrobat). We proposed to 
disseminate these certificates to providers and facilities once per 
year after the preview period for the QIP performance scores has been 
completed. We would use a secure, Web-based system, similar to the 
system used to allow facilities to preview their QIP performance 
scores, to disseminate certificates. The secure Web-based system would 
allow CMS to transmit performance score certificates to providers/
facilities in a secure manner. We stated that we would make every 
effort to synchronize the release of the certificates for provider/
facility display with the release of performance score information on 
the Internet.
    Under our proposal, each provider/facility would be required to 
display the certificate no later than 5 business days after CMS sends 
it. We stated that we expect that dialysis providers/facilities would 
have the capability to download and print their certificates from the 
secure Web site. We proposed that providers/facilities would be 
prohibited from altering the content of the certificates and that they 
must print the certificates on plain, blank, white or light-colored 
paper, no smaller than 8\1/2\ inches by 11 inches (a standard-sized 
document). In addition, providers/facilities may not reduce or 
otherwise change the font size on the certificate.
    We proposed that each provider/facility must post at least one copy 
of the certificate prominently in a patient area of the dialysis 
provider/facility. Specifically, we proposed that providers/facilities 
must post the certificate in a conspicuous place where they post other 
patient-directed materials so that it is in plain view for all patients 
(or their parents/guardians or representatives) to inspect. We stated 
that we would update the certificates annually with new performance 
information, and that providers/facilities would be required to post 
the updated certificate within 5 business days of the day that we 
transmit it. We stated that we expect that providers/facilities will 
take steps to prevent certificates from being altered, defaced, stolen, 
marred, or covered by other material. In the event that a certificate 
is stolen or destroyed while it is posted, providers/facilities would 
be responsible for replacing the stolen or destroyed certificate with a 
fresh copy by re-printing the certificate file they have received from 
CMS. The provider/facility would also be responsible for answering 
patient questions about the certificate in an understandable manner, 
taking into account that some patients might have limited English 
proficiency.
    We proposed to include on the certificate of each provider/facility 
all of the information that we are also making available to the public 
under sections 1881(h)(6)(A) and 1881(h)(6)(D) with respect to the 
provider/facility. These data elements include:
     The total performance score achieved by the provider/
facility under the QIP with respect to the year involved;
     Comparative data that shows how well the provider/
facility's total performance score compares to the national total 
performance rate;
     The performance score that the provider/facility achieved 
on each individual measure with respect to the year involved; and
     Comparative data that shows how well the provider/
facility's individual quality measure performance scores compare to the 
national performance rate for each quality measure. (75 FR 49226).
    We considered several options for making the QIP performance score 
data available via certificate. Regarding the content of the 
certificates, we considered including not just information for the ESRD 
QIP-related quality measures, but additional quality measure 
information that CMS has at its disposal from the DFC Web site that is 
not related to the QIP, such as risk-adjusted survival information. 
Ultimately, we determined that an electronic method of disseminating 
certificates was the easiest way for CMS to deliver certificates 
directly to providers/facilities because it is the least burdensome and 
most cost effective way of providing the certificates. We also 
determined that the information posted on the certificates should be 
restricted only to QIP information. We believe that limiting the 
information on the certificate to QIP-specific data will make the 
certificate easier for Medicare beneficiaries to read and understand.
    We requested public comments on how to make the information 
contained on the certificate as user friendly and easy to understand as 
possible, and how to make the information available to Medicare 
beneficiaries who may be unable to read the certificates due to a 
physical disability or because of limited or no reading proficiency in 
the English language. We stated that we were particularly interested in 
comments on how we can educate Medicare beneficiaries and their 
families about the presence of certificates in dialysis providers/
facilities and how the information can be used to engage in meaningful 
conversations with their dialysis caregivers and the clinical community 
about the quality of America's kidney dialysis care.
    Furthermore, we requested public comments on the proposal to use 
the DFR distribution process to provide the certificates to providers/
facilities under section 1881(h)(6)(C) of the Act. Specifically, we 
requested comments on the feasibility and advisability of using the DFR 
system to provide the certificates to providers/facilities in a 
generally available format such as Microsoft Word or Adobe Acrobat.
    The comments we received on this proposal and our responses are set 
forth below.
    Comment: A few commenters offered recommendations about how to help 
patients interpret the certificates (including considerations for 
beneficiaries with limited English proficiency and low health literacy 
and/or numeracy) as well as provider/facility survey reports. One of 
the commenters recommended that the State survey reports and any 
complaint investigations by CMS or the ESRD Networks be posted in 
dialysis facilities along with the QIP certificates. Another commenter 
suggested that the certificates account for various levels of reading 
ability as well as cultural and language diversity. In addition, 
another commenter viewed the posting of the certificate as an 
opportunity to educate ESRD patients on quality and recommended 
including data on beneficiary-specific results (for example, 
hospitalizations, infections, UFR (Ultra-Filtration Rate) (ml/kg/hr), 
measures of bone health, Kt/V, and hemoglobin) in the context of the 
provider/facility's

[[Page 638]]

results (and in the context of state, Network area, national results), 
as well as CMS guidance on how to use the information. The commenter 
also offered that of the three finalized measures, only the Hemoglobin 
Less Than 10g/dL should be displayed.
    Response: We appreciate the comments on how to make the QIP 
certificates useful and easy to understand for beneficiaries and other 
dialysis facility visitors. We will consider the suggestions from the 
commenters as we craft the certificates' visual display and language. 
Whenever possible, we will share draft designs with the public and seek 
a broad range of stakeholder input. We will consider including 
additional information on the certificates in future years. Also, we 
plan to include on the 2012 certificates quality data related to all 
three measures that we use to calculate the provider/facility's total 
performance score because we believe that this information is critical 
to inform beneficiaries and the public about the quality of care that 
the facility/provider is delivering, and that Medicare beneficiaries 
deserve. We believe that including on the certificates information 
related to all three measures, rather than just the Hemoglobin Less 
Than 10g/dL Measure, will provide a better picture of ESRD provider/
facility care. Lastly, it is important to note that we have proposed to 
make enhancements to the DFC Web site so that it includes the same 
information that appears on the certificates, which we believe will 
provide more robust and meaningful information to beneficiaries. With 
access to more useful information, we hope that this will encourage 
more effective communication between patients and their providers.
    Comment: One commenter recommended that performance scores be 
eliminated from the public certificate. The commenter stated that, 
``without appropriate individualized counseling as to the `scores,' the 
document may lead to more confusion than what its intent originally was 
meant to accomplish.'' One of the commenters also noted that wherever 
CMS reports quality, consistency in its reporting is the most important 
decision CMS can make in public reporting. The commenter stated that 
patients need to be able to see the same quality information on the 
certificates that they see on the DFC Web site.
    Response: Although we understand the commenter's concern, section 
1881(h)(5)(C) of the Act requires that each certificate indicate the 
total performance score achieved by the provider/facility. We 
appreciate the commenter's concern that the information be put into 
context for the reader. As previously mentioned, we are working to 
design the certificate so that it is a useful tool for beneficiaries. 
We are also working on a strategy for educating ESRD beneficiaries and 
their caregivers about what the certificates say and their implications 
for the quality of care ESRD beneficiaries can expect to receive from 
their provider/facility. We also will assure that information on the 
certificates matches what is contained on the DFC Web site.
    After consideration of the public comments, we are finalizing the 
proposed methodology for informing the public through facility-posted 
certificates as proposed.
4. Informing the Public Through a Medicare Web Site
    Section 1881(h)(6)(D) of the Act requires the Secretary to use a 
CMS-maintained Web site for the purpose of establishing a list of 
dialysis providers/facilities that furnish renal dialysis services to 
Medicare beneficiaries and indicates the total performance score and 
the performance score for individual measures achieved by the provider 
or facility.
    We currently use the DFC Web site (a CMS-maintained Web site) to 
publish information about the availability of dialysis providers/
facilities across the United States, as well as data about how well 
each of these providers/facilities has performed on existing dialysis-
related quality of care measures. DFC is part of a larger suite of 
``Compare'' tools, all of which are available online at http://www.medicare.gov. In addition to DFC, the suite of Compare sites 
include Nursing Home Compare, Home Health Compare, and Hospital 
Compare, as well as tools that allow users to compare prescription drug 
plans, health plans, and Medigap policies.
    DFC links Medicare beneficiaries with detailed information about 
each of the over 5400 dialysis providers/facilities certified to 
participate in Medicare, and allows them to compare providers/
facilities in a geographic region. Users can review information about 
the size of the provider/facility, the types of dialysis offered, the 
provider/facility's ownership, and whether the provider/facility offers 
evening treatment shifts. Beneficiaries can also compare dialysis 
providers/facilities based on three key quality measures--how well 
patients at a provider/facility have their anemia managed, and how well 
patients at a provider/facility have waste removed from their blood 
during dialysis, and whether the patients treated at a provider/
facility generally live as long as expected. DFC aims to help 
beneficiaries decide which dialysis provider/facility would best serve 
their care needs, as well as to encourage conversations among 
beneficiaries and their caregivers about the quality of care at 
dialysis providers/facilities, thus providing an additional incentive 
for dialysis providers/facilities to improve the quality of care they 
furnish. Lastly, DFC links beneficiaries to resources that support 
family members, as well as beneficiary advocacy groups.
    We proposed to use DFC as the mechanism for meeting the Web-based 
public information requirement under section 1881(h)(6)(D) of the Act. 
We noted that the DFC is a consumer-focused tool, and the 
implementation of the QIP will not change this focus. We recognize that 
sharing information with the public about the QIP is not only a 
statutory requirement, it is also a function of open and transparent 
government. Ultimately, the intent of DFC is to provide beneficiaries 
with the information they need to be able to make proper care choices.
    We believe that DFC already provides accurate and trusted 
information about the characteristics of all Medicare certified 
dialysis providers/facilities, as well as information about the quality 
of care furnished by these providers/facilities. Furthermore, CMS 
already has the information technology infrastructure in place to 
support DFC and its public reporting functions; therefore, adding new 
QIP-related data to the DFC Web site would not create additional 
significant expenditures or overly burden agency resources.
    We proposed to update the DFC Web site once per year at a minimum 
with the following data elements for every provider/facility listed on 
DFC (that is, every Medicare-approved provider/facility):
     The total performance score achieved by each provider/
facility under the QIP with respect to the year involved;
     Comparative data that shows how well the provider/
facility's total performance score compares to the national total 
performance rate;
     Scores for each of the individual measures that comprise 
the overall QIP performance score for the provider/facility with 
respect to the year involved; and
     Comparative data that shows how well the provider/
facility's individual quality measure performance scores compare to the 
national performance rate for each quality measure.
    We note that this is the same information we proposed to include on 
the certificates that we will provide to

[[Page 639]]

providers/facilities. We also note that for the 2012 payment year, we 
do not propose to include comparative information on DFC about how the 
provider's or the facility's performance has changed from year to year, 
since the 2012 total performance score calculation does not provide any 
differential scoring for improvement versus achievement. However, we 
will consider including this data on DFC in future program years.
    We requested public comments about whether the total performance 
score and the individual measure performance scores should be 
integrated into the design of the DFC tool itself or whether we should 
alternatively implement section 1881(h)(6)(D) by making a file 
available to the public on the CMS Web site (at http://www.cms.gov). We 
are sensitive to the need to balance our interest in making QIP 
performance score information public with our need to provide 
beneficiaries with easy-to-understand, non-technical information about 
providers/facilities that they can use to make decisions about where to 
receive dialysis care.
    We also requested public comment on the advisability of using DFC 
as our mechanism for making QIP information available over the 
Internet. We also requested comment on the presentation of QIP 
information on the Web site and the breadth of detail that we should 
make publicly available regarding QIP performance scores. Lastly, we 
requested comment on how DFC could be redesigned to make QIP 
information useful to Medicare beneficiaries as they compare the 
quality of care available at the nation's Medicare-approved dialysis 
providers/facilities.
    The comments we received on this proposal and our responses are set 
forth below.
    Comment: A few commenters recommended that the total performance 
score and the individual measure performance scores be integrated into 
the design of the DFC Web site.
    Response: We appreciate the suggestion and are currently reviewing 
strategies for increasing the usefulness of DFC, especially for 
reporting information from the ESRD QIP. CMS is committed to providing 
beneficiaries and ESRD stakeholders with information that is accessible 
and useful.
    After consideration of the public comments, we are finalizing the 
proposed methodology for informing the public through a Medicare Web 
site as proposed.

F. Applicability of the QIP

    We received a number of comments asking if certain types of 
providers/facilities would be excluded from the first year of the QIP. 
These comments and our responses are set forth below.
    Comment: Several commenters noted their concern that for providers/
facilities that treat small numbers of patients, one or a few patients 
that achieve poor outcomes could dramatically affect the provider/
facility's overall performance score. One of the commenters also 
recommended that CMS develop a statistically valid methodology for 
evaluating the performance of small dialysis providers/facilities.
    Response: We agree with the commenter's concern regarding the 
potential impact on small providers/facilities, recognizing that one or 
two poor patient outcomes could greatly skew their performance scores 
for reasons unrelated to the quality of care they have furnished. 
Therefore, as we proposed, we are using for purposes of the CY 2012 QIP 
the specifications for the three finalized measures that are also used 
for DFC, each of which requires that a provider/facility have a minimum 
of 11 cases that meet the reporting criteria for the measure in order 
for us to calculate it. We believe that this minimum case threshold 
will help prevent the possibility that a small number of poor outcomes 
artificially, and for reasons unrelated to the quality of care, skews a 
small provider/facility's performance score. Also, eleven cases is a 
statistically valid threshold that will give us confidence that a 
provider/facility's total performance score is an accurate reflection 
of the quality of care it furnishes. As a result, this threshold will 
help preserve beneficiary access to care at much needed small 
providers/facilities in rural and/or under-served areas. We will also 
be closely monitoring to determine if the implementation of the QIP has 
any adverse impact on beneficiary access to care, including by looking 
at the rate of facility closures, and particularly small facility 
closures. We will also continue to examine how to best treat small 
providers/facilities and intend to address this issue in future years 
of the ESRD QIP.
    Comment: Several commenters suggested that CMS exclude from the QIP 
provider/facilities that treat nursing home patients because the 
complex nature of the health problems faced by these patients will make 
it difficult for these facilities to achieve the performance standards.
    Response: We understand that certain patients present a challenge 
in terms of their clinical management due to co-morbidities and other 
factors that add to the complexity of care. However, we do not believe 
that providers/facilities that treat patients with complex health 
problems should be subject to a different standard than other 
providers/facilities.
    Comment: One commenter asked if the ESRD QIP would affect home 
health agencies that provide dialysis supplies and medicine.
    Response: We believe that the commenter's question is in reference 
to the provision of dialysis supplies and medicine under Method II. 
Effective January 1, 2011 Method II home dialysis will be eliminated. 
Medicare will no longer make payments directly to DMEPOS suppliers of 
home dialysis equipment and supplies. All Medicare payments for home 
dialysis services (including equipment and supplies) will be made to 
the dialysis provider/facility (75 FR 49056). Thus, the concern raised 
by the commenter will be moot by the time the QIP incentive payments 
are made.
    Comment: Several commenters questioned how home dialysis providers 
will be evaluated under the QIP. Specifically, they asked how the 
absence of a relevant hemodialysis adequacy measure would affect the 
calculation of their total performance score and potential payment 
reductions.
    Response: The commenters are correct that home hemodialysis 
patients (as well as peritoneal dialysis patients and pediatric 
patients) are excluded from the patient population for purposes of 
calculating the hemodialysis adequacy measure (URR) for payment 
consequence year 2012. As such, a very small provider/facility may not 
have a sufficient number of in-center dialysis patients to receive a 
score on the hemodialysis adequacy measure (URR), but could have enough 
patient data to be scored on the anemia management measures. For these 
providers/facilities that do not have enough data to assign a score on 
all three measures, we will not assign a total performance score for 
the CY 2012 ESRD QIP and will also not reduce their payment. As stated 
previously, we believe that requiring a minimum number of cases that 
meets the measure reporting criteria for the three finalized measures 
will help prevent the possibility that a small provider/facility's 
performance score could be greatly skewed for reasons unrelated to the 
quality of care it furnishes. We are also concerned about the impact of 
the QIP on small facilities, and particularly how that impact may

[[Page 640]]

affect beneficiary access to these much needed facilities in rural or 
under-served areas. For these reasons, we will be closely monitoring to 
determine if the ESRD QIP has any adverse impact on beneficiary access 
to care, especially at small providers/facilities. We intend to examine 
alternative methodologies to address this situation for future years of 
the ESRD QIP.
    Comment: Several commenters asked how new providers/facilities 
would be treated under the QIP. Some commenters asked what performance 
standards they would have to meet while others recommended that new 
providers/facilities, or those not in operation for 12 months, or those 
not in operation for 24 months, be exempt from any potential payment 
reductions.
    Response: 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 2008 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 2010 will then be compared against that initial 
performance standard.

G. Additional Comments

    Additional comments and our responses are set forth below.
    Comment: One commenter asked that CMS utilize formal rulemaking 
procedures for future changes to the QIP, including changes to the 
measures, weighting, and scoring methodologies.
    Response: We interpret the comment to be asking about the notice 
and comment rulemaking process (informal rulemaking versus where an 
agency is required by law to make a decision on the record after the 
opportunity for an agency hearing). We agree that the informal 
rulemaking process is the best approach for making changes to the ESRD 
QIP in the future and will use that approach whenever possible. We note 
that procedural guidance that does not impact measures, weighting, or 
scoring methodologies may be issued separate from the rulemaking 
process. We also note that section 1881(h) of the Act does not require 
us to establish the ESRD QIP rules via formal rulemaking procedures.
    Comment: One commenter suggested that CMS solicit the participation 
of private insurance companies and Medicare Advantage Plans to develop 
a quality incentive program similar to the ESRD QIP.
    Response: Medicare is currently conducting the Evaluation of the 
ESRD Disease Management Demonstration to study the effectiveness of 
disease management for patients enrolled in Medicare Advantage plans. 
The demonstration will assess participating plans' clinical and 
financial impact to determine whether integrated disease management 
programs can minimize treatment complications and improve complications 
while reducing costs.
    We are also exploring the feasibility of implementing a number of 
other programs that will attempt to align financial incentives with the 
quality of care delivered. These initiatives will touch on a wide 
variety of health care settings, including physician offices, inpatient 
rehabilitation facilities, inpatient psychiatric hospitals, long-term 
care hospitals, cancer hospitals, ambulatory surgery centers, hospice 
providers, and hospitals. Within the Medicare Advantage program, 
section 3201 of the Affordable Care Act requires CMS to provide for 
enhanced payments based on a Medicare Advantage plan's overall quality 
rating. CMS looks forward to working with payers, advocacy groups, 
patients, and other stakeholders in developing important initiatives 
aimed at transforming Medicare from a passive payer of claims to an 
active purchaser of quality health care.
    Comment: Several commenters stressed the need to encourage greater 
use of home modalities. Another commenter suggested that CMS make all 
forms of dialysis equally profitable by equalizing profit margins 
across all forms of dialysis treatments and monitor recommended 
treatments to assess whether one treatment is being recommended over 
another because of the potential to receive a higher profit margin.
    Response: Medicare currently pays one rate for all forms of 
dialysis. We agree with commenters that home dialysis is an important 
modality for ESRD patients that should be encouraged if clinically 
appropriate. Home modalities can enable patients to continue with 
employment and other activities that may be difficult with in-center 
dialysis. In an effort to promote patient-centered care, we want to 
ensure there are incentives to provide ESRD patients with options that 
fit their clinical needs and personal preferences.
    We will be monitoring whether the implementation of both the ESRD 
PPS and the ESRD QIP leads to shifts in modality and, if so, whether 
those shifts affect the quality of care furnished to ESRD 
beneficiaries.
    Comment: One commenter was concerned about the potential burden on 
small dialysis providers/facilities if they have to manually record and 
maintain data for the ESRD QIP.
    Response: The measures we have adopted for the initial year of the 
ESRD QIP are claims-based measures, and we can calculate them using 
information contained on Medicare FFS claims. To the extent we want to 
adopt QIP measures in the future for which providers/facilities would 
need to submit additional data, we will carefully consider any impacts 
that such data submission might have on providers/facilities.
    Comment: One commenter suggested that CMS ensure that facilities/
providers submit valid, reliable data and take steps to ensure that 
they don't misreport data.
    Response: We agree that having reliable data is crucial in 
evaluating provider/facility performance for the QIP and intend to 
implement a formal validation process in the future. We also intend to 
monitor the ESRD QIP, including identifying whether certain patterns or 
trends warrant further investigation or response. We anticipate that 
these activities will help to ensure that providers/facilities are 
submitting complete and accurate data.
    Comment: One commenter, a former dialysis patient, expressed 
support for the QIP.
    Response: We appreciate the support the commenter expressed.
    Comment: One commenter suggested that CMS involve more 
beneficiaries in committees and study groups.
    Response: We appreciate the importance of beneficiary input. 
Beneficiaries are considered one of the most important stakeholder 
groups, and we plan to continue our outreach efforts to gather the 
feedback of beneficiaries and patient advocates when making decisions 
regarding the QIP.

IV. Future ESRD QIP Considerations

A. Monitoring and Evaluation

    CMS plans to monitor and evaluate the new ESRD PPS and ESRD QIP as 
part of our ongoing effort to ensure that Medicare beneficiaries with 
ESRD receive high quality care. The monitoring will focus on whether, 
following implementation of the new PPS and the ESRD QIP, we observe 
changes in access to and quality of care, especially within vulnerable 
populations. We will be evaluating the effects of the new ESRD PPS and 
the QIP and focusing on areas such as:
     Access to care for beneficiaries, including categories or 
subgroups of beneficiaries;
     Changes in care practices that could adversely impact the 
quality of care for beneficiaries;

[[Page 641]]

     Patterns of care suggesting particular effects of the new 
PPS--for example, whether there are increases/decreases in utilization 
of injectable ESRD drugs and the use of home modalities for certain 
groups of ESRD beneficiaries;
     Best practices of high-performing providers/facilities 
that might be adopted by other providers/facilities.
    CMS currently collects detailed claims data on patients' hemoglobin 
levels and adequacy of dialysis, and also collects information on other 
facets of ESRD care, including treatments provided, drugs, 
hospitalizations, and deaths. In addition, we collect beneficiary 
enrollment data which provides important demographic and other 
information related to Medicare ESRD beneficiaries. These data and 
other data sources will provide the basis for early examination of 
overall trends in care delivery, access, and quality. We will also use 
the data to assess more fully the quality of care furnished to Medicare 
beneficiaries under the new PPS, and to help inform possible 
refinements to the PPS and QIP moving forward. We requested public 
comments about an approach to monitoring and evaluating the ESRD PPS 
and the ESRD QIP.
    The comments we received on this monitoring approach and our 
responses are set forth below.
    Comment: A number of commenters addressed the issue of monitoring 
and our plan to evaluate the impact of both the new ESRD PPS and the 
QIP on beneficiary access to, and the quality of, care. Many commenters 
expressed support for this plan and urged CMS to closely monitor 
whether the new ESRD PPS and QIP impact the quality of care furnished 
by ESRD providers/facilities to vulnerable populations and at-risk 
populations. Citing a March 2010 report issued by the Government 
Accountability Office (GAO), one commenter recommended that CMS 
specifically monitor whether injectable drug usage increases or 
decreases after the new ESRD PPS and QIP go into effect. Other 
commenters raised the concern that the QIP could lead to increased 
``cherry picking'' in the practice of patient referrals, increased 
involuntary discharges, and other barriers to dialysis care for 
difficult-to-treat patients or those patients who might negatively 
affect provider/facility performance metrics. One commenter recommended 
the universal implementation of CROWNWeb for monitoring the PPS and the 
QIP. Another commenter suggested that CMS establish a national database 
that tracks the number, demographics and reasons why a provider/
facility involuntarily discharged/released a patient. Another commenter 
requested that CMS set forth specific details on how it plans to 
monitor the effects of the QIP on beneficiaries, that CMS provide 
details on how it plans to engage the ESRD community to ensure that 
special needs are met, and that the agency provide an opportunity for 
public comment on the monitoring plan. One commenter recommended that 
facilities provide easier methods for patients to return satisfaction 
surveys. Finally, one commenter requested that the results of studies 
evaluating the QIP be made public.
    Response: Beginning in 2009, we conducted a series of town hall 
meetings, listening sessions, and other outreach efforts to assess 
reaction to upcoming changes to the Medicare ESRD program. CMS had 
identified a need to monitor the impact of both the new ESRD PPS and 
the QIP, and through these interactions sought the feedback of the ESRD 
community, including facilities, providers, and patient advocates.
    In its March 2010 report, entitled ``End-Stage Renal Disease: CMS 
Should Monitor Access to and Quality of Dialysis Care Promptly after 
Implementation of New Bundled Payment System'' (GAO-10-295), GAO 
recommended that CMS monitor whether beneficiary access to, and the 
quality of, dialysis care is diminished or degraded following 
implementation of the newly expanded ESRD bundled payment system, 
especially for certain groups of Medicare ESRD beneficiaries who may be 
more vulnerable. Specifically, the GAO report highlighted a concern 
that the new ESRD PPS might affect access to and quality of dialysis 
care for ``certain groups of beneficiaries, such as those who receive 
above average doses of injectable ESRD drugs.''
    In response to these concerns and as part of fulfilling our mission 
to ensure effective, up-to-date healthcare coverage and quality care 
for beneficiaries, we will launch an ESRD services monitoring program 
to identify changes in beneficiary access to and quality of care 
following implementation of the ESRD PPS in January 2011 and the QIP in 
January 2012. The ESRD services monitoring program will enable CMS to 
identify whether there are access-to-care and quality concerns 
requiring further examination and response, as well as help to drive 
continuous improvement by identifying best practices and providing 
constructive feedback to ESRD facilities and providers. Findings from 
the monitoring program will also be used to design longer-term 
evaluation studies assessing relationships between program policies and 
outcomes. While monitoring alone cannot determine the cause of observed 
changes, certain events identified through the monitoring program will 
be used to alert CMS of the need for further review and investigation.
    In addition to conducting monitoring activities, CMS will be 
evaluating the impact of the new program on access to and quality of 
care for Medicare ESRD beneficiaries. Evaluation takes a long-term 
focus, examining relationships between ESRD PPS and/or QIP policies and 
patient outcomes for vulnerable subpopulations of ESRD beneficiaries 
over a study period.
    In developing the ESRD services monitoring and evaluation program, 
we sought input from a broad array of stakeholders, including ESRD 
providers/facilities, the ESRD Network Organizations, and patient 
advocates. We also took into account the recommendations of a study 
that looked at whether particular segments of the ESRD population, 
including racial and ethnic minorities and other populations that we 
consider to be vulnerable or at-risk, could be disproportionately 
affected by the new ESRD PPS.
    As part of the planned ESRD services monitoring and evaluation 
program, we will also examine a number of indicators and available data 
sources to ascertain whether any disruptions in access or quality occur 
following implementation of the QIP. We intend to track monitoring 
indicators of facility/provider practice, including patient loss rates, 
facility closures, and other areas of concern to determine if there are 
any changes that may need further study. We plan to utilize available 
data sources, including CROWNWeb, claims data, patient activity 
reports, provider forms, and other quantitative and qualitative data 
sources in the monitoring and evaluation program. As we continue to 
refine and develop the monitoring and evaluation program in 2011 and 
beyond, we will consider the commenters' suggestions.
    As the ESRD services monitoring effort continues to expand and 
mature in 2012 and beyond, we expect to gain insight into how the ESRD 
PPS and QIP are affecting the quality of care furnished to individuals 
with ESRD, and with that insight in mind, we expect to design 
additional evaluation studies and make information available to the 
public, including the ESRD community and researchers.

[[Page 642]]

B. Potential QIP Changes and Updates

    As noted above, section 1881(h)(4)(B) of the Act provides that the 
performance standards established under section 1881(h)(4)(A) shall 
include levels of achievement and improvement, as determined 
appropriate by the Secretary. We anticipate that we will propose to 
adopt performance standards under section 1881(h)(4)(A) of the Act that 
include levels of achievement and improvement for the 2013 QIP.
    In addition, we anticipate strengthening the performance standard 
for each measure in future years of the QIP, including potentially 
moving away from using the national performance rate as the performance 
standard and instead identifying absolute standards that reflect 
performance goals widely recognized by the ESRD medical community as 
demonstrating high quality care for ESRD patients. For instance, we may 
seek to raise the performance standard for each of the three measures 
finalized for the 2012 QIP above the proposed or finalized level (that 
is, Hemoglobin Less Than 10g/dL--two percent; Hemoglobin More Than 12g/
dL--26 percent; and Hemodialysis Adequacy Measure--96 percent).
    Additionally, for these initial three finalized measures, we intend 
to establish the national performance rates of each of these measures 
as ``floors'', such that the performance standards will never be lower 
than those set for the previous year, even if provider/facility 
performance--and therefore the national performance rate--fails to 
improve, or even declines, over time. The performance standard to which 
facilities and providers will be held for these measures will not be 
lowered from one year to the next. This will better ensure that the 
quality of ESRD patient care will continue to improve over time. 
Establishing such floors for performance standards, however, will in no 
way prohibit the Secretary from establishing performance standards that 
are higher than the floors if the Secretary determines that higher 
performance standards are appropriate.
    In establishing new measures for the QIP in future years, we intend 
that the concept of ``floors'' described above would be established for 
each new measure and applied to these new measures in order to better 
ensure improvement in the quality of care, once we have a historical 
perspective on how the measure performs. While we will consider the use 
of national performance rates, we also will take into consideration 
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.
    As noted above, section 1881(h)(2)(A) of the Act also requires that 
the measures include, to the extent feasible, measures on patient 
satisfaction, as well as such other measures that the Secretary 
specifies, including iron management, bone mineral metabolism (that is, 
calcium and phosphorus), and vascular access. We are currently 
developing measures in each of the areas specified in section 
1881(h)(2)(A) of the Act and are also moving forward with developing 
additional measures such as Kt/V, access infection rate, fluid weight 
management, and pediatric measures. As part of the process of 
developing these new measures, where necessary data are not currently 
being collected, we intend to require providers to submit data needed 
to establish a baseline for each of the measures under consideration, 
as listed above, as soon as is practicable. For QIP measures, we will 
use a collection process that has been determined appropriate by the 
Secretary to obtain this data. We anticipate proposing additional 
measures, such as those listed above under section 1881(h)(2)(A) of the 
Act, in future rulemaking for the QIP.
    We requested public comments on how we might best incorporate both 
improvement and achievement standards as specified by the Act. We also 
requested comments on performance standards for future years of the 
QIP. We are committed to adopting additional quality measures for the 
QIP as soon as practicable. While we are evaluating measures for 
inclusion in future years of the QIP, we also requested public comment 
on setting performance standards for the first year a new measure is 
included in the QIP.
    The comments we received on these issues and our responses are set 
forth below.
    Comment: A few commenters encouraged CMS to measure improvement as 
well as achievement under the QIP. One of the commenters expressed 
disappointment that CMS has chosen not to address improvement in the 
first year of the QIP.
    Response: We believe that levels of achievement and improvement are 
important components of the future QIP performance standards, and we 
anticipate proposing to adopt such levels for the 2013 QIP program 
year.
    Comment: Several commenters expressed support for our concept of 
establishing ``floors'' for the performance standards, to ensure that a 
measure's performance standards will never be lowered in future years 
even if provider/facility performance fails to improve or even 
declines. Other commenters expressed concern that when measures change 
(for example, from URR to Kt/V), it would be necessary to establish new 
floors, and believe that CMS should remain open to changes based on 
scientific evidence and best practices.
    Response: We appreciate the comments supportive of establishing 
performance standard floors for future years of the QIP, and will 
continue to examine the benefits of establishing them. We also share 
the commenters' belief that we must be open to establishing new floors 
in the event that the scientific evidence or best practice changes with 
respect to a measure.
    Comment: Many commenters offered suggestions regarding the 
inclusion of additional measures in future years of the QIP. Most 
commenters strongly advocated for the inclusion of new measures such as 
Kt/V, transplant referrals, access infection rates, fluid weight 
management, iron management, bone mineral metabolism, vascular access, 
patient satisfaction, and measures for pediatric and home hemodialysis 
patients as soon as possible.
    Response: We plan to continuously work to improve the ESRD QIP, 
including adopting robust measures that provide valid assessments of 
the quality of care delivered to ESRD beneficiaries by providers and 
facilities. To that end, we are in the process of developing measures 
that can be applied to all modalities (that is, home and in-center) as 
well as the pediatric population. Measures that we are considering 
proposing to adopt include measures on mineral metabolism, vascular 
access infections, vascular access type, pediatric anemia (for example, 
iron targets), pediatric dialysis adequacy (Kt/V), and fluid 
management. Additionally, we are currently testing the feasibility of 
using claims data to calculate some of these measures. We are also 
considering establishing all or part of 2011 as the performance period 
for the 2013 QIP.
    As the ESRD QIP continues to evolve, we realize the importance of 
assuring that the measures are reviewed and refined to confirm that 
they continue to align with currently accepted clinical practices. 
Further, we will review any needs for risk adjustment for measures that 
currently do not have this specification. As we consider the 
feasibility of adopting new measures for the QIP, we intend to seek the 
input of the ESRD community to ensure that the measures we seek to 
adopt are appropriate, scientifically acceptable,

[[Page 643]]

and valuable to continuous quality improvement.
    We are also focused on identifying QIP patient-centered measures 
such as patient satisfaction, access to nutrition services, referral to 
transplant, and training for those on home modalities. Patient 
perceptions of care and support services that contribute to dialysis 
outcomes are critical. Again, collaboration with beneficiaries as well 
as the renal community will be important for identifying key issues for 
measurement. CMS is dedicated to making the measure development and 
selection process as transparent and inclusive as possible so that it 
continuously advances the goals of the ESRD QIP to ensure that 
individuals with ESRD have access to quality care.
    Lastly, as we work toward identifying and proposing to adopt new 
measures for the QIP, we understand the importance of collecting real-
time data for more timely measurement of performance. We are working to 
expand the scope of the CROWNWeb project and intend to explore the 
feasibility of using the CROWNWeb system to collect QIP data.

V. Collection of Information Requirements

    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.
    Therefore, we solicited public comment on each of these issues for 
the following sections of this document that contain information 
collection requirements (ICRs):
    In the proposed rule, we discussed a disclosure requirement (75 FR 
49226). Section 1881(h)(6)(C) of the Act requires the Secretary to 
provide certificates to dialysis care providers and facilities about 
their total performance scores under the QIP. This section also 
requires each provider and facility that receives a QIP certificate to 
display it prominently in patient areas.
    To comply with this requirement, we proposed to issue QIP 
certificates to providers and facilities via a generally accessible 
electronic file format. We proposed that each provider and facility 
would prominently display the QIP certificate in patient areas. In 
addition, we proposed that each provider and facility will take the 
necessary measures to ensure the security of the certificate in the 
patient areas. Finally, we proposed that each provider/facility would 
have staff available to answer questions about the certificate in an 
understandable manner, taking into account that some patients might 
have limited English proficiency.
    We finalized these requirements in this final rule.
    We stated in the proposed rule that the burden associated with the 
aforementioned requirements is the time and effort necessary for 
providers and facilities to print the QIP certificates, display the 
certificate prominently in patient areas, ensure the safety of the 
certificate, and respond to patient inquiries in reference to the 
certificates. We estimated that 4,311 providers and facilities will 
receive QIP certificates and will be required to display them. We also 
estimated that it will take each provider or facility 10 minutes to 
print, prominently display and secure the QIP certificate, for a total 
estimated annual burden of 719 hours. We estimated that approximately 
one-third of ESRD patients will ask a question about the QIP 
certificate. We further estimated that it will take each provider/
facility five minutes to answer each patient question about the QIP 
certificate, or 1.65 hours per provider or facility each year. We 
estimated that the total annual burden associated with this requirement 
would be 7,121 hours. We also estimated that the total annual burden 
for both displaying the QIP certificates and answering patient 
questions about the certificates would be 7,840 hours. While the total 
estimated annual burden associated with both of these requirements 
would be 7,840 hours, we stated that we did not believe that there 
would be a significant cost associated with these requirements because 
we would not be requiring providers/facilities to complete new forms. 
As discussed in the proposed rule (75 FR 49228), we estimated the total 
cost for all ESRD facilities to comply with the collection of 
information requirements would be less than $200,000.
    We did not receive any comments related to this information 
collection and are finalizing these burdens.

VI. Regulatory Impact Analysis

A. Statement of Need

    This final rule implements a QIP for Medicare ESRD dialysis 
providers and facilities with payment reductions beginning January 1, 
2012. 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. We view the 
ESRD QIP required by section 1881(h) of the Act as the next step in the 
evolution of the ESRD quality program that began more than 30 years 
ago. Our vision is to implement a robust, comprehensive ESRD QIP that 
builds on the foundation that has already been established.

B. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, section 202 of the Unfunded 
Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on 
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 
804(2)).
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year). This final 
rule is not an economically significant rule because we estimate that 
the effects of the rule will fall well below the economic threshold of 
$100 million (see analysis below). In addition, given this estimated 
impact, this final rule also is not a major rule under the 
Congressional Review Act. We requested comments on the economic 
analysis.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses if a rule has a significant impact on a substantial 
number of small

[[Page 644]]

entities. For purposes of the RFA, approximately 19 percent of ESRD 
dialysis facilities are considered small entities according to the 
Small Business Administration's size standards, which consider small 
businesses those dialysis facilities having total Medicare revenues of 
$34.5 million or less in any one year, and 19 percent of dialysis 
facilities are nonprofit organizations. For more information on SBA's 
size standards, see the Small Business Administration's Web site at 
http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf (Kidney Dialysis Centers are listed as 621492 with a size 
standard of $34.5 million).
    For purposes of the RFA, using DFC performance data based on 
Medicare claims from 2007 and 2008, we consider the 802 independent 
facilities and hospital-based facilities to be small entities. The ESRD 
facilities that are owned and operated by a Large Dialysis Organization 
(LDO) and/or regional chain, comprising approximately 3,509 facilities, 
would have total revenues in excess of $34.5 million in any year when 
the total revenues for all locations are combined for each business 
(individual LDO or regional chain). Table 5 below shows the estimated 
impact of the QIP on small entities for payment consequence year 2012. 
The distribution of ESRD providers/facilities by facility size (both 
among facilities considered to be small entities for purposes of this 
analysis and by number of treatments per facility), geography (both 
urban/rural and by region), and by facility type (hospital based/
freestanding facilities).

Table 5--Impact of ESRD QIP Payment Reductions to ESRD Facilities for CY 2012 Includes Estimated Impact on Small
                             Entities for Regulatory Flexibility Act (RFA) Analysis
----------------------------------------------------------------------------------------------------------------
                                                                                Number of
                                                                                facilities     Payment reduction
                     Facility type                           Number of         expected to      (percent change
                                                             facilities     receive a payment    in total ESRD
                                                                                reduction          payments)
----------------------------------------------------------------------------------------------------------------
All Facilities.........................................              4,311              1,106              -0.19
Type:
    Freestanding.......................................              3,916                977              -0.18
    Hospital Based.....................................                167                 47              -0.25
    Unknown \1\........................................                228                 82              -0.30
Facility Size: \2\
    Small entities.....................................                802                252              -0.27
    Large entities.....................................              3,509                854              -0.17
Urban/Rural status:
    Urban..............................................              3,159                788              -0.19
    Rural..............................................                924                236              -0.18
    Unknown \3\........................................                228                 82              -0.30
Geographic Region:
    Northeast..........................................                652                182              -0.22
    South..............................................              2,048                521              -0.18
    Midwest............................................                871                237              -0.22
    West...............................................                705                158              -0.16
    Other \4\..........................................                 35                  8              -0.23
Facility Size (number of treatments):
    Less than 3,000 treatments.........................                261                 77              -0.28
    3,000-9,999 treatments.............................              2,566                675              -0.20
    Over 10,000 treatments.............................              1,484                354              -0.18
----------------------------------------------------------------------------------------------------------------
\1\ Based on DFC self-reported status.
\2\ ``Small entities'' include hospital-based facilities and non-chain facilities based on DFC self-reported
  status.
\3\ Based on DFC self-reported status.
\4\ Includes American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and Virgin Islands.
Source: Analysis of DFC/Medicare claims data (2007-2008) for ESRD providers/facilities reporting data on all
  three measures.

    We note that guidance issued by the Department of Health and Human 
Services interpreting the RFA considers effects to be economically 
significant if they reach a threshold of three to five percent or more 
of total revenue or total costs. Under the final rule, the maximum 
payment reduction applied to providers/facilities, regardless of its 
size, is 2.0 percent of aggregate Medicare payments for dialysis 
services. This falls below the 3.0 percent threshold for economic 
significance established by HHS. To further ascertain the impact on 
small entities for purposes of the RFA, we projected provider/facility 
performance based on DFC performance data from 2007 and 2008. For the 
2012 ESRD QIP, of the 1,106 ESRD facilities expected to receive a 
payment reduction, 252 small entities would be expected to receive a 
payment reduction (ranging from 0.5 percent up to 2.0 of total 
payments). The average payment reduction for the 252 small facilities 
receiving a payment reduction is approximately $18,000 per facility. 
Using our projections of provider/facility performance, we next 
estimated the impact of expected payment reductions on small entities 
by comparing the total payment reduction for the 252 small entities 
expected to receive a payment reduction with aggregate ESRD payments to 
all small entities. For the entire group of 802 small entities, a minor 
decrease of 0.27 percent in aggregate ESRD payments is observed.
    Therefore, we are not preparing an analysis for the RFA because the 
Secretary has determined that this final rule will not have a 
significant economic impact on a substantial number of small entities.
    Comment: In reviewing Table 9 in the proposed rule (75 FR 49230) 
for the estimated impact of payment reductions, one commenter noted 
that 31 percent of small entities will be affected by this proposed 
rule as opposed to only 24 percent of large entities. The commenter 
further noted that this disproportionately affects smaller entities, 
which do not have the inherent volume discounts and diverse purchasing 
powers that large entities typically have. The payment reduction 
(percent changes in aggregate ESRD

[[Page 645]]

payments), though considered minor, is estimated to be 0.10 percent 
higher for smaller entities.
    Response: The technical specifications for each of the finalized 
measures require that a provider/facility has a minimum of 11 cases 
meeting the measure criteria in order to report it. We believe that 
these specifications will minimize the rule's economic burden on small 
entities. Second, we note that for purposes of RFA analysis in 
determining whether agencies must perform an initial or final 
regulatory flexibility analysis, agencies must determine whether the 
regulation is expected to have a significant economic impact on small 
entities. Though the rule may have a disproportionate, but not 
economically significant, impact on small entities, it is not relevant 
for purposes of the analysis. Third, we expect all facilities to 
provide quality care, particularly in the important areas of anemia 
management and dialysis adequacy, regardless of size. Finally, we 
intend to monitor and evaluate the impact of the ESRD QIP on access to 
and quality of care for ESRD beneficiaries, including indicators of 
facility financial health, to identify any disruptions or to make 
future improvements in the program.
    Comment: Another commenter noted that CMS has provided an estimate 
of the number and geographic region of other facilities it projects 
will receive reductions based on other characteristics (such as small 
versus large and rural versus urban) but would like to understand the 
impact of the proposed payment reductions safety-net and other not-for-
profit providers. The commenter also stated that it is important to 
estimate the influence of payment reductions by facility type (for 
example, large dialysis organizations (LDOs) versus independent 
facilities).
    Response: As stated, we estimate 19 percent of ESRD facilities to 
be nonprofit for purposes of RFA analysis. These entities are included 
in the estimates of the impact of payment reductions on small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. Any 
such regulatory impact analysis must conform to the provisions of 
section 604 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
a metropolitan statistical area and has fewer than 100 beds. We do not 
believe this final rule has a significant impact on operations of a 
substantial number of small rural hospitals because most dialysis 
facilities are freestanding. Overall, we estimate that the hospital-
based dialysis facilities will experience an average 0.25 percent 
decrease in payments. As a result, this rule will not have a 
significant impact on small rural hospitals. Therefore, the Secretary 
has determined that this final rule will not have a significant impact 
on the operations of a substantial number of small rural hospitals.
    Finally, section 202 of the Unfunded Mandates Reform Act of 1995 
(UMRA) also requires that agencies assess anticipated costs and 
benefits before issuing any rule whose mandates require spending in any 
one year $100 million in 1995 dollars, updated annually for inflation. 
In 2010, that threshold is approximately $135 million. We do not 
believe that this rule includes any mandates that would impose spending 
costs on State, local, or Tribal governments in the aggregate, or by 
the private sector, of $135 million or more in 2010.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule and subsequent 
final rule that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. We do not believe this final rule will have a substantial 
direct effect on State or local governments, preempt State law, or 
otherwise have Federalism implications.

C. Anticipated Effects

    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 a QIP 
that would reduce ESRD payments by up to two 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. Any reductions in 
ESRD payment would begin on January 1, 2012 for services furnished on 
or after January 1, 2012.
    The calculations used to determine the impact of this proposed rule 
reveal that approximately 27 percent, or 1,106, ESRD dialysis 
facilities would likely receive some kind of payment reduction for 
2012. Again using DFC/Medicare claims data from 2007-2008, Table 6 
shows the overall estimated distribution of payment reductions 
resulting from the 2012 ESRD QIP.

 Table 6--Estimated Distribution of CY 2012 ESRD QIP Payment Reductions
------------------------------------------------------------------------
                                                              Number of
                     Payment reduction                           ESRD
                                                              facilities
------------------------------------------------------------------------
No Payment Reduction.......................................        3,205
0.5% Payment Reduction.....................................          709
1.0% Payment Reduction.....................................          183
1.5% Payment Reduction.....................................          184
2.0% Payment Reduction.....................................           30
------------------------------------------------------------------------

    To estimate the total payment reductions in 2012 resulting from the 
proposed rule for each facility, we multiplied the number of patients 
treated at each facility receiving a reduction times an average of 
three treatments per week. We then multiplied this product by a base 
rate of $229.63 per dialysis treatment (the finalized 2011 rate, before 
an adjustor is applied) to arrive at a total ESRD payment for each 
facility:

((Number of patients treated at each facility x three treatments per 
week) x base rate)

    Finally, we applied the estimated payment reduction percentage 
expected under the ESRD QIP, yielding a total payment reduction amount 
for each facility:

(Total ESRD payment x estimated payment reduction percentage)

    Totaling all of the payment reductions for each of the 1,106 
facilities expected to receive a reduction leads to a total payment 
reduction of approximately $17.3 million for payment consequence year 
2012. Further, we estimate that the total costs associated with the 
collection of information requirements described in section IV of this 
final rule would be less than $200,000 for all ESRD facilities. As a 
result, the estimated aggregate $17.5 million impact for 2012 does not 
reach the $100 million threshold for an economically significant rule.

D. Alternatives Considered

    In developing this final rule, we considered a number of 
alternatives. 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 2012 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. Thus, 
we believe the measures selected will allow CMS to continue focusing on 
improving the quality of care that Medicare

[[Page 646]]

beneficiaries receive from ESRD dialysis providers and facilities.
    We considered alternatives for identifying the performance 
standard, including the mean, median, and mode. However, we determined 
that the national average would be appropriate for the first payment 
year for the reasons listed below:
     CMS believes that the legislative intent was to set the 
performance standard at the ``average,'' as this is the performance 
standard that has been publicly reported on the Dialysis Facility 
Compare Web site (DFC) for the past ten years and was the standard in 
effect when the language was crafted;
     Recognizing, however, that there was some flexibility, CMS 
reviewed other possible standards and noted that there was little 
difference in the range of performance, with the exception of 
performance for Hemoglobin Greater Than 12g/dL (Hemoglobin < 10g/dL: 0 
percent-3 percent; Hemoglobin > 12g/dL: 8 percent-38 percent; URR >= 65 
percent: 94 percent-100 percent). As the bundled payment will likely 
reverse the incentive that may be leading to the wider range for this 
measure, the differences in the performance did not warrant moving from 
the use of a national performance rate for performance.
     CMS has seen great improvement in the rates for these 
measures over the past several years as reported in DFC, in part due to 
public reporting and continuous oversight and monitoring. The rate for 
Hemoglobin Less Than 10g/dL has improved and maintained improvement, 
while Hemoglobin Greater Than 12g/dL improved from 44 percent in 2007 
to 26 percent in 2008 as demonstrated below. Should it become evident 
that the rates begin to move in the wrong direction due to the bundled 
payment, different performance standards can be proposed through future 
rulemaking. For example, if the national average for Hemoglobin Less 
Than 10g/dL began to drop, CMS could propose to require a rate of two 
percent or less regardless of the national average.
     The national average was also selected because of the 
rapid implementation date for the first year and because the proposed 
rule was published more than halfway into the period of performance for 
the first payment year. Especially for this first year of the QIP, we 
did not believe introduction of a new performance standard after the 
period of performance has nearly ended was appropriate.
    We also considered alternatives for applying payment reductions. 
Our main alternatives considered varying point reductions based on each 
one percentage point a facility or provider was below the performance 
standard. We did not propose alternatives that applied payment 
reductions that accounted for the variability seen within each measure, 
and as noted above, we asked for public comment on such alternatives.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 413

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


0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services 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).

Subpart H--Payment for End-Stage Renal Disease (ESRD) Services and 
Organ Procurement Costs

0
2. Section 413.177 is added to subpart H to read as follows:


Sec.  413.177  Quality Incentive Program Payment.

    (a) With respect to renal dialysis services as defined under Sec.  
413.171 of this part, in the case of an ESRD facility that does not 
meet the performance requirements described in section 1881(h)(1)(B) of 
the Act for the performance year, payments otherwise made to the 
provider or facility section 1881(b)(14) of the Act for renal dialysis 
services will be reduced by up to two percent, as determined 
appropriate by the Secretary.
    (b) Any payment reduction will apply only to the payment year 
involved and will not be taken into account in computing the single 
payment amount under this subpart for services provided in a subsequent 
payment year.

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

    Dated: November 18, 2010.
Donald Berwick,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: December 15, 2010.
Kathleen Sebelius,
Secretary.
[FR Doc. 2010-33143 Filed 12-29-10; 11:15 am]
BILLING CODE 4120-01-P